Opinions Focus
- Yara is drastically cutting European fertilizer production.
- This is due to the high price of natural gas.
- Urea prices have traded higher as a result.
Yara has decided to curtail production at the equivalent of 3.1 million MT/year ammonia, 4 million MT/year finished products of which Urea 1.8 million MT, 1.9 million MT nitrates and 0.3 million MT of NPK.
With the outlook of gas pricing in Europe to remain high for an unforeseeable future with Russian gas supplies being limited, further fertilizer production cutbacks are inevitable. Prior to the Yara announcement, producers in Poland and Lithuania decided to throw in the towel.
European producers will now import ammonia where suitable and continue limited production.
As a consequence of the above, Urea prices jumped in North Africa and prices there are now USD 120 PMT higher than in the Middle East. Further price increases on urea are expected from all origins with India said to be entering the market with a tender for 1 million MT and demand in Brazil coming to fruition.
Other products are not faring so well with both potash and processed phosphate prices falling. In Brazil, potash prices are now USD 365 PMT or 31% lower than their peak in May of this year at USD 1,180 having spiked from USD 345 CFR the year prior. Buyers in Brazil are now finding that potash availability is much higher than anticipated from the panic buying on the back of sanctions of Belarus and Russian products.
What is happening in Brazil most likely will spread to other markets in the world notably the Far East with major importers in Malaysia and Indonesia paying attention.
DAP prices are also suffering with no demand except for India. DAP prices in India have declined an average of USD 125 PMT or 13% from their peak of USD 1,000 in May with the current price range between USD 857-900 CFR.
The future outlook for DAP prices are bearish with high stocks, demand destruction and crashing sulphur prices putting pressure on prices.
