Mon Jan 5, 2015 08:50 AM CST
DTN Fertilizer Outlook 01/05 08:29 World Prices Hang on Chinese Demand, Tax Decision World fertilizer prices were moved in December by changes in Chinese demand and that country's export tax decision. By Ken Johnson DTN Fertilizer Columnist AMMONIA World ammonia prices fell throughout December. Export ammonia tons from Yuzhnyy, FSU, traded at $58 to $590 early and at month's end had plummeted to $460 to $500. Demand from industrial buyers in China and other Far East markets continued soft and some were reportedly planning maintenance shutdowns in January. At mid-month, Mississippi Phosphates Corporation petitioned for bankruptcy protection and stopped production of DAP. There were production issues in several ammonia exporting countries like Algeria, Egypt, Indonesia and Trinidad, but they were not sufficient to overcome the general malaise in demand. OCP, Morocco, was reportedly in talks to purchase U.S. ammonia from Koch and CF Industries in January. This would be the first ammonia export cargo from the U.S. in some time. Late in December, the January price for import ammonia tons settled at $625 per metric ton, down $80 from December. We expect world ammonia prices to run flat to lower in the short term. Domestic ammonia prices at interior terminals traded at around $650 early, dropped to $610 by mid-December and then recovered slightly to $625 at month's end. Fall plowdown demand had been slow early in the month, which pressured prices lower. However, weather conditions improved in late December and demand resurfaced. There were reports of at least modest levels of carryover tons in the Corn Belt, which persisted even after the late improvement in demand. For the short term, we expect domestic ammonia prices to run flat with an undertone of strength. UREA World urea prices moved higher through December. Prilled prices at Yuzhnyy traded at $300 to $305 mt early and crossed at $320 to $324 late. In mid-December, India came in with another large tender. In November China exported over 2 million metric tons, of which 1.2 mmt went to India. Also in mid-December, China affirmed a flat tax of $13/mt for 2015. The world market will be reliant on strong domestic demand to limit the volumes that are exported out of China in the first quarter. If export volumes are significant, prices could come down. Yuzhnyy found some spot demand late in the month and this, coupled with good domestic demand, helped to underpin the price and firm late December values. OPZ, FSU, however has decided to restart a second urea line and so more export tons should be available in January. Baltic prices are still quite soft as European interest has thinned due to fairly high stocks in place and South American buyers are showing only limited interest. In the granular market, prices in the Middle East moved up late in the month to $336 mton and producers were refusing to consider any price below $340. Chinese granular prices are much firmer, but they will continue to undercut Middle East prices in the pursuit of sales in central and South America. A combination of continued interest east and west will be needed in the New Year to keep the market firm and possibly slightly stronger and of course, strong Chinese domestic demand will be needed to ensure export availability in the quarter does not depress the market. We look for world urea prices to run flat to slightly higher in the short term. Domestic urea prices firmed through December at NOLA (New Orleans, Louisiana) rising from $307 to $315 per short ton early to $338 to $342 late. Traders indicated most of the cargo on numerous vessels arriving in December (tonnage totaling 650,000t) had been sold. As in the case with ammonia, apparently higher corn and wheat prices are encouraging wholesalers/dealers/farmers to buy in product. We look for domestic urea prices to run flat with an undertone of strength in the short term. UAN Domestic prices for UAN traded almost flat in December, rising $5 to $250/32% at month's end. Wholesalers indicated the late resumption of ammonia application in some Corn Belt markets has taken the edge off concerns that added demand for UAN could develop in the spring. Dealers in many markets remain reluctant to commit absent sales to farmers. Reports have many farmers selling only enough of the current corn crop to cover short-term obligations, not wanting to sell at current low prices. Prices for competing forms of N are variable, with ammonia prices falling and urea prices moving higher. For the short term, we look for domestic UAN prices to run flat to slightly higher. DAP World DAP market prices firmed through the month with Tampa export tons trading at $450 to $455 in early December and rising to $465 to $470 late. MAP buyers in Brazil in late December moved to purchase Russian tons in the range $505 to $510 cfr, $15 higher than prices achieved by U.S. MAP in mid-December. Further sales have also been made out of North Africa as GCT, Tunisia, has sold DAP into Italy and France at $510 fob. OCP, Morocco, added to its order book with DAP/MAP commitments for U.S. and Brazil and is comfortable for January; however Moroccan output continues to run below capacity. The domestic market in China is in season and set to peak in the early months of 1Q, 2015. Provided this continues to limit the pressure of potential Chinese tons hanging over the market, supply may be lower than feared by some. Several import market buyers postponed their purchasing decisions prior to the announcement of the Chinese export tax (set at $13 per metric ton for 2015) and should deferred demand find lower than anticipated Chinese supply, then prices would likely firm. This is by no means a given, however. Overall, additional demand both west and east of Suez will be required in January to keep the market on a firm footing and the local market in China will need to perform well to avoid tons being forced offshore. We look for world DAP/MAP prices to run steady to slightly higher in the short term. Domestic DAP prices at NOLA followed world prices higher with barges trading at $410 to $415 early and moving up to $440 to $450 late. Some interior market prices also moved up, but on very light volume due to the holidays and bad weather. For the short term, we look for domestic DAP/MAP prices to run steady to slightly higher. POTASH NOLA potash barge prices traded at $370 to $375 early and fell slightly late in the month to $367 to $370 on pressure from imported product. Interior terminal prices held flat as slow rail service improved only slightly in the month. Absent some new, stronger buying activity, we look for domestic potash prices to run firm but flat in the short term. Ken Johnson can be reached at (CZ/SK) Copyright 2015 DTN/The Progressive Farmer. All rights reserved.