Insight Focus
- OCI, Azomures cut ammonia ouput as gas prices soar
- Brazil urea prices rise despite high stocks at ports
- First Nigerian, US urea arrives in Europe as trade flows change
The surge in European gas prices in Europe over the past week caused Netherlands-based OCI and Azomures of Romania,to cut their ammonia production with more cuts by other producers expected imminently. At these gas prices urea production costs in Europe exceed USD 1,000 a tonne, excluding carbon charges.
Traders moved quickly to cover their urea shorts in Europe which led to FOB prices in Egypt leaping to USD 740 compared with USD 625/tonne on June 1. All eyes are now on Brazilian and Indian purchases for the second half of the year.
However, massive stocks of fertilizers at the Brazilian ports of Paranagua and Santos as well as abnormal corn stocks inland will create logistical challenges which could have global ramification on fertilizer prices. Nonetheless Urea CFR prices in Brazil increased to USD 630 this week from USD 570/tonne last week due to higher FOB prices in North Africa.
Shift in Trade Flows
Trade flows are also changing and for the first time Nigerian and US urea is finding its way to Europe as a result of the limited gas supplies and increased costs for European manufacturers.
Potash prices are also under pressure particularly due to lack of Brazilian demand. Unless Brazil comes to the table with increased purchases from July on, it is very likely that the all time potash prices in Brazil will fall further. Brazilian potash prices fell another USD 25 this week to USD 1,000-1,100/tonne CFR with the average price down USD 150/tonne from April’s record high. Russian producers seemed to have found a way to have exported 590k tonnes in May alone to Brazil despite sanctions against Belarus and restricted supplies from Russia. Major potash producers will actively seek other markets – notably Malaysia and Indonesia in Asia – to support prices.
Granular phosphate prices are also under pressure across multiple global markets from weak demand and increased supplies from China. China’s strong participation in the Bangladesh tender surprised the market and the question now is whether China will continue to export large quantities despite strict export measures.
All Eyes on India-Morocco Talks
The negotiations between Morocco and India on the second-quarter phosphoric acid price are adding to the uncertainty in the global phosphate market. The price will determine if India makes its own granular phosphates or import them.
The outlook for granular phosphates is that of demand destruction and as a result we will most likely see reduced prices for both da- and monoammonium phosphate (DAP, MAP) and other phosphate rock dependent finished fertilizers.
