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DTN Fertilizer Outlook
Monday, February 13, 2023 10:33AM CDT
DTN Fertilizer Outlook 02/13 10:09
Nitrogen Fertilizer Wholesale Prices Fall Sharply in January on Lack of
Demand, Lower European Natural Gas Prices
January began a reset across the nitrogen complex with anhydrous ammonia,
urea and UAN fertilizer prices falling sharply to open 2023, due mostly to a
lack of demand across all products as well as further reductions in European
natural gas prices.
By Logan Garcia, Market Reporter -- Fertecon, S and P Global Commodity Insights
January began a reset across the nitrogen complex with anhydrous ammonia,
urea and UAN fertilizer prices falling sharply to open 2023, a fall attributed
mostly to a lack of demand across all products as well as further reductions in
European natural gas prices last month.
The following is a recap of fertilizer price trends and market developments
for the month of January.
AMMONIA
Domestic: Following an expected reduction in the Tampa ammonia settlement
for January, the U.S. ammonia market was mostly quiet in January. Some reduced
pricing from initial fill offers in December were reported, but overall, the
scenario in the local market was one of stability ahead of an anticipated price
reset, which would arrive in February.
No major changes were reported on previous Corn Belt prompt offers from
December from $950-$1,100 per short ton (t) free-on-board (FOB -- or price per
ton of ammonia without transport costs). Much of the country saw spotty
precipitation and winter weather in January, precluding much in the way of
early season activity even in the southern U.S., including Texas.
Oklahoma factory prices were also reported lower last month at $870-$885/t
FOB ex-plant against initial fill offers from $890-$950 in December.
Buyers have remained mostly absent for 2023 so far, content to wait in hopes
of lower pricing closer to spring preplant direct application. Sellers in the
market have told Fertecon that ammonia prepay sales were rather disappointing
compared to previous years, which could also result in greater logistical
strain than usual for spring 2023.
In the short term, we see the U.S. ammonia market as soft with further price
reductions expected before direct application could take off in March/April.
International: There was a change in tide in the ammonia market in January
following a drop in gas prices in Europe. The cost of natural gas in Europe
declined in late December and into January, boosting the prospect of an
increase in ammonia output in Europe by suggesting a total theoretical cost of
production of around $750 per metric ton (mt) in Europe -- far lower than 2022
year-end price levels.
In late January, further guidance emerged from the U.S. Gulf, with Yara and
Mosaic settling their monthly supply contract at $790/mt cost-and-freight (CFR
-- or sales price plus shipping costs) Tampa for February. The price, down $185
on January, is the lowest level seen at Tampa since October 2021.
The falling prices in the wider ammonia market are further illustrated by
Black Sea ammonia, assessed nominally at $770-$820/mt FOB down from highs at
$995 in December, and in the Baltic, where prices fell from $872-$907/mt FOB to
$730-$775.
The outlook remains soft for the global ammonia market, which is expecting
further decreases on recovering natural gas costs in Europe continuing to lower
price levels globally.
UREA
Domestic: Urea prices fell sharply during January, reaching near two-year
lows at New Orleans, Louisiana, (NOLA) of $340-$390/t FOB during the last week
of the month, down from our first assessment of 2023 at $416-$460/t FOB. World
demand took a pause as buyers waited for other buyers to emerge in India, and
the building supply glut is resulting in more deliveries earmarked to the U.S.
is lieu of any other major buyers stepping forward.
Urea offers at terminals on the Mississippi River still open to barging were
adjusted lower to $420-$450/t FOB, approximately $100 lower from late 2023
offers.
Market sentiment on urea seems softer ahead of spring demand, along with a
building import lineup on the trader side. Further down the supply chain,
however, urea remained the cheapest form of nitrogen fertilizer at the price
spread before UAN offers fell sharply further in February.
The outlook on urea prices is softer with potential to stabilize once buyers
return to the market for spring product. However, the sheer speed and size of
price cuts across the nitrogen complex in early February seemed to put the
entire market in a state of shock.
Discussions at The Fertilizer Industry (TFI) annual conference in Palm
Springs this month will likely be dominated by this new price spread we find
ourselves in, and how both buyers and sellers can navigate selling in a falling
market with considerable length in domestic supplies.
International: Global urea markets continued to fall across the board in
January as weak demand persisted from key markets such as India and Brazil and
sellers awaited fresh buying interest in Europe and the U.S. The continued
absence of an Indian spot tender put pressure on the trading community, and the
free fall in prices continued throughout the month. The month ended with sales
activity muted in Asia due to Chinese Lunar New Year celebrations.
On the sellers' side, the picture was not pretty. All major suppliers were
long with the fading hope of an Indian tender, leading Egyptian urea prices to
fall to $430-$455/mt FOB last month, or about $100-$120 down compared to
December.
Urea prices in Brazil fell similarly because of its lackluster demand for
urea cargoes in January, settling the month at $400-$420/mt CFR versus
$520-$550 at the end of 2022.
With no Indian tender announced in January, fresh hopes are pinned on one in
February for March/April shipment. New demand from Brazil along with Europe
would be needed to firm up prices heading into spring, which as of now, remain
in a falling price scenario.
UAN
As urea prices have continued to plummet in recent months, stagnant UAN
values were unable to compete and lost almost all buyer interest for spring
against urea to open 2023 as a result. This put downward pressure on the UAN
market in the arms race for spring nitrogen buying.
NOLA UAN barges slipped to $335-$350/t FOB by late January, down from
$460-$480 at the start of the month.
Eastern Oklahoma factory prices fell as well by about $150/t from $500-$530
FOB from the plant in December to $350-$360 last month.
Cincinnati UAN 32% was offered lower to $400/t FOB to end the month, down
from the 2023 opening year price of $460. The lower prices also mirrored the
weaker barge prices. Other river hub terminals that were open to barges were
priced similarly in a range of $400-$410.
On the U.S. East Coast, the UAN 32% levels moved lower to $420-$470/mt CFR,
down from $500-$530 on last spot trades reported prior to the new year break.
The region has been an illiquid market of late due to Russian sellers getting
better netbacks elsewhere, but price ideas have now aligned more closely with
the rest of the country despite slow sales.
Across the January and early February price reductions, it seems UAN has
finally been able to achieve a price spread with urea more reflective of
historical market conditions, and fears over massive lost acres have mostly
subsided as well.
Our outlook on U.S. UAN prices is stable in the short term, pending further
developments in the urea and ammonia markets, which might necessitate further
price adjustments again.
PHOSPHATES
Domestic: January was a month of split pressure across the phosphate market
in the U.S. due to pressure from a greater proportion of MAP versus DAP imports
in recent months, as well as the emergence of some early application activity
in the Southern Plains, which is primarily a DAP market.
However, demand for phosphates overall was slow, typical for the early year
winter period between the fall/winter and spring application windows.
Our NOLA DAP assessment increased from $610-$630/t FOB to $635-$645 through
January. In comparison, NOLA MAP barge prices conversely saw a modest $5/t
increase on the upper end, assessed at $600-$605 FOB to open the year compared
to $600-$610/t FOB at the end of January.
Terminal activity was similarly slow alongside low barge demand. DAP prices
gained $5-$10/t over December to $675-$700 FOB, a smaller increase than at the
U.S. Gulf due to lower inland demand. MAP offers, meanwhile, fell about $10 to
$655-$680 due to the reasons above.
Imports on phosphates are building for the spring season from overseas
sellers after the stable-to-higher values were noted, as well as supply
concerns considering the various challenges the phosphates market faced in
2022, including low water on the Mississippi River.
Phosphate prices in the U.S. are seen as stable in the short term, with the
evolving supply and demand balance to take further shape over the next several
weeks.
International: The phosphate market was quiet in January, as Asia and Latin
America were out of season, but also because many buyers continued to defer
their purchasing decisions, hoping to yield lower prices. This theory was
vindicated in most instances, with benchmarks in Russia, North Africa, China
and Europe all falling throughout January.
Following several weeks of prices rallying to buck the overall trend,
however, the Brazilian MAP market opened 2023 with upward momentum, having
ended December at $640-$660/mt CFR but rising to $650-$660 in January. More
typical was the scenario seen in India, which in January saw DAP prices end the
month at $658-$660/mt CFR, down from $720-$730 in late 2022.
There was little reported buying in European markets, but suppliers' hopes
were riding on strong last-minute demand to take prices up. Prospects for
Europe were clouded by debt worries and exchange rate fluctuations, but North
African and Baltic producers would take heart from continued U.S. dollar
weakness.
The resulting divide between markets on either side of the Atlantic leaves
our short-term price outlook for global phosphates mixed in the west but weaker
in the east.
POTASH
Some potash buying has certainly occurred over the previous fall and winter
sales periods, but the question now is when buyers will return for the
remaining requirements, and whether U.S. logistics will be in place to meet
those needs when the time comes. There is a general sense of oversupply both in
the U.S. as well as the rest of the globe, and without much reason to act
early, buyers still appeared to be waiting out January in hopes of lower prices.
NOLA granular potash barges were assessed at the end of January at $395/t
FOB, falling below $400/t FOB for the first time since June 2021 -- around the
time that the U.S., EU, UK and Canada all announced coordinated sanctions on
Belarusian potash. The market remains soft following winter-fill offers earlier
this month, with the NOLA assessment having fallen nearly $100 from $490 in
December.
Halfway through the month, Nutrien released its potash winter-fill offers at
$480/t FOB Midwest terminal, $530-$560 Pacific Northwest, and $495 Baltimore in
the U.S. Nutrien took orders at these levels for first-quarter delivery and at
$40/t premium for delivery in the second quarter, before ending the sales
program.
Mosaic also announced an updated price list in mid-January, having offered
$475/t FOB river terminal and $480 Midwest inland terminal for shipments
through March.
River terminal offer levels continued to fall after the producer sales as
supply weighed on prices. Most of the major U.S. sales points fell in line to
$460-$485/t FOB -- down from $540-$560/t FOB in December along sections of the
river still open to barges.
Potash prices in the U.S. are seen softer to stable in the short term with
little new trade developments to speak of in January.
**
Editor's Note: This information was supplied courtesy of Fertecon, S&P
Global Commodity Insights, formerly IHS Markit.
**
DTN recently published a series titled "Global Fertilizer Outlook." Here are
those articles:
To see Global Fertilizer Outlook - 1, go to:
https://www.dtnpf.com/agriculture/web/ag/news/article/2022/12/06/global-nitrogen
-fertilizer-market.
To see Global Fertilizer Outlook - 2, go to:
https://www.dtnpf.com/agriculture/web/ag/news/article/2022/12/13/world-phosphoru
s-outlook-sees-lower.
To see Global Fertilizer Outlook - 3, go to:
https://www.dtnpf.com/agriculture/web/ag/news/article/2022/12/22/2023-potash-out
look-see-supply-lower.
(c) Copyright 2023 DTN, LLC. All rights reserved.
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