Insight Focus
- India only bought 1.1 million mt urea from total offers of 3.6 million mt.
- Other major urea markets like Brazil, the US and Europe remain muted putting additional pressure on weak urea prices.
- Processed phosphate prices dropped across the board this week due to sluggish demand and Indian buying coming to a halt.
The India urea tender fall out has been significant.
A total of 3.6 million MT of urea was offered but India’s government agency IPL decided to stay firm at only 1.1 million MT. Prices received were around USD 250 less than the November 2022 tender with WCI at USD 330 CFR and ECI at USD 334.80 CFR. Netback to producers shipping from the Baltics is said to be around USD 260 FOB whilst the Middle East netback is pegged at around USD 310, around USD 25 PMT less than the last price done a few weeks ago.
The latest shipment period for this tender is June 1st from the point of origin. The big question now is when India will return with another tender to absorb length in the market with other major markets like Brazil, the US and Europe being muted and showing little appetite for buying. NOLA barge price traded as low as USD 295 FOB short ton this week, the lowest since 2021. Brazil CFR price is reported to be around the USD 320 mark. Heading into late spring and summer months the outlook for urea prices are not positive for producers. The only glimmer of light is that both the Australian and Thailand granular urea markets will approach their major buying and consumption months between April – September where about 80% of all their annual imports take place. Between the two this volume could reach around 4 million MT, mostly supplied through off-take contracts with major producers in the Middle East and SE Asia.
Processed phosphate prices across all points of origins and destinations have come this week between USD 10-25 PMT on the back of sluggish demand. Chinese DAP is now reported at around the 605-615 range FOB. Although India has been very active in the first couple of months of 2023 to secure ample supplies for the Kharif season, buying interest has now slowed down. Most recent import price is around the USD 625 CFR mark with buyers now looking to secure a level of USD 615 CFR, or less. Subsidy allocation for P&K (phosphates and potash) in India has been reduced by 38%, and if all allocated to DAP, the break-even price would be around USD 600 CFR.
Brazil MAP prices also came down another USD 10 PMT this week now pegged at between USD 640-645 CFR.
All eyes continue to be on India on MOP – muriate of potash – for their contract settlement with major producers. However, the longer India stays out of the negotiating room, the lower the expectation is for the price level to be agreed. The current contract price is USD 595 CFR and some now expect the new price to be closer to USD 400 CFR. Buyers in SE Asia are holding back buying and as a result the standard MOP price this week dropped another USD 20 to between USD 450-480 CFR. Granular MOP prices in Brazil also tumbled another USD 20 PMT reaching a range between USD 460-480 CFR, the lowest level since June 2021.
China is reported to be buing substantial amounts of Russian and Belarus MOP delivered on the trans European rail line.
The global ammonia market has come to a standstill with several ammonia ships now returning to the LPG trade or are simply being idled. Middle East netbacks this week dropped close to USD 70 PMT and are now reported at around USD 435 FOB. Gas prices in Europe are getting less and the one month forward price reported on March 9th was Euro 41 making it USD 12.50 mmBtu resulting in an estimated ammonia production cost of around USD 520.
Saudi Arabia exported 2.551 million MT of ammonia in 2022 – down from 2.912 million MT in 2021.
