Marrakesh hosts IFA fertilizer conference
London, 19 May (Argus) — The global fertilizer industry descends on Marrakesh next week, for the biggest annual event in the fertilizer calendar.
A great deal of business traditionally takes place around the conference between the 1,400 participants, but it is also an opportunity for key fertilizer players to gauge the mood of buyers, discuss market factors, and to ascertain how the next half of the year will unfold. Argus looks at the dominating topics of conversation at IFA by sector.
Support for Urea emerges ahead of IFA
Support for the urea market has finally emerged ahead of the IFA conference, as significant buying activity ended a three-month downtrend in prices. Close to 250,000t of Egyptian urea and 130,000t of spot AG urea sold this week, with support emerging at around $190/t fob in both places.
The immediate question is whether this is the real floor for the market, or whether prices will come under renewed pressure when all the short positions have been covered. Delivered prices will need to rise to confirm the rally. Buying interest is picking up in Asia and Africa, although short-term demand appears to be deteriorating in Brazil, and the sharp depreciation in the Real could keep buyers out of the market.
The renewed buying activity this week coincided with the announcement of a new Indian tender closing on 29 May and prices in the tender are expected to be set by the level of offers from Iran. The deadline for shipments is 10 July and availability from Iran is expected to be high, with the new Pardis 3 urea unit due to start production around the end of this month. As previously, discussions will centre on how much India will buy this time around, with initial estimates put at around 700,000-800,000t. India bought a combined 998,000t in its first two tenders of the year.
Potash steady on price, but oversupply waits in the wings
MOP suppliers enter IFA at a point where prices have been slowly rising since July last year, in stark contrast to IFA's conference last year when MOP prices were still in freefall ahead of China contract settlements, and demand was sluggish.
This time, suppliers enter the conference in a more robust position, having mostly reported being fully committed until the end of May. Granular MOP demand has been exceptionally high in Brazil and Europe, causing a temporary bottleneck in supply, and this has kept the market firming. But as Europe slows down, and imports to Brazil wane, attention turns to the China seaborne contracts, which typically set the MOP price floor, as China buys 6mn-8mnt. India is likely to be testing the water with suppliers next week too, as its annual contract for 2016-17 ends in June.
The potash market will also be keen to examine the impact of new supply coming on stream from this year at K+S' 2.86mn t /yr capacity Bethune mine in Saskatchewan, Turkmenistan's 1.4mn t/yr Garlyk mine and EuroChem's two Russian mine projects — with total capacity of 8.3mn t/yr — one of which will commence production this year. BHP's recent announcement that it appears to be pushing ahead, albeit slowly, with the 8mn t/yr Jansen mine will also add to an impending period of oversupply. Some market participants have said the supply and demand balance will take as long as 10 years to rebalance. Bad news for suppliers of course, although lower pricing could accelerate demand growth in emerging markets.
Phosphate prices dip ahead of IFA
Phosphate prices have gradually eroded throughout May, and this, along with Indian kharif DAP demand, Chinese exports and producers' capacity expansions will be key topics of discussion next week.
High DAP stocks and an increase in international prices sapped Indian demand over the first quarter; there were no DAP imports in February. But there has been an increase in Indian demand over May as the rupee has strengthened against the dollar, increasing importers' margins as the kharif season begins. The monsoon is expected to support phosphate consumption over the upcoming months but is likely to be tempered by increased producer supply capacity and Chinese exports.
Chinese DAP exports in the first quarter of 2017 are up by nearly half on the period last year, despite reports that operating rates could be as low as 30pc for 2017. Whether or not the producers will maintain this rate of exports, especially now that the domestic season is ending, will be of great interest at the conference.
Major suppliers OCP and Ma'aden continue to expand capacity, and additional extensions are scheduled to come on line in 2017. OCP's total DAP, MAP and NPK capacity was enhanced to 8mn t/yr, and further expansion is expected to add another 1mn t/yr by the end of 2017. Ma'aden will also expand its DAP, MAP, NPS, and NPK capacity when its 3mn t/yr capacity Ma'aden Wa'ad Al-Shamal Phosphate (MWSPC) joint venture project completes later this year. What effect these extra volumes will have is one of the key questions facing the phosphates market this year.
NPK participants focus on raw materials
The NPK market has been fairly stable in the lead-up to IFA, where discussions will largely focus on outlooks for raw material prices in order to establish a price direction for NPKs. East of Suez, another key issue will be logistics. Recent hikes in container freight rates on routes from the west to the east, as well as a lack of container vessel availability, have resulted in delayed shipments to Asia. With the main season approaching in southeast Asia, suppliers will be keen to discuss delivery options.
West of Suez, there may be speculation over the new season 15-15-15 pre-storage prices in Europe, which is not expected to be announced until nitrate prices are established. Last year first prices were seen in July. In the meantime, market players will be closely watching nitrate and potash prices for an indication of the new season price. Buyers note the slightly higher nitrate and potash prices this year and think this will translate into a €10/t increase to the 2017-18 starting price for 15-15-15 relative to 2016-17, taking it to €260-265/t cif inland.
Flat-to-firm pricing expectations dominate sulphur discussions
This week, there has been some firming in the market, but not to the extent that it can be described as a recovery in prices. But the slight nudge up is expected to give the bulls more confidence, which is likely to lead discussions over the next week as the period approaches in which UAE's Adnoc, Saudi Arabia's Aramco Trading, and Qatar Petroleum (QP) announce their sulphur lifting price for June. Early comments point towards the slightly elevated prices in China to the low-$90s/t cfr and the award of QP's 16 May tender in the high-$70s/t fob Ras Laffan leading these three key producers to roll their May prices of $82/t fob Ruwais, $80/t fob Jubail and $76/t fob Ras Laffan/Mesaieed, respectively, into June.
Cfr prices for China and India are also likely to lead discussions at IFA. China firmed to the low-$90s/t cfr on new business after spending five weeks at $90/t cfr and under. The market is now focusing on the region to see if prices increase towards the mid-$90s/t cfr for confirmed business, as China is used as a bellwether by the global sulphur market.
India is also likely to be key to discussions, as demand remains constant. At present, around 85,000t is being sought by four buyers, and Fertilizers and Chemicals Travancore is anticipated to float a purchase tender before the end of the month. Expectations are for prices to firm above the mid-$90s/t cfr as buyers seek product from a market which is described as balanced and lacking spot volumes.
Ammonia prices plunge ahead of IFA
Prices have fallen significantly in the week leading up to IFA, and industry talk will focus on the new pricing points that have emerged.
Discussions are likely to centre around the June ammonia contract price between Yara and Mosaic that has yet to be settled. The emergence of a rare spot purchase by Mosaic of a cargo of around 23,000t at $260/t cfr for second half June delivery has come as a surprise to many in the market. The May price was settled at $330/t cfr and was the first price drop after after five consecutive months of incremental price increases.
Elsewhere, Trammo and Sumitomo concluded a deal at $320/t cfr for 10,000t, while a 6,000t cargo was bought by Namhae Chemical at $294/t cfr for first-half June delivery. Both these deals weighed on the east Asia cfr price assessment, which sank to $310-370/t, down from $360-395/t a week ago.