Fertilizer Market Report – May 17, 2023

ICIS Fertilizers: Striving For Stability

As published in the March edition of The World Fertilizer Magazine the following paragraph is the most compelling argument from the article written by Deepika Thapliyal and Julia Meehan from ICIS Fertilizers, UK.

“The outlook for urea prices is weak in 2023, as the unprecedented increases seen over the last two years, due to the coronavirus pandemic and then the war, are unlikely to be repeated. Any surge in gas prices and subsequent hit in production in Europe may once again lead to an uptick in global prices due to supply issues. European producers are ramping up, with current capacity estimates around 70%. It cannot be ruled out that some producers may need to shut down again with urea prices being so low. The disconnect between the cost of producing ammonia and urea versus importing the crop nutrients for the European market is expected to widen moving into 2023, and this is a growing concern for related downstream petrochemical markets. For now, Europe is well stocked with gas, but the situation will need to be watched as 2023 will mark the first full year without Russian gas moving into Europe: the biggest worry will be winter of 2023-2024. Gas prices will likely be a concern since the direction of nitrogen prices is so heavily influenced by developments in the gas market. Developments in decarbonization of ammonia into blue and green will also be a key feature for the global market, and further MoUs are expected in relation to new builds and projects.”

To summarize, the risk in nitrogen prices is weighted to the downside due to excessive supply coming onstream this year.

The backwardation (futures prices significantly lower than spot prices) noticed in the urea NOLA market — with June prices so much lower than today’s prices — is a good indicator of the continued downward move in prices.

North America Urea Last Two Weeks

According to Green Markets, delivered urea pricing in Western Canada last week was flat week-over-week in a range of C$720-C$765.

Eastern Canada urea was quoted in a broad range at C$675-C$875/mt FOB in mid-May, depending on location and supplier.

Prompt urea barges continued to post a large premium and were put as high as US$440-US$450/st FOB. Barges sailing in late-May or first-week June were reported as low as US$300/st FOB.

North America Phosphate Last Two Weeks

MAP market in Western Canada was flat week-over-week in a range of C$1,115-C$1,150.

New MAP offers in Eastern Canada firmed to C$1,049-C$1,280/mt FOB, depending on location and supplier, up C$19/mt at the low end of the range. DAP remained at the C$1,038/mt FOB level in Montreal.

The NOLA DAP market was fighting for direction during the week. Prices for prompt tons were reported spiking compared to week-ago levels, while values softened for full-May loading.

Players reported full-May DAP barges available at US$510-US$520/st FOB early in the May 5-11 trading period, slipping from the prior US$520/st FOB, while offers tracked as low as US$500/st FOB later in the week. A June barge traded at US$490/st FOB on May 11, sources said.

Market watchers also reported a prompt NOLA barge selling for US$630/st FOB, a premium to full-May not seen in the prior week, while prompt upriver trades were noted at a US$620/st FOB NOLA-equivalent.

“(There are) still rumors of higher loaded DAP barges trading,” said one trader, “but I think it is only possible/happening upriver with a barge in the right spot at the right time.”

Sources reported few, if any, MAP barges changing hands, leaving pricing unchanged from the week-ago US$485-US$500/st FOB. Updated offers were reported in a US$490-US$510/st FOB range, while public bids maxed out at US$475/st FOB, resulting in no confirmed business.

Players attributed the market’s volatility to a mix of seasonal softness, a strong expected May-June import lineup, and ongoing shipping slowdowns resulting from flooding on the Upper Mississippi River.

NOLA DAP barges were reported stretching to a US$500-US$630/st FOB range for the week, a change from $520/st FOB in the prior report. With no new business reported, MAP barges continued at US$485-US$500/st FOB, steady from last report.

Green Markets Global Macro Comments

India

The last of the tons from the IPL tender are reportedly being rounded up and loaded to vessels in order to meet the June 1 shipping deadline. A new tender is still expected to be called in late May or early June.

Brazil

The landed price was pegged at US$320-US$335/mt CFR, down from the previous US$340-US$345/mt CFR. Sources said bidders had become more aggressive in what they saw as a softening market. There were reports of bids coming in at US$295-US$305/mt CFR, but without luck so far.

China

Sources said producers continued to offer US$335-US$338/mt FOB for granular, and were willing to accept US$10/mt less for prills, citing reports that at least one roughly 30,000 mt granular cargo was offered at that level. Buyers, however, are pushing for lower prices, and no deal has been done so far. The Fudao price put Chinese urea back in line with the Arab Gulf price in the US$330s/mt FOB. Prior to the imposition of export controls by China, the Arab Gulf and Chinese markets were usually priced within a few dollars of each other. The move to limit exports from China boosted the global price for the Chinese product, however, while lowering it for the domestic market.

Middle East

Producers were mostly busy filling orders for the IPL/India tender, along with a few long-term contract sales. There has been limited spot buying interest from the area due to a relative balance in the region’s supply and demand.

Sources said the price remained in the low-$330s/mt FOB. However, the few buyers who had approached producers were said to push for prices in the $320s/mt FOB. Deals were rumored to have been done in the $320s/mt FOB, but without confirmation.

Industry Tidbits

• • European ammonia production remains uncompetitive with imports from abroad
  • EU likely in market for Canadian durum
  • Long-time fertilizer industry veteran Wayne Brownlee has agreed to accept a membership on the Board of Directors of junior minor Gensource Potash Corp., Saskatoon.
  • Yara International ASA has confirmed that it is returning its ammonia plant in Ferrara, Italy, to production.
  • European natural gas prices have continued to weaken in recent weeks. European gas storage was 64% full as of May 14, according to Bloomberg, versus a five-year seasonal average of 45%.