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.