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.