Fertilizer markets cautious, should start recovery in 2014 - exec

20 November 2013 22:38  [Source: ICIS news]

Fertilizer markets cautious, should start recovery in 2014 - execTAMPA, Florida (ICIS)--Weaker fundamentals and lower pricing have caused the fertilizer markets to develop a very cautious sentiment, but a Mosaic executive said on Wednesday that 2014 will see the pricing decline hit its bottom and begin a steady recovery.

The outlook for diammonium phosphate (DAP) looks especially encouraging going forward, Mosaic vice president of market and strategic analysis Mike Rahm said during a presentation at The Fertilizer Institute's (TFI) outlook and technology conference in Tampa, Florida.

“In terms of the situation over the last couple of years, all the nutrients markets have kind of been in a slow burn where fundamentals have weakened over time, and the weaker fundamentals and lower pricing have caused as lot of very cautious sentiment. The two kind of build upon each other,” said Rahm.

“For the 2014 outlook, our takeaway is hopefully, we will be hitting bottom and beginning to recover," he added. "If you look at the demand side, I think there is some very positive things taking place there in that the drivers are still good. Certainly not as good as the last couple of years, but I think the second point is more important, in terms of changes in channel inventories.”

Rahm said that when looking at demand it is a tale of two hemispheres, where there is very strong demand in the western hemisphere and weaker demand in Asia.

“I think one of the big concerns in terms of outlook is the supply uncertainty that hangs over the markets. There are those questions about how much and when some of these supplies get to the market,” Rahm said.

“When we look out five to 10 years, we think the outlook of supply and demand situation looks pretty balanced and positive for the phosphate market, and that is largely due to pretty robust demand prospects. And on the supply side, we think we are really looking at a new ball game in terms of phosphate supply longer term.”

Weighing the current situation, he said one of the primary causes of the weaker fundamentals is collapse of import demand on the part of India. Factoring in to the decline has also come from a steady reduction in prices for key commodities like corn and soybeans.

“Understand the pipeline and the swings in the pipeline, and that will really cause the markets to move in one direction or the other. There is a tremendous amount of caution in the phosphate market, and the fact that prices have come down there is negative expectations. The other key driver of this caution is what is going on in the commodities markets,” Rahm said.

He said DAP pricing in Tampa has declined about 47% from its peak in 2011 of $656/tonne (€485/tonne).

“If you compare current prices to the peaks in 2011, pretty much across the board, the prices of these key products are down about 40%. So the fundamentals have certainly weakened,” Rahm said.

“A year ago, we were talking about how high agricultural prices had to go to elevate this short crop. We had this terrible drought in the US and the rest of the world didn’t have a great year either…And there were a lot of smart people that said we were going to $10 corn. And lot of smart people trade corn and make a living off of that,” Rahm said.

“I think the question this year how low do crop prices have to go to unleash a fair amount of pent up demand, and that obviously is the big question.”

He said looking ahead at 2014, the big questions are how much will China export and how much additionally production will come online from foreign producers, especially in the Middle East. Currently, Mosaic estimates that global phosphate shipments will climb to a range of 64-66m tonnes next year. For 2013, that figure is calculated at 63-64m tonnes.

One area that will see an increase over the next year and beyond as its agricultural industry continues to make further gains in the world market is Brazil.

Shipments to the South American nation are forecasted to climb 5.7% per year, or by 3.4m tonnes from the current 4.5m tonnes to 7.9m tonnes in 2020. The increases in domestic production of DAP are projected to meet roughly one-third of this growth with imports capturing the remaining share.

($1 = €0.74)


By: Mark Milam



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