Fertilizer industry chiefs head to Boston for major TFI conference

Source: ICIS News

2015/09/25

focus article by Richard Ewing LONDON (ICIS)--As industry participants head to Boston for this year's annual showcase of The Fertilizer Institute (TFI), many producers could be forgiven for humming the Bee Gees song Tragedy rather than Massachusetts, given recent bearish market conditions.

The outlook for the ammonia, urea and phosphates markets has darkened recently for some major manufacturers as prices have adopted a downward trajectory or remained static because of concern over the health of the global economy, particularly China.

Little business was seen ahead of the 27-29 September World Fertilizer Conference, with most players adopting a wait-and-see approach and others away from their desks due to religious holidays in the Arabian Gulf.

The urea market was quiet, with the continued lack of demand slowing activity and Eid al Adha holidays taking many participants out of the market.

Prices remain under pressure, however, with lower numbers being talked and expectations that there is room for further downward movement in the coming weeks given ample supply and a lack of upcoming demand.

Forward prices on the paper market at lower levels also indicate that more decreases are on the cards.

Paper trades have been concluded down to a new low of $243/tonne FOB (free on board) Arabian Gulf (AG) this week, while the physical market is in the $250s/tonne FOB AG for the time being.

Prices in end user markets look to be falling at a faster rate than prices at origin, meaning there are currently discrepancies between CFR (cost and freight) and FOB levels.

Most urea prices are at considerably lower levels compared to this time last year underlining the weaker sentiment that has been prevalent in the market this year given new production coming on-stream.

Yuzhny prices are $80/tonne lower than this point last year, while Arabian Gulf prices are $90-100/tonne lower.

The phosphates market was also flat this week due to a lack of demand and the Eid al Adha holiday in most export regions.

The most active region has been Pakistan, with diammonium phosphate (DAP) sales from Saudi Arabia, China and Australia.

Demand in India, on the other hand, has been muted due to high DAP inventories, around 5m tonnes has arrived at ports so far this year. Activity in China is expected to pick up following the National Day holiday (1-7 October).

West of Suez, the Tampa DAP benchmark remains under pressure due to a lack of business. DAP barge demand is thin ahead of the Mississippi river closure in mid-October. The weakness in the market is coupled with farmers’ concern over grain prices.

On the supply side, US phosphates giant Mosaic and Moroccan major OCP are heard to have curtailed production reacting to a lack of demand.

There are expectations that due to the lack of demand in traditional markets, producers will focus in domestic markets or seasonal regions, like Australia, southeast Asia and the Indian subcontinent, where they can achieve better netbacks.

The settlement of the October Tampa ammonia price at $435/tonne CFR – down $10/tonne from September – failed to spark any major spot activity.

Yara attributed the fall in the benchmark price to an oversupply in the region and lack of demand from US farmers, while Mosaic announced it will continue to run phosphate plants at lower rates.

This loosening of the supply/demand balance has not been repeated in other parts of the world where prices have generally remained static, or even climbed slightly higher on supply constraints.

No new business has been seen in the Black Sea, although the restart of OPZ’s second ammonia line following several weeks of routine maintenance will increase availability.

East of Suez, regional holidays in the Arabian Gulf meant no new business was heard, with market participants not expected back at their desks until the middle of next week.

In Asia Pacific, contract prices have climbed to as high as $480/tonne CFR, with spot buyers staying on the sidelines for now due to soft caprolactam (capro) and acrylonitrile (ACN) conditions, and downstream plant turnarounds in Taiwan and Korea.

The key question arising from the sulphur market this week is whether prices have finally reached a floor since the start of their downward spiral in August.

This is particularly pertinent for major buyers and sellers who are in the early stages of fourth-quarter contract price negotiations and for those wishing to secure spot material.

Ahead of Eid al Adha, Middle East producers were sounding upbeat about their demand and also described stock positions as sold out.

However, traders were rather sceptical about Middle East producers describing stock positions as being sold out, particularly those that had volume to sell for which they could not find a home.

In India, the mood was rather downbeat in terms of demand and pricing.  Fertilisers and Chemicals Travancore's (FACT) expected to see a much lower price for its October requirement than its previous tender which was awarded to Swiss Singapore at $169.50/tonne CFR.

Indeed, the tender was scrapped because it only received one offer in the mid-$130s/tonne CFR Kochi, formerly Cochin. Traders said FACT was targeting $100/tonne CFR.

In the potash market, prices for muriate of potash (MOP) were mostly steady this week as both buyers and sellers paused to re-evaluate the market following further drops in currency for most markets, including Brazil, Indonesia and Malaysia.

Mosaic joined the chorus of market participants who have been expressing concerns over the downturn in the market when it announced it was going to be lower its potash production by extending the maintenance period at Colonsay mine in response to the softer conditions

In Asia, the market is quiet, with no new tenders heard from plantations in the southeast. Indian demand continues, but while recent data show monthly import volumes are currently above 2014 levels, sales volumes are currently lower.

Quieter sentiment prevailed across the global sulphuric acid market, with public holidays falling in a number of regions.

Further feedback from the recent Mosaic Brazil tender indicated the price was in the low-$50s/tonne CFR.

In contrast to the European market, supply from Japan and Korea remains tight, with a recent fire at Pan Pacific Copper (PPC) expected to take the Tamano smelter in Japan off-line for another month.

Rebecca Clarke, Deepika Thapliyal, Sylvia Traganida, Julia Meehan and Kate Wilcock contributed to this report.