INSIGHT: Fertilizer prices on the rise as energy crisis, tight availability, bite

Author: Sylvia Traganida

2021/10/01

LONDON (ICIS)--All fertilizer products have firmed in recent weeks following the spectacular increase in natural gas prices and continued tight supply in most regions.

Urea prices globally have touched 13-year highs, as the energy crisis has spread from Europe to China.

European natural gas prices continue to rise, with no clarity on when the situation will ease. Urea plants in Europe and Ukraine are shut down, with no restart date in sight.

China is also looking to restrict urea exports to ensure domestic supply at a time when energy availability for factories is short. Exports from Indonesia are likely to be limited because of domestic requirements.

This adds pressure on buyers such as India, which needs to buy at least 1m tonnes/month over the next three months.

Prices have increased each day, with recent sales in the Arab Gulf concluded at $620/tonne free on board (FOB) for October. Egypt, Algeria and the Baltic have also sold granular urea above $600/tonne FOB.

There are not many offers in the market, as suppliers are in a wait-and-see stance and the gap between ammonia and urea prices is closing.

The outlook remains bullish, with natural gas and coal prices likely to face pressure during the winter months, when domestic energy consumption is high.

The paper market is reflecting significantly higher levels, with Brazil trading at $725/tonne cost and freight (CFR) on paper. In the physical market, buying is thin in Brazil as prices increase.

Following recent cuts in ammonia production, yet more European capacity was curtailed on soaring natural gas prices, with BASF the latest producer to reduce output.

Given the chemicals group’s curtailments in Germany and Belgium, the company has been heavily linked to Nutrien’s spot deal with a mystery buyer for 25,000 tonnes from the Caribbean.

Yara and Mosaic agreed a $50/tonne hike in the ammonia Tampa contract for October loadings, although Yara’s talks over the Baltic contracts have yet to conclude.

The Norwegian major purchased a spot cargo in the Black Sea at a premium to September business, as did Borealis in France and Agropolychim in Bulgaria.

Trammo also sold to Borealis and concluded a small sale into Greece, with suggestions the trader may be poised to load a US spot cargo.

With spot deals focused on the west of Suez, business east of Suez was slow ahead of national holidays in northeast Asia.

That left the long-awaited restart of a Saudi ammonia plant as the main talking point. Ma’aden also more than doubled its fleet size as it chartered four tankers to handle output from a new plant.

Ammonia prices softened in Asia Pacific, but it remains unclear if large producers east of Suez will look to sell spot volume into Europe at better margins than can be obtained in their traditional markets.

SUPPLY UNCERTAINTY DRIVES THE PHOSPHATES MARKET
The phosphates market has been characterised by uncertainty recently, as it is unclear whether China will restrict phosphates exports.

So far, there is no official announcement from the government, and phosphates availability out of China remains tight for Q4.

In India, there is diammonium phosphate (DAP) import demand, with a couple of import tenders floated in the market.

Other buyers are reluctant to make purchases due to high prices and snug supply, as well as the wait for the phosphoric acid contract price for Q4 settlement between Moroccan producer OCP and its Indian customers. This is expected to offer some guidance on DAP import demand.

The price is expected to settle at an increase in the next few days, as raw material and DAP prices are up.

In China, phosphates producers are expected to prioritise supply to the domestic market, and it is unclear how much availability they will have for the export market.

Production rates at domestic DAP and monoammonium phosphate (MAP) plants remain stable at 65%.

DAP prices have risen on the netback of a sale to the Philippines. Chinese producers will also be looking at India for demand direction, as buyers will need cargoes for 15 December arrival at the latest.

In the Americas, the Tampa DAP price remains unchanged on a lack of export business from Mosaic.

In the domestic market, DAP and MAP barges traded at higher levels. However, Mosaic agreed on barge business at lower levels for October-December shipment, as supply in North America remains limited.

On the supply side, availability is tight for October and beyond until clarity on the export supply from China arises.

Saudi producers are busy in October with shipments to Africa, India, the US and Brazil. Ethiopia has not issued its annual import tender for NPS, which is expected to keep OCP busy together with phosphoric acid shipments to India.

BULLISH SENTIMENT CONTINUES FOR SULPHUR; POTASH AVAILABILITY STAYS TIGHT
Sulphur sentiment remains bullish, amid good downstream demand.

In China, buying activity is tepid ahead of the Golden Week holiday (1-7 October). Meanwhile, market players are observing the impact of the government’s energy conservation efforts on production.

Chinese port inventories dropped this week, reaching the lowest level since early 2019.

Indian sulphur demand was seen as increasing in the short term, amid uncertainty about Chinese phosphates export availability.

In the Arab Gulf, Muntajat began the posted prices announcements, setting the Qatar Sulphur Price (QSP) at a $14/tonne increase from September. The market awaits announcements from the region’s other major suppliers.

Activity continues in Sub-Sahara Africa, with some deals concluded during the week and some buyers still in need of tonnes.

Fourth quarter negotiations are ongoing in Europe and North Africa.

In the US, Tampa Q4 contract prices were settled at a $12/tonne decline, following a hurricane that damaged Mosaic’s phosphate operations and led to some length in the sulphur market.

In Brazil, multiple buyers are understood to have concluded business at higher levels this week.

In the potash market, Russian muriate of potash (MOP) major Uralkali has again smashed the ceiling on sales into the Latin American powerhouse of Brazil, closing 90,000 tonnes of granular potash at $750-770/tonne CFR, shipping October.

MOP trade is otherwise limited, although offers show no sign of decline.

In southeast Asia offers have firmed considerably on tight supply.

Insight by Sylvia Traganida

Interactives by Erica Sesay
Reporting by the ICIS Fertilizer team

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