Q3 Fertilizer Review
DAP prices remain firm and uncorrelated with Urea
and MOP price declines
Urea prices were stable ending the quarter up 1.4% on a bounce from the latest Indian tender.
DAP remained firm increasing 11% for the quarter and 35% year over year on limited supply.
MOP drifted weaker and is forming a bottom.
The Thai Government’s 29.5 billion Baht rice program was put on hold and will be studied further before implementation.
Thai Baht strengthened 11% from 36.8 to 32.8 THB/USD in the 3rd quarter. This will help reduce import prices in the fourth quarter.
The flooding in Chiang Rai, Lampang and Phitsanulok in the North; Nong Khai and Nakhon Phanom in the Northeast; and Ayutthaya in the Central Plain has curtailed fertilizer demand.
The conflict in the Middle East and Ukraine continues to add uncertainty to the supply chain.
Global container freight rates have eased a bit from the second quarter and bulk freight rates have been relatively stable,
China continued to restrict Urea exports and did not export in the 3rd quarter.
Natural Gas disruptions in Egypt have stabilized from the 2nd quarter.
Agricultural commodities posted a strong recovery from July and August weakness. Palm Oil prices are at roughly $950 USD/ton, a level not seen since April.
The regional Asian fertilizer conference is being held 8-10 October in Hong Kong
UREA
Urea ended the quarter around the $385 CFR level up 1.4% for the quarter and down 2.5% year over year. Local wholesale prices ended the quarter at 12,900-13,100 Baht per metric ton in bulk ex-warehouse.
Urea prices drifted lower in July and August on lackluster demand as the market waited for another Indian tender. On 29 August, NLF tendered for 1.13m tons of urea for shipment ending October. Winning offers were $340 CFR West Coast and $349.88 East Coast representing an average decline of $14 per ton from the tender in July.
A subsequent tender was issued 19 September with shipments by 20th November. Price and quantities will be announced on 3 October and could set the price direction in the fourth quarter. India’s expected demand is 2-2.5m tons as inventories are seasonally low and good rains in the monsoon season have kept demand firm.
Thailand urea imports from Malaysia were down 39% on increased supply from Brunei, Indonesia and Oman. China did not export urea in the 3rd quarter instead keeping for domestic consumption and is unlikely to export in the 4th quarter.
DAP
DAP prices increased in the 2nd quarter 11% to $635-640 CFR. Year over year, DAP prices have increased 35%. Local wholesale prices traded around 22,500-23,000 Baht per metric ton at the end of the quarter.
DAP began the quarter at $575 CFR and continued firm on tight supply and limited demand from India. India bought at $550 CFR in first half July and ended the quarter buying in the $630’s CFR level. India delayed purchases in the hopes of price declines as the current subsidy makes buying at these levels unprofitable for importers. Production of DAP (down 15%), import (48%) and sales (11%) were all down in the second quarter respectively. India, Pakistan and Bangladesh eventually were forced to buy at higher price levels as their inventories drew down.
CIQ inspections in China are now taking up to 4 weeks for export approval. DAP prices are expected to remain stable to firm even as demand is typically weak in the fourth quarter in SE Asia.
MOP
Granular MOP prices were mostly stable around the $320-$330 CFR level. Year over year, MOP prices were down 13%. Local wholesale prices ended the quarter at 12,100 – 12,300 Baht per metric ton down about 800 Baht per ton for the quarter. ICL increased their standard grade contract price with an India importer $6 pmt to $285 CFR. This may indicate a market bottom.
Uralkali appears set to enter the Thai market directly and sell both wholesale and retail in their brand. Along with MOP from Laos, this will put further pressure on retail MOP prices.
There is still a large disconnect between SOP and MOP prices. With SOP exports restricted from China, supply of granular is very tight in S.E. Asia. SOP has come down $20-30, but still trades around $650 - $660 CFR from Vietnam/Taiwan.
MOP prices should remain stable as dealers try to maintain their current prices and the CPO price remains strong.
A fun look at inflation
Are today’s inflation-adjusted prices affordable?
Tickets to the 1975 World Series Game – Game 6: Price $7.50
This game is always mentioned as one of the greatest games in World Series History.
Four-Day Pass to the 1985 Masters: Price $75
Bernhard Langer won and all Top 10 finishers are in the PGA Hall of Fame.
Tickets to the 1991 World Series: Price: $45.
Most Braves fans prefer to remember 1995.
Standard Grade Muriate of Potash (MOP), FOB Vancouver in USD.
February Price Levels:
1988 ($88pmt)
1998 ($125pmt)
2008 ($375pmt)
2018 ($230pmt)
2024 ($240pmt)
Source: Argus Media.
Excluding the extreme events in 2008, Covid-19 and the geopolitical disruptions in 2021-2022, MOP has increased about 3.5% per year, generally in line with inflation. If all the other events above had a similar 3.5% inflationary increase, prices might still be very reasonable for the average fan:
A World Series ticket at Fenway Park today would cost approximately : $52
A Four-Day Pass to the 2024 Masters : $287
A World Series ticket to see the Braves win in 2024 : $140
Conclusion: Potash at $240 seems quite affordable.
Separating the Noise from the Song?
Separating the Noise in Commodities
A friend sent the attached graphic, and it made me think of all the noise in the commodity industry and how it affects fertilizer prices. How do you separate what is important when buying fertilizer?
“And you may ask yourself, ‘How do I work this?’ “
Annual standard-grade MOP contracts are settled with China and India
Egyptian gas shortages and Indonesian ammonium sulphate tenders
India’s latest Urea/DAP tender/demand. Right amount? Right price?
China. Imports vs Exports vs Domestic Consumption
Exorbitant container freight costs
Product quality and consistency issues
Production rates and turnarounds
In-season vs Out-of-season
World Supply vs World Demand
Crop Price Volatility. Corn vs Beans
Natural Gas, Ammonia and Oil Prices
Floods, fires, monsoons and droughts
Wars, sanctions, tariffs and global supply chain disruptions
Interest rates, exchange rates and financing issues
“And you may ask yourself, ‘Am I right, am I wrong?’’”
In many ways, predicting fertilizer prices is like predicting the flow of water, it goes where it wants to go, to the path of least resistance until there is sufficient pushback.
“And you may ask yourself, ‘Well, how did I get here?’“
Fertilizer prices will rise until they can rise no more. They will decline until the downward trend is finished. The water doesn’t care why the dam broke. It is always perfectly explainable after the fact, but very dangerous to fight the trend. Complexity is a certainty.
So where are prices headed now?
Quotations: ‘Once in a Lifetime’ by Talking Heads
Q2 Fertilizer Review
Q2 Fertilizer Review
Urea and DAP prices were very volatile during the quarter, while MOP prices were mostly stable.
The conflict in the Gaza Strip continues to cause cargo delays and alter trade routes.
The conflict between Ukraine and Russia continues to affect world freight and insurance markets and MOP trade routes.
Global container freight congestion has caused freight rates to increase 2-3x in the quarter. Container freights from China to Thailand have hit two-year highs. $1,500 per TEU from North China and $900-1000 per TEU from Central China.
China continues to halt Urea exports at least until August.
Natural Gas disruptions in Egypt have created supply disruptions in the Arab Gulf.
Agricultural commodities including Corn, Wheat, Soybeans and Palm Oil had a weak 2nd quarter. Wheat dropped 18% in June.
UREA
Urea ended the quarter around the $380 CFR level up 3.8% for the quarter and up 17% for the year.
Urea prices started the quarter with an Indian tender commitment of 724,000 tons at $347.70 - $339 per ton CFR. The tender was subsequently reduced to 340,000 tons which exacerbated the downtrend that would continue for the next 45 days, reaching $320 CFR in mid-May.
The market reversed after Egyptian producers cut output due to worries about national gas supplies. Urea prices finished the quarter up $60 per ton as Egypt was forced to close all Urea plants.
The quarter ended with Indian Potash Limited (IPL) issuing a tender closing on 8 July with offers valid until 18 July for delivery up to 27 August. Purchase estimates are in the 500,000-1,000,000 tons range. India has approximately 10.5m tons in stock and consumes about 36m tons per year.
There is still uncertainty about whether China will export urea in the 3rd quarter or keep for domestic consumption.
DAP
DAP prices declined slightly in the 2nd quarter 2.6% to $570-$575 CFR. Year over year, DAP prices have increased 25%.
DAP began the quarter softening to around the $530 CFR level but firmed to end the quarter with strong demand in S.E. Asia. India and Pakistan have low phosphate inventories compared to last year, but India is reluctant to pay the current CFR prices. The breakeven cost for Indian DAP importers is around $510 CFR based on the subsidies and maximum retail price (MRP). Demand for high P2O5 NPK grades in India may increase due to the high price of DAP.
In Thailand, cargo from Phosagro, OCP, Maaden and various Chinese producers arrived for the main season. DAP was reportedly purchased around the $575 CFR level for end-July shipment. CIQ inspections in China are now taking 2-4 weeks.
The DAP price is expected to remain stable throughout the third quarter with Indian demand and overall affordability expected to pressure the price downwards. The pending Bangladesh tender, with expected prices of $600 FOB, however, may push the price higher still.
MOP
Granular MOP prices were mostly stable declining slightly to $320-$330 CFR. Year over year, MOP prices are down 13%.
Granular prices were supported by steady in-season demand from Brazil, but standard MOP prices continued to drift lower as the markets wait for new standard MOP contracts for India and China. The new contracts are expected to be priced at the $280 CFR level. The contracts should stimulate MOP demand and set a floor on prices.
There is still a large disconnect between SOP and MOP prices. With SOP exports restricted from China, supply is very tight in S.E. Asia. SOP is being offered in Thailand at $685 - $695 CFR partially due to higher freights. The $365 per ton premium is significantly higher than the traditional average price difference of $200 per ton.
Q1 Fertilizer Review
Urea, DAP and MOP prices were mixed at the close of the 1st quarter but are expected to soften until more demand comes at the start of the seasons in S.E. Asia.
Conflict in the Middle East between Israel and Hamas in the Gaza Strip continues to cause cargo delays and freight increases from the Red Sea.
Lack of sufficient rainfall due to El Niño continues to slow traffic through the Panama Canal although the situation is improving.
Conflict between Ukraine and Russia continues to affect world freight and insurance markets.
China’s decision on 9 November 2023 to halt exports has been lifted for DAP as of 15 March 2024. NPK exports are expected to resume 1 May and Urea exports in June. SOP exports remain restricted.
The Thai Baht / US Dollar exchange rate weakened ending the quarter 35.8 – 36.5 Baht / USD range.
UREA
Urea ended the quarter at $372 CFR, up 4.2% for the quarter and 10% year over year. Local wholesale prices ended the quarter at 14,300 Baht in bulk per metric ton ex-warehouse.
The quarter began with India tendering for 647,000 tons of urea at $329.40 CFR (East Coast) and $316.80 CFR (West Coast). Although lower than the 1.0 – 1.5 million tons expected to be tendered, this sparked a rally in urea sending prices as high as $415 CFR Thailand in February.
After a strong January and February, prices declined in March and have broken through key long-term support on the downside. Offers at the end of the quarter into Thailand were at the $370’s level.
The quarter ended with India issuing another tender on 27 March. 760k tons were purchased in the $339 - $348 per ton CFR range. Local production of urea in India continues to increase (2.49 million tons in March) and 31.3 million tons from April 2023 to March 2024 (up 9.8%). This is reducing the quantity and frequency of Indian urea tenders.
Pertronas’ (Malaysia) Bintulu and Gurun granular Urea plants will come online to begin the 2nd quarter after one month of maintenance.
Urea is expected to weaken into the 2nd quarter.
DAP
DAP prices declined slightly in the 1st quarter to $616 CFR. Year over year, DAP prices have increased 3%. Local wholesale prices traded at around 23,000 Baht per metric ton at the end of the quarter.
China announced on 15 March, exports could resume with a 7-day CIQ inspection. Cargo from China for April and May has mostly been booked. The supply of DAP in Thailand remains tight but should loosen in May and June with fresh cargoes from China.
Traders are shorting DAP tenders for May into India with products from Saudi Arabia, Morocco, and Russia. This, in turn, should drive down Chinese prices. DAP prices have broken through long-term support levels on the downside.
DAP is expected to weaken significantly in the 2nd quarter.
MOP
Granular MOP prices declined 8% in the 1st quarter to around the $335 CFR level and declined 40% year over year. Local wholesale prices ended the quarter at 12,900 – 13,200 Baht per metric ton.
The MOP market was quiet in the first quarter but is expected to pick up with the start of the season after the Songkran holiday 12-16 April.
Although standard MOP continues to weaken in Indonesia and Malaysia, the Thai MOP market is stable with import prices in the $320-$335 CFR level. The new Indian standard MOP contract is expected to settle in April, which should set a price floor.
Q4 Fertilizer Review
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.