LONDON (ICIS)--Bustling Berlin forms the backdrop for this year’s annual conference of the International Fertilizer Association (IFA), with thousands of delegates set to descend on the German capital for the 18-20 June event.
Producers of nitrogen fertilizers - urea, ammonia, and nitrates - are in relatively bullish mood for IFA's showcase conference, with prices on an upward trajectory as the second quarter draws to a close.
Manufacturers' confidence extends to other fertilizers too, including potash and phosphates, with a flurry of deals likely to be struck across the crop nutrient spectrum in the coming days.
The bulls in the urea market outnumber the bears for now as the outlook on prices is firm at least until August.
Latin American and Indian demand is expected to emerge sometime in H1 July and this is largely the reason for the sentiment on prices.
Most producers are committed for July but a significant quantity is now in trader hands, which is yet to find a home with end users not matching current levels yet.
Iranian material is on offer at a significant discount into Turkey and Brazil. This has led to some concern among suppliers that Iran will significantly undercut other origins in the next Indian tender.
But Iran will likely have higher prices for India and look to offer at a smaller discount to other producers.
Brazil is showing early signs of activity, while the US continues to look for direction with barge levels in a wide range.
Europe remains quiet. Offers are higher but there is no interest to buy as the season is at its end.
China is still unchanged with only cross-border business heard for imports. Domestic prices are stable and operating rates still around 60% of capacity.
Southeast Asia business has been slow because of holidays, while Thailand is occupied with contract commitments.
Demand in southern Asia is emerging, with Sri Lanka and Nepal in the market and Bangladesh expected to issue a tender soon.
The key focus in the coming weeks will be on Iran, given there is ample unsold urea in the Persian Gulf for June-July, and how suppliers approach the next Indian tender.
While some discount to Arab Gulf is expected, any big cut from Iran will make it uncompetitive for other origins to sell to India leading to more supply for markets such as Latin America.
In the global ammonia industry, the market remains defined by weak spot demand and a relatively tight supply/demand balance that have contrived to limit activity for June and July loadings.
While a small uptick in the benchmark Black Sea FOB (free on board) price was recorded by Ameropa, few other spot sales were seen this week as buyers anticipate bullish sentiment will evaporate once plant turnarounds end.
Despite several scheduled and unscheduled plant shutdowns this month and next, upward price pressure remains rather weak, with buyers yet to pay significant premiums for spot material.
Little price inflation has been witnessed in contract prices either, contrary to producers’ claims that the market is extremely tight and spot volumes scarce.
More tonnes will hit the market in the coming weeks, with the Yara/BASF 750,000 tonne/year joint venture in Freeport, Texas, about to commence commercial production.
In addition, the long-awaited start-up of the PT 660,000 tonne/year Panca Amara Utama (PAU) in Indonesia not far away, with Japanese trader Mitsubishi eager to lift its inaugural cargo under an exclusive offtake arrangement.
The phosphates market is showing signs of strength in the Southern Hemisphere ahead of the conference.
In India, buying demand is active with a few tenders issued for diammonium phosphate (DAP) and nitrogen phosphorus potassium (NPK) fertilizers.
Market players are expecting the result of a major DAP tender, which is expected to give some price direction to the market.
More demand is expected to emerge in the country as the monsoon has started and it is described as normal.
Buyers are on the sidelines in Pakistan and Bangladesh following recent purchases.
In Bangladesh, the Ministry of Agriculture is yet to award its annual purchase tender for 250,000 tonnes of triple superphosphate (TSP) and 30,000 tonnes of powdered monoammonium phosphate (MAP), which is expected to absorb some material from the market.
According to market sources, so far in 2018 India is estimated to have bought 2.5m tonnes of DAP, Pakistan 800,000 tonnes and Bangladesh 400,000 tonnes, which is estimated to be half of their annual requirements.
In China, the DAP market is stable with prices unchanged. Producers are focusing on the export market and all eyes are on India, Pakistan and Bangladesh and their future DAP demand.
West of Suez, the Tampa DAP price has been strengthened on sales to Latin America from Mosaic.
Domestic DAP/MAP barge prices have increased amid a lack of business on tight availability.
Cargoes from Morocco and Russia are expected at Nola in the coming weeks and slowly buyers will start making purchases for storage for the autumn.
In Brazil, MAP demand is slowly trickling through and there are expectations of prices bouncing back.
On the supply side, most producers are comfortable for July, with shipments to high-demand regions like Brazil.
The sulphur market has been subdued in recent days, as availability remains tight in the main regions.
There has not been much news out of the Middle East this week, especially following the recent announcement of monthly prices and the start of the Eid holiday.
In China, there are expectations that demand will pick up as the domestic season is due to start soon. Import prices seem to have weakened due to the falling US dollar.
Indian demand is seen as strong despite production issues at some plants in the country. Phosphates demand, which has picked up as the monsoon season is good, is expected to keep sulphur business active and prices high.
West of Suez, the main characteristic of the US market is tight availability, as product is trickling through from Canada.
Several cargoes are expected to load this month in California for Mexico, Brazil and China.
In Brazil, the market remains stable this week following the recent truckers’ strike. There are expectations that demand will be strong, as the phosphates market seems to be picking up for the new season.
A producer is expecting the market to enter a stable third quarter, with no big jumps in prices are anticipated.
In Europe, availability is tight due to issues at the gas fields in Germany and the refinery in Italy.
The global muriate of potash (MOP) market is on standby ahead of the conference - although Belarus Potash Company (BPC) has bucked the trend by selling the last of its Brazil export volumes, until at least September, at a new high for the region.
There are expectations Indian buyers may step up to negotiate the next long term MOP import contract at the conference, after concluding that China’s buyers will continue to delay opening talks.
Putting a value on spot sulphuric acid internationally is rather academic right now due to a lack of availability.
As a result, a number of major suppliers prefer not to suggest even a notional price range for tonnes because they have nothing to offer.
In South Korea/Japan, levels are now at a six-year high and there is no sign of availability improving, with sellers saying commitments are solely with long-term contact partners.
The shutdown at Tuticorin in India has pushed prices up and while no further increases were seen this week, bids for smaller lots into India were $100/tonne CFR (cost and freight).
Because of the current market situation, Q3 contract prices in Asia are expected to firm, but to what extent, remains to be seen.
Sulphur shortages are also supporting the recent rally in the value of burner acid, which in turn has seen major buyer OCP Morocco looking for additional tonnes of sulphuric acid.
Chile appears to be the exception in terms of availability and price movement, with the country understood to be sitting on high stocks.
Additional reporting by Julia Meehan, Deepika Thapliyal, Sylvia Traganida, Andy Hemphill, Mark Victory, Mark Milam and Annalise Little
Photos courtesy of Yara, PhosAgro, and BPC.