Weekly Fertiliser Update: Week 15

Bearish sentiment in the global fertiliser markets is continuing to drive prices down, although floors are coming into sight. After potash suppliers have been able to halt further price erosion, nitrogen and phosphate fertiliser manufacturers might finally yield some successes in their struggle to prevent prices from sliding. All eyes will be on India in the coming weeks.

India will play a key role in determining the urea and phosphate price trend in the coming weeks. Undoubtedly, the country’s announced urea tender will absorb significant volumes from the market. The question remains, though: at what price? Domestic prices in China—the single-largest urea exporter—remain above levels realised in important export markets. Although China’s domestic spring season is drawing to a close, so far there seems to be no incentive for Chinese manufacturers to lower their export prices. But the strength of the competition for volumes out of Iran and the Middle East might influence Chinese manufacturers’ tactics in this upcoming tender. Relatively low volumes out of these areas might enable Chinese manufacturers to maintain their current export price levels. Strong competition might force them to adjust their export prices downward. Or they might opt to leave the volumes to their global competitors in anticipation of lower competition—and thus higher prices—for business outside of India. The available volumes out of the Middle East strongly depend on the successful restart of production capacity in Qatar.

Increased demand for DAP in India—upon the expected final confirmation of the subsidy rates and following the substantial phosphoric acid price increase announced last week—can bring about some relief in the global phosphate market. Whether this can compensate for recent weak demand in Europe and the US, and as such can serve to stabilise global phosphate prices until demand in Brazil (the main phosphate market, together with India and the US) starts in earnest will become clear in the next weeks.

Potash prices have stabilised after the Chinese potash price (the historical floor price in the market) was agreed upon two weeks ago. Last week, it became clear that the intended 1H 2015 benchmark price is actually the fixed price for the full year 2015, as several suppliers agreed on the volumes that they will ship against the contract price (315 USD/tonne CFR) with their Chinese customers. The Chinese contract and the YOY larger committed volumes that have been agreed on so far provide potash suppliers with some leverage in negotiations in spot markets like Brazil and Southeast Asia, although demand in these markets needs to strengthen considerably in order for suppliers to negotiate higher prices. But the downturn in the agricultural markets and the global farming community’s subsequent cautious attitude with regard to fertiliser applications are diminishing the opportunities for suppliers to negotiate higher prices for the remainder of 2015.

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