US phosphate demand is poised to rebound ahead of the spring as buyers re-enter the market to replenish depleted inventories, while lower prices across key macronutrients boost fertilizer affordability for domestic growers.
A simultaneously thin import lineup for near-term MAP and DAP shipments could indicate the need for additional supply to meet spring demand, bolstering values into the first quarter of 2023. But forward price outlooks remain clouded among market participants, as DAP maintains an atypical premium to MAP at the US Gulf coast and nearby demand remains thin. Buyers are still practicing tight inventory management in an effort to mitigate forward price risk should additional depreciation occur on either product ahead of the spring.
Argus estimates 273,000 metric tonnes (t) of offshore DAP reached the US from July through early December, about a 60pc decline from the same period in the 2021-22 fertilizer year ended in June 2022. MAP imports in the same period fell by about 11pc to 485,000t.
Historically elevated prices throughout 2022 and carryover inventories from the past spring eroded demand for new tonnage going into the just-concluded fall application period. Hesitation that characterized buying habits this year is expected to continue into 2023 even as overall demand is anticipated higher.
Fourth-quarter consumption estimates continue to trend below normal, although hand-to-mouth purchasing this season is said to have mitigated large carryover inventories that would typically follow reduced application rates. Some industry participants were initially projecting a 10-15pc drop in phosphate consumption this fall versus historical norms, but one supplier has since raised its estimate to 25pc.
Sources in late December cited depleted buyer inventories throughout the supply chain heading into the traditional winter fill purchasing period, particularly among DAP customers. Improved fertilizer affordability compared to year-earlier levels should also incentivize buying for the spring, while favorable crop values urge farmers to maximize crop yields.
The Argus US fertilizer affordability index, which measures key fertilizer costs against crop values, reached a one-and-a-half-year high last week. DAP and MAP barge prices by 15 December declined to about $620/short ton (st) fob Nola and $601/st fob, respectively, from record highs nearing $1,000/st fob Nola in March.
Comparatively tighter post-fall DAP supplies — and mixed global trends for DAP and MAP — are likely responsible for the product's recent unusual premium to MAP, despite the latter's higher P2O5 content.
MAP prices in Brazil, a key competitor for imports, trended at about a $22/t discount to the US Gulf coast on a cfr-equivalent basis in the week ended 15 December. Argus estimates US Gulf coast DAP during the same week trailed values in India by nearly $45/t, and industry participants agree the diverging relationships are contributing to DAP's abnormal premium in the US as sellers cite MAP pressure from lower Brazilian values and support for stable DAP prices from India.
The difference between the two price relationships by mid-December this year — at $67/t on a cfr basis between India's premium and Brazil's discount — marked a nearly 41pc narrowing from the beginning of the month, when India maintained a $32/t premium to US DAP and domestic MAP values trended nearly $82/t higher than those in Brazil. The difference has averaged $87/t so far in December, a sharp increase from trends since 2015, when the spread ranged from $4-62/t.
Market sources by the end of the month expected continued support for the DAP premium in the US for as long as the widedifference in spreads to key offshore markets lingers.
