Q4 Fertilizer Review
At the close of 2023, prices for Urea, DAP, and MOP are substantially lower than at the start of the year. In the fourth quarter, Urea and MOP prices have stabilized at lower levels. Fertilizer affordability to crop prices are currently favourable for farmers. India’s rice export ban has helped support Thai rice prices.
Container and bulk freight continued their ascent in the 4th quarter due to geopolitical risk. Freights have risen to 18-month highs.
The conflict in the Middle East between Israel and Hamas in the Gaza Strip has created turmoil in the Red Sea. The Houthi rebels have been attacking vessels in the Red Sea and are targeting vessels from Israel as they transit through the Bag al-Mandeb Straight. This could affect MOP vessels from Israel and Jordan transiting to Asia. 12% of all global trade transits through the Red Sea.
The lack of sufficient rainfall due to El Niño is forcing the Panama Canal Authority to reduce the number of vessels by 40% that can transit through the canal. 40% of all U.S. container traffic travels through the Panama Canal. This is affecting global shipping routes to and from North America.
The conflict between Ukraine and Russia continues to affect world freight and insurance markets.
El Niño and depleted water levels in the major dams remain a concern in Thailand.
The Asia regional fertilizer conference was held in Bangkok from 11 - 13 October at the Mandarin Oriental Hotel. The most impactful news affecting the Thai fertilizer industry in the fourth quarter was China’s 9 November decision by the National Development and Reform Commission (NDRC) to immediately suspend all CIQ inspections which effectively halted all exports of Urea, DAP, SOP and compound, finished fertilizers. The move was made to stabilize domestic Chinese prices, discourage speculation, and ensure sufficient levels for domestic supply. The export ban is expected to last through the first quarter of 2024, but details are unclear.
The Thai Baht / US Dollar exchange rate has strengthened in the fourth quarter with speculation that the U.S. Federal Reserve will lower interest rates in 2024. The exchange rate ended the quarter 34.8 – 35.1 Baht / USD range.
UREA
Urea ended the quarter at $358 CFR, down 14% for the quarter and 26% year over year. Local wholesale prices ended the quarter at 13,800 Baht in bulk per metric ton ex-warehouse.
India is producing record amounts of monthly urea reducing import tender demand. In 2023, imports have decreased by approximately 3 million tons.
India announced a tender of 1.0 – 1.5 million tons on 4 January for shipment up to 29 February. With China effectively out of the export market, prices should stabilize in S.E. Asia.
Natural Gas prices have eased since the start of the quarter. Ammonia prices have softened to $525 CFR (from $575 CFR per metric at the end of the 3rd quarter).
Urea prices have stabilized but could again become volatile if there is a disruption in the ammonia or natural gas markets due to geopolitics or if India comes into the market and buys substantial quantities.
DAP
DAP prices rose slightly in the 4th quarter to $620 CFR mostly due to supply tightness in China. Year over year, DAP prices have decreased 14%. Local wholesale prices traded at around 23,100 Baht per metric ton at the end of the quarter.
China’s decision of 9 November to halt exports has caused problems for Thai bulk blenders. Inventories of DAP remain low and may cause production issues in the first quarter. Small quantities of DAP are being sent by train from Kunming, but supply remains sparse. Phosagro (Russia) and Sabic/Ma’aden (Saudi Arabia) are the only other viable options outside of China.
Both India and Pakistan have low DAP inventories. In late October, India reduced the DAP Nutrient Based Subsidy (NBS) by 31%. At current prices, importers will lose $70-$80 per ton creating reluctance among buyers. Many thought this would put pressure on the DAP prices. However, China’s decision to halt phosphate exports has kept the price stable to firm.
The supply of DAP in Thailand continues to remain tight as importers are only buying what they immediately need and have delayed larger purchases until the first quarter of next year and until the decision on China export policy is more clear. Local prices remain elevated. Prices are softening in North and South America but remain stable in Asia.
MOP
Granular MOP prices declined 3% in the 4th quarter to around the $370 CFR level. Prices have been declining since the peak in June 2022 at $1,125 per ton CFR. Most believe the market has stabilized and prices should remain stable through the first half of 2024. Local wholesale prices ended the quarter down 15% to 14,000 Baht ex-warehouse (from 16,400 Baht).
IPL (India) signed a new standard grade MOP contract at $319 CFR with 180 days credit. The Indian MOP subsidy was cut 85% to Rs1,427 per metric ton.
MOP Imports into Thailand from Jan-Oct were down 21% to 539,200 metric tons.
Palm Oil prices in South East Asia have stabilized and fresh fruit bunch prices are healthy at 7 Baht per kg.
Belarus exports have recovered and the price discount from other origins has closed. BPC will export 7 million tons in 2023. Their exports are expected to reach 10-12 million in 2024 largely supported by China.
Yemen’s Houthi rebels have been attacking vessels in the Red Sea. This may cause disruption and a change in routing for Dead Sea Works (Israel) MOP vessels. An Israeli MOP cargo for Thailand loaded at the end of December and is scheduled for a first half January arrival. It is unclear whether
Increased supply of granular MOP from Laos and Belarus has helped stabilize prices in Asia. Sino-KCL (Laos) is expected to commission their third 1 million ton per year production line by the end of the fourth quarter. The current capacity is three million tons per year with a target of five million tons by the end of 2027. The other active MOP producer in Laos, Lao Kaiyuan, currently has a one million-ton capacity (300,000 tons of granular).
Granular MOP prices should remain stable in Thailand going into the first quarter.