Insight Focus
- India buys less than expected at RCF urea tender.
- But Egyptian urea prices rebound as traders cover shorts.
- But more supply is incoming from July onwards.
The international urea market is in a confused state.
Following the lacklustre RCF India urea tender where they ended up buying 560 KT vs intended 800 KT, the market all of a sudden showed some life,
Egyptian granular urea prices increased all the way up to USD 335 FOB on the back of traders covering shorts as well as taking some long positions in view of the continuation of the 5.5% import duty on urea from most origins bar Egypt which is exempt. Egyptian exports recorded a volume of 183,000 MT over the past two weeks.
Middle East producers and Russian producers will cover the India tender with the exception of one cargo reported from China. Current Middle East granular urea price is anywhere from USD 253 PMT FOB to closer to USD 300 PMT FOB all subject to destination and shipment period.
Looking forward it appears that producers are comfortable for the first half of July but that increased export volumes are to be expected thereafter. Petronas of Malaysia is expected to come back into production with the two lines currently down, so will BFI of Brunei which also has faced technical issues. Chinese production will clearly make an inroad into the international market by July – how much is difficult to assess. However, if the trend from January to May continues which saw exports increase 46% year on year to 780 KT from 538 KT, Chinese urea will feature heavily in the export market putting pressure on prices globally.
Thailand imports of urea from January to April increased 16.3% year on year to 601.7 KT vesrus 517.3 KT. South Korean imports dropped 29.8% from 525 KT to 368.4 KT year on year. Indonesia exports dropped 41.3% from 471.3 KT to 276.7 KT due to technical problems at one of their major granular urea factories plus focus being put on domestic demand.
In general the outlook for the urea price is that of downward pressure come 2nd half of July on the back of increased export volumes and lacklustre demand in major markets.
Global phosphate prices are also falling.
Buyers are holding back coupled with high inventories in both India and Brazil.
RCF of India held a tender for 50 KT of DAP and the lowest price was USD 458.79 CFR. As a result of this price and the expectation that the cargo would come from India saw Chinese DAP prices drop an average of USD 15 PMT to 440 FOB. This is a decline of an average of USD 240 PMT or 35% since the start of 2023.
Brazil MAP prices dropped another USD 15 PMT this week to a range of between USD 420-430 CFR.
The outlook for the phosphate price is bearish with some indicating we could se USD 400 PMT FOB prices in the next couple of months
The global potash market saw Israel ICL agree to supply China at the same price as CANPOTEX settlement at USD 307 CFR. This has strengthened the belief that potash prices globally will trend lower in the next few months.
Brazil’s potash price range is now assessed at between USD 320-330 PMT CFR. This is a drop of USD 190 PMT or 37% since the start of 2023.
Pressure is also building in SE Asia where there now is a spread of around USD 100 PMT to the Chinese settlement price – and this is viewed as not sustainable and thus prices in SE Asia are expected to decrease in the months to come.
All eyes are again on the Yara Mosaic Tampa CFR July settlement price which some expect to be reduced by another USD 50 PMT from the June price of USD 340 PMT CFR. This could lead to pressure on production margins in Trinidad at levels around US D250 MT FOB.
Historically the Tampa CFR price has been exceptionally volatile with a high CFR price of USD 1,425 in May of 2022 and a low of USD 205 CFR in July and August of 2020.
TTF month ahead gas pricing in Europe also on the increase resulting in production cost of ammonia of USD 475 plus carbon costs. The ammonia market is now coming to terms with the reintroduction of the 5.5% import duty on ammonia from the US and the Middle East.
Ammonia prices in the Far East has seen CFR China at USD 360 PMT but the Chinese are barking at this price thus the market may see a drop in the ammonia price in the Far East to align with European prices.
