Green shoots for potash fertilizer market

Author: Andy Hemphill


LONDON (ICIS)--The global muriate of potash (MOP) fertilizer market is showing signs of recovery after a lacklustre fourth quarter and slow festive season.

The rebound is particularly notable in south Asia, where India’s Rashtriya Chemicals and Fertilizers (RCF) this week awarded a 105,000 tonne MOP import tender to Belarusian Potash Company (BPC).

The sale is understood to have been agreed at the established Indian benchmark of $280/tonne CFR (cost & freight), and originally closed on 6 December.

Market speculation indicates RCF may have negotiated a discount on the $280/tonne CFR price within the agreement, although no further information is available.

The requirement originally called for 140,000 tonnes - 105,000 tonnes firm and 35,000 tonnes optional - for delivery in Q1 2020.

Rival importer Indian Madras Fertilizers (MFL) will close a spot purchase tender for 25,000 tonnes (+/- 10%) of pink/red MOP on 28 January.

This will be delivered to Chennai on the east coast, with shipment required within 20 days from the date of issue for letters of intent.

In neighbouring Sri Lanka, offers have been received under the Ministry of Agriculture’s (MOA) import tender for 13,600 tonnes of red/pinkish/white MOP, for end-March shipment in 50kg bags.

Sri Lanka Ministry of Agriculture potash import tender offers ($/tonne CFR)

Bidder, Origin, Company 180 days' credit 270 days' credit
AgriCommodities, Jordan, Arab Potash 317.25 320
Aries Fertilizers, Uzbekistan, TBC 319.97 323.47
Swiss Singapore, Israel, ICL 327.45 329.7
Agricultural Resources, Belarus, BPC 334 337
Valency International, CIS, TBC 341.74 345

The tender requires delivery to the port of Colombo.

The lowest offers were from AgriCommodities, with Jordanian material from Arab Potash Company (APC).

Demand is also showing a slight uptick in southeast Asia where plantation owners are keeping an eye on the resurgent crude palm oil futures market.

Despite news this week that India plans to cut palm imports from Malaysia - India is one of the country's key export targets - the threat of tighter supplies looks set to push the futures market up even further.

There is an expectation among some potash producers that fertilizer producers will shortly be putting in orders for MOP volumes as they prepare for blended fertilizer production, including nitrogen, phosphorus, potassium (NPK) blends.

Local distributors are active in tenders throughout the region, and once these have closed, will place orders with their primary MOP suppliers.

That said, Indonesian fertilizer manufacturing and distribution firm PT Pupuk has yet to award a 305,000 tonne potash import tender that closed in December last year.

Holding group Pupuk issued a single tender for four of its subsidiary companies: Petrokimia Gresik, Pupuk Kujang, Pupuk Sriwidjaja Palembang, and Pupuk Kalimantan Timur.

There is speculation that lower-priced offers from Laos may have been behind the delay.

The Pupuk settlement is expected to offer much-needed price direction to the region's potash market.

The MOP outlook is not as rosy in Brazil, as offer prices continue to slide amid high inventories and low demand.

Brazil was arguably the strongest-performing nation in 2018, in terms of potash demand, as the US-China trade war saw the value of Brazilian crops pick up considerably.

Since then, the low season and an oversupply resulting from 2018’s bumper MOP imports has pushed offers down.

Offers were heard at $265/tonne CFR earlier this week, before some slipped back to $255/tonne CFR.

Bids were heard as low as $240-250/tonne CFR, although nothing was heard sold at this level.

One producer was adamant that offers have not slipped below $260/tonne CFR.

A second discussed offers at $260-265/tonne CFR Brazil.

In the long term, many players are waiting for the start to China’s 2020-2021 import contract talks, which will define offer pricing for Asia - and much of the world - in the year to come.

Chinese MOP inventories are high, and it is likely that Chinese buyers will push for a considerable decrease on the outgoing 2019 agreement at $290/tonne CFR China.

Indian buyers will also shortly be returning to conclude a second six-month agreement, having taken enough MOP at the previous $280/tonne CFR price point to satisfy some of the nation’s voracious fertilizer demand - but definitely not all.

The bearish pressure of both China and India pushing for a cut to contract prices may weigh on producers’ firm stance.

Focus article by Andy Hemphill