Insight Focus
- Urea is hugely oversupplied globally.
- Producers are holding huge stocks.
- Global demand remains weak.
Four of my past five reports on Czapp have lead with the news that Urea prices have been falling sharply. Today’s report continues that theme.
Urea prices continue to be under heavy pressure with oversupply and lack of demand taking massive tolls. Middle East producers are said to have around 800,000mt of urea unsold for February with some indicating sales took place as low as USD 410 PMT FOB. Chinese producers are said to be having around 400,000 MT of prilled urea in stock at ports waiting for an India urea tender. However, India appears not to be coming back in the market with a spot tender anytime soon. In addition, Chinese New Year celebrations and TET in Vietnam make Asia come to a standstill for the next week or so. Several urea cargoes destined for Europe from the US, Nigeria and Malaysia are said to be partially unsold with buyers holding back anticipating lower prices in the next couple of weeks. Chinese urea exports through December 2022 ended at 2.8 million MT, down 46.8% from the year before.
On the phosphate side all eyes are on India. Phosphoric acid Q1/2023 negotiations are ongoing with some indicating bids as low as USD 900 CFR vs offers at around USD 1,100 vs Q4/2022 settlement at USD 1,175. Moreover, there has been a mid-Rabi subsidy cut on DAP of USD 93 PMT resulting in new imports taking a USD 40 PMT tumble to around USD 660 CFR for Chinese imported DAP cargo. Further subsidy cuts are expected from April onwards which could result in DAP support cut by more than USD 200 PMT. MAP prices in Brazil remain unchanged this week after an average of USD 60 PMT increase in price since December.
Potash prices keep falling in the US, Europe and SE Asia. Weak demand and ample supplies are taking a toll on prices. Brazil prices remain at USD 530 CFR albeit with better affordability and expected increased demand. NOLA granular potash prices are now less than half of what they were during the peak in April 2022. Current price FOB barge is assessed at slightly below USD 400 short ton. SE Asia prices are also down another USD 10-15 PMT from last week. The outlook for potash prices will hinge on the development of the India contract price which is expected to be around USD 475 CFR, down from the current contract price from last year of USD 595 CFR.
Ammonia prices in Europe are under severe pressure with TTF gas prices looking to remain low (Q2+Q3 gas below Euro 56 this week) and with European ammonia production gradually coming back. A quick and simple calculation using consumption of 34 MMBTU to make one metric tons of ammonia with TTF at Euro 51.7 suggests an ammonia production cost of just less than USD 600 plus CO2 charges and with urea at USD 450 ex warehouse, also plus CO2 charges. Buyers in Europe are waiting for directions on the Tampa settlement between Yara and MOSAIC.
