IFA '08: Meeting to focus on prices, China impact

16 May 2008 12:29  [Source: ICIS news]

By Rebecca Clarke

 

LONDON (ICIS news)--Price prospects will be a major topic of discussion at next week’s International Fertilizer Industry Association (IFA) annual meeting in Vienna, coming at a time when most fertilizer products are already at record levels.

 

The consequences of the Chinese government’s decision to impose additional 100% export duties on all fertilizers, and whether restrictions will continue beyond September, will also be at the forefront of delegates discussions.

 

Initial third quarter and second half 2008 contract price ideas for sulphur are expected to be aired in Vienna, although serious negotiations will not take place until June.

 

Early expectations are for substantial increases given that spot prices have risen strongly since contracts were last agreed and are forecast to increase further as the year progresses.

 

Although spot demand has slowed in the major import markets of China and India over recent weeks, sulphur remains in short supply and this situation is not expected to ease until the end of this year at the earliest.

 

Abu Dhabi National Oil Co’s (Adnoc) monthly sulphur price, which is largely viewed as an indicator of global price direction, is at $720/tonne FOB (free on board) in May 2008 some $620/tonne (€403/tonne) higher than in May 2007.

 

Third quarter and second half price discussions for phosphoric acid and phosphate rock are also likely to get underway next week, with more big increases on the horizon.

 

Phosphoric acid prices for quarter two in India were up around $1,400/tonne on year earlier prices. Additionally, producers were only offering quarterly pricing rather than the usual annual contracts.

 

Meanwhile, there are indications that phosphate rock suppliers will target a $150-200/tonne rise to around $400/tonne FOB.

 

Potash prices keep setting new records. Producers have started to achieve prices of $1,000/tonne CFR (cost and freight) in southeast Asian markets for third quarter shipments, up from numbers around $240/tonne CFR this time last year.

 

They will try to roll out similar price increases in other markets before the end of the year, citing the current imbalance between supply and demand.

 

Diammonium phosphate (DAP) and urea prices, already at high levels, have been boosted in the past month or so by the news that Chinese exports have effectively been banned following the imposition of an extra 100% export tax on top of the 35% already in place.

 

Delegates will be discussing what further impact this might have on supply and prices, and also the possible impact on demand for raw materials.

 

This week’s earthquake in China, which has damaged phosphate and other fertilizer production, was expected to bolster the government’s resolve to stop any exports through to the end of the year.

 

There had already been speculation in the market prior to the earthquake that China was determined to restrict exports in the fourth quarter and even beyond, with government statements pointing to the introduction of a quota system, sold or allocated to major state-owned companies.

 

In addition, IFA will present papers looking at the medium term outlook for world fertilizer supply and demand, as well as looking more in depth at the European Union (EU), Russia, India and the US.

 

The conference will also cover fertilizers and their role in the food versus fuel debate.

 

ICIS news will be providing comprehensive coverage of the IFA conference, which runs from 18-21 May.

 

($1 = €0.65)

By: Rebecca Clarke
+44 20 8652 3214

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