Andrea: Welcome, everyone, to the latest episode of our regular podcast series on global fertilizers markets, "Fertilizer Matters." My name is Andrea Valentini. I'm based in Singapore, and I'm in charge of Argus fertilizer sectors in Asia Pacific.
In this episode, we will discuss some of the key findings from our recent trip to FAI in Delhi, one of the most important events for the fertilizer industry in the region where Argus had a strong delegation covering all products. With me today, I have my colleagues, Deon and Tom, who cover sulfur, sulfuric acid, and phosphate respectively. Deon, Tom, could you please introduce yourselves?
Deon: Thank you, Andrea. I'm Deon, a senior reporter here at Argus where I cover the sulfur and sulfuric acid markets from our Singapore office.
Tom: Hey, thanks, Andrea. I'm Tom, I'm the phosphate editor covering the global phosphates market and I'm based in London.
Andrea: Fantastic. Welcome, guys. Let's start with Sulfur. Deon, can you take us through your main findings in FAI and what has happened since then?
Deon: Sure, of course. For one, it was good to be in New Delhi again to see many familiar faces, and I'm also already missing the nice weather there. On the sulfur side of things, I think the mood was slightly different this year. CFR India sulfur prices rose by more than $30 since the end of October to 183 CFR during the week of the conference. This was very much different from FAI last year when prices were around 100 CFR. So this, in turn, sparked discussion among buyers on sulfur prices for the rest of the year.
Sulfur prices have also become increasingly important this year following some sulfur-burning capacity expansions on the East Coast. Interestingly, some upcoming projects are also expected to come earlier than expected next year and will support sulfur demand to India.
Andrea: Very good. And obviously, it's been more than a week since the conference ended. The market moves fast. So what are your expectations for sulfur prices in the coming weeks and months?
Deon: As of this week, I think it seems like prices have stabilized before the quarterly contract negotiations and also the very seasonal holiday period in many regions today. In China, buyers have mostly retreated from the spot market for the time being with offers in the mid and high 180 CFR failing to gather any buying interest now. We expect buying activity to be muted for the rest of the year and emerge in January ahead of the Lunar New Year holiday that falls on the 29 of January next year.
Andrea: Very good. And what about sulfuric acid? What were the key talking points for that market at the conference?
Deon: On sulfuric acid, domestic Indian prices have remained mostly stable despite a rise in sulfur prices both on an import and export basis. Domestic sulfuric acid prices that were offered from sulfur burners were indicated at around 7,500 rupees on an export basis. This is after seeing a run-up over the last few months as more cargoes were committed to export to buyers in both Saudi Arabia and Morocco. If sulfuric acid prices fail to pick up in the domestic market, some sulfur burners will have to cut operating rates due to these lower margins, which I think will also tighten export availability of sulfuric acid.
In the import market, a ramp-up in sulfur-burning operations this year have cut some sulfuric acid demand from fertilizer producers on the East Coast with most burners indicated to already be running at full capacity during the week of the conference.
So what we see now is that buying interest to the East Coast has also waned as a result with buyers adopting more opportunistic buying patterns instead, and then opting to withdraw to the sidelines during a rising market like it is happening now.
Andrea: On the topic of sulfuric acid, there has been a lot of talk about calming capacities in the next one or two years, not just in India, but regionally as well. Can you tell us more about that?
Deon: Yes, indeed. I think during the conference, the talk of startup dates for smelters in both India and Indonesia was definitely a hot topic, although I did find that no consensus was being reached by the end of it. However, I think that most of the participants agree that the new smelter capacity would see a very limited impact on next year's sulfuric acid market given issues like a shortage of copper concentrates, also existing obligations to their respective domestic markets.
Andrea: Fantastic. This is really interesting. Thanks, Deon. Moving on to phosphates, Tom, what was the market sentiment at the conference, and what has happened since in the phosphates markets?
Tom: Well, it's quite a contrast to sulfur, what Deon's saying on the price side because it's really quite steady and it was holding steady through the conference as well. Not a huge direction. You'd say that India still needs a lot of DAP. Stocks drew down again last month in November and finished November at about 1.4 million tons, which is quite low.
On the other hand, OCP, Morocco, without Ethiopia, you know, normally OCP would be selling into Ethiopia. But this year Ethiopia has tended for DAP and taken from other sources. So Morocco has length, whereas India needs DAP. And it's come up a little bit into who blinks first because a lot of the talk in the conference was around a lot of rumors about talks between OCP and the Indian government about a big deal, about as much as a million tons of DAP and TSP split into probably 700,000 tons of DAP, 300,000 tons of TSP.
Now, since then, since last week, nothing has come of these talks just yet, but really India's competition for DAP is mostly really now coming from Ethiopia. And there are a lot of talks about where Ethiopia will source the DAP from now that China is sort of out of the market. And I think we'll talk about that a little bit later. So generally, prices were holding fairly steady. Some people are a little bit bullish, some people are a little bit bearish, but not a massive direction in prices.
Andrea: Very interesting. And very importantly, you mentioned the need for India to import more DAP and reducing stock levels. But isn't affordability still an issue for Indian importers?
Tom: It is, yeah. So at the moment, with the current nutrient-based subsidy and the current maximum retail price, the break-even CFR price is somewhere around the low 540 CFR. And put that in context. The latest sale into India, which happened this week, there was...Russians sold in and also a Jordanian cargo, which was picked up during the conference but only sold on CFR this week. They sold about 633. So there's technically a loss of about $90 or so on imports at the moment.
And the governments have said that they'll make up losses on imports, but still private-sector importers are staying out of the market and all the buying that's happened at the moment is really under public sector or public sector undertaking. There was a lot of talk about the maximum retail price and rumors that the maximum retail price will be increased.
So at the moment, given the current nutrient-based subsidy, given the current CFR prices, if they were to change the maximum retail price to bring it up to meet market levels, to turn CFR to break-even, the government would need to raise the maximum retail price from the current 27,000 rupees a ton up by about 8,000 or 9,000 rupees, which is a big jump that would push a lot onto farmers.
And then there's a current special additional subsidy on DAP of 3,500 rupees, which is going to end at the end of this month. So if we take that out, that would push the current break-even price, you know, further down to sort of lower in 500s or so CFR. And in order to make that up, they would need to push the maximum retail price up by more like 12,000 rupees, which people really don't expect them to do because, as I say, that's a big, big impact on farmers.
It's unlikely that they'll increase to more than 35,000 rupees or something like that, you know, maybe they'll increase but still lower than that. But there was a lot of talk around that at the conference about expectations that the MRP, the maximum retail price will be increased.
Andrea: And how is China's absence from the market affecting this situation?
Tom: Well, that was where a lot of the talk around this Ethiopia tender, which will close later this month, close on the 23rd circulated because under the last tender, a lot of the DAP, which EABC and Ethiopia secured was Chinese. And then there were some Saudi, Jordanian. Russian was also offered into the tender as well.
Now they will need to look more to non-Chinese origins, and that will mean that draws non-Chinese origins away potentially from India. And so that's giving those producers, you know. We're expecting Saudi Arabian to be offered. We're expecting Jordanian to be offered. We're expecting Russian to be offered into this new upcoming Ethiopian tender.
Andrea: Any other markets we should keep an eye on?
Tom: So I'd say I'd pick out three interesting ones for the coming weeks going into the early part of the new year. I'd say Australia is interesting, U.S., Europe. And then as a potential bonus, Bangladesh. Australia, just because, as we say, China is out of the market, China has suspended DAP, MAP offers for export, and there's the potential it could delay exports from China into Australia. And Australia is coming into its main season. It's unclear. It's probable that these Chinese cargoes will get to Australia. But there is definitely demand for non-Chinese MAP, non-Chinese product in Australia at the moment. So in the last two weeks, we've seen OCP and Northern selling significant volumes for Australia.
In the U.S., barge prices had been going down. Went down previous weeks, but now they've found a flaw. They've turned around. Suppliers have raised offers. Mosaic released its winter, fall prices a bit higher than expected, and that drew buyers back into the market trying to get ahead of higher prices in the spring season.
And then Europe has been lackluster at the moment. With the Euro-Dollar exchange rate, it's made importing into Europe difficult for suppliers, but there have been offers still at lower levels, you know, in Euros, 605, 610 Euros a ton FCA, which, you know, on a dollar to ton CFR equivalent is on par or even lower with India at the moment. So we will potentially see, or we should expect to see demand start to come back potentially in the New Year in Europe. And we should see... You know, it'd be likely that we'll see prices catch up with the markets in Europe.
And then Bangladesh, they've had several tenders this year, they've awarded the most recent ones. And so we'll see cargoes carry on going into Bangladesh and we might see G2G sales. So Bangladesh isn't out. You know, we can still expect product to go in there rather than going to some of the other major markets which are actively buying at the moment.
Andrea: Very good. Really appreciate the level of insight that both of you have just provided. We are approaching the end of the podcast, but I just wanted to add something on a different topic that was discussed during the conference. This one is a bit different from the typical bulk fertilizer markets that we normally look at.
So during the conference, one of the things that quite a few importers, especially ammonia importers were discussing was the ongoing tender organized by the Indian government to stimulate the green ammonia market domestically. So in particular, the Indian government is aiming to supply over 700,000 tons per year of green ammonia produced domestically to a range of domestic fertilizer companies. The discussions at the conference were very interesting in that sense because there seems to be quite a significant pushback from the domestic fertilizer industry against the way the mechanism is being set up.
And in particular, the main concern seems to be about the costs. We know that green ammonia production costs are significantly higher than what we call gray ammonia production costs and prices. And fertilizer companies in India expect price parity with gray ammonia and seem to be unwilling to pay any price premium according to industry participants that we have spoken to at the conference.
We understand that the deadline for that particular tender has been pushed back to January. It was supposed to be closed during the FAI conference week. That has not happened because of the concern that we have heard of during the conference. So that is another interesting space to look at, and that's something that we are definitely keeping a close eye on.
Deon, Tom, this is the end of the podcast. Again, thank you so much for contributing to this. To all the listeners, if you have any questions about the markets that we have covered, do not hesitate to contact us directly. Thank you very much, and see you next time.
Tom: Thank you.
