Global ferts prices to recover in 2018 despite bumps in the road – Bernstein

LONDON (ICIS)–Some fertilizers prices have markedly improved during past months while others that had been trending up since the beginning of the year halted their rally in May, chemical equity analysts at Bernstein Research said on Wednesday.

Following record low prices during the past two years, European fertilizers pricing continues to be sluggish, despite signs of improvement, Bernstein said..

The mixed performance in key fertilizer products shows that the industry is still not out of the danger zone, and is still facing challenging conditions, especially in Europe.

While potash prices in key consumer Brazil continued to strengthen in May – at $261/tonne CFR (cost and freight), up from April’s $255/tonne CFR – values in another big regional market, the US, suffered as poor weather delayed the planting season, said Bernstein.

However, at $267/tonne FOB (free on board) US Midwest in May, potash prices have risen by 5% on a year-on-year basis, despite the fall in a monthly basis from April’s $278/tonne US Midwest.

The European market was more subdued in May, compared to the same month a year ago and despite an increase from April’s values.

At €255/tonne NWE (northwest Europe) CIF (cost, insurance, freight) in May, prices for muriate of potash (MOP) fell year on year by 4% while those of sulphate of potash (SOP) decreased by 9% according to Bernstein.

Month on month, however, European potash prices remained broadly stable.

The volatility of potash prices in the Americas and Europe even reached Bernstein’s analysts themselves, with different outlooks depending on location.

“The US team is more bullish [on potash price forecasts], believing that demonstrated industry discipline will continue to propel prices to incentive price levels,” said Bernstein.

“The EU team is less bullish, assuming the major producers only curtail production enough to absorb new capacity, supporting price stability.”

In fact, the analysts in the US expect potash prices to average $289/tonne FOB US Midwest in 2017, and $333/tonne in 2018.

In Europe, prices are expected at $252/tonne NWE CIF in 2017 and $256/tonne in 2018. Prospects for SOP are even worse, averaging $199/tonne NWE in 2017 but falling back to $160/tonne in 2018, according to the analysts.

Within nitrogen fertilizers, both ammonia and urea benchmark prices fell in May. Ammonia prices stood in May at $306/tonne US Gulf/Tampa CFR, down 4% year on year and 9.5% month on month, as reported at the time by ICIS.

Urea prices stood in May at $187/tonne NOLA FOB, down sharply both year on year (-15%) and month on month (-8.8%), which corresponded to feedback from sources, who have argued the outlook for the global urea market remains uncertain.

European urea prices suffered practically the same fate, with May’s prices at $180/tonne FOB Black Sea, down from a year earlier by 10% and month on month by 12%.

A positive within Europe came from calcium ammonium nitrate (CAN) prices, which rose in May by 4.2% year on year, at €175/tonne on average. However, CAN values lost ground from April, down by 10%.

“Ammonia cash margins have softened as price fell. Non-integrated urea cash margins stayed in negative territory as urea price declines offset falling ammonia price,” said Bernstein.

“In Europe, urea prices continued to decline through May but have started to improve more recently; nitrate premiums were down in the past few weeks but came above the previous year’s very low level.”

Phosphates fertilizers prices were the most stable in May, with little variations from April and slight increases from a year ago.

In the last weeks, phosphates prices have however been subdued.

Prices of diammonium phosphate (DAP) stood in the key Indian market at $363/tonne CFR India in May, slightly down month on month (-1.6%) but up year on year by 5.2%.

The Americas DAP benchmark followed the same pattern, with prices at $357/tonne FOB US Gulf/Tampa in May, down from April (-2.5%) but up year on year by 2.3%.

“Phosphate rock prices are down 18% year over year, though they were up MoM [month on month in May]. US integrated DAP margins (where rock is produced on site) were up 12% YoY [year on year], though they fell 1% MoM because of lower US DAP prices,” concluded the analysts.

(Pictured: potash evaporation ponds in the desert in Utah, US. Source: Jassen Todorov/Solent News/REX/Shutterstock)