International ammonia prices were under pressure through January. The Yuzhnyy export price range dropped from $279-$310 early to $270-$280 late. Both the Black Sea and Baltic spot markets remained quiet. At month's end the price of Trinidad export ammonia into Tampa dropped $40 to $310 mt. Demand from Far East industrial users continues weak and bearish conditions in world phosphate markets seem likely to discourage world ammonia price increases in the short term. Domestic ammonia prices ran flat for most of January with central Illinois terminals at $455 early and falling $10 to $445 late. Prices for competing forms of N are soft and late in the month domestic ammonia prices took a sharp hit in the Western Corn Belt as Koch reduced Sioux City prices by $55 to $380 per short ton. Domestic ammonia prices have been far out of line with decreasing urea prices for some time and we believe this could be only the beginning of a decline in domestic ammonia prices.
World urea prices moved lower through January. Prilled material from Yuzhnyy dropped $40 mt through January to $200-$204. The price for Middle East granular for export to the U.S. dropped from $201-$216 early to $193-$199 late. North African prices also came under considerable pressure as European prices were slashed to try to move Middle East cargo. Turkey looked like a promising outlet for North African material, but aggressive offers from Iran and elsewhere in the Middle East eroded possible netbacks and market share for Egypt and Algeria. Brazilian buyers bought a few cargoes hand-to-mouth through the month at ever falling prices. Prices for Chinese material moved lower with export tons trading at $232-$235 early and ending the month at $195-$200. Even though prices of Chinese product have moved lower, there has been a supply build in the ports. With close to a million tons at the ports and about 25,000-30,000 tons per day still moving in, supply from China seems likely to put a cap on any price recovery. There is no sign of a return to the market by India; they may return at the end of the first quarter. We look for world urea market prices to run flat to lower in the short term. In the domestic market NOLA (New Orleans, Louisiana) granular barges traded at $202-$205 early in January and toward month's end fell to the $179-$180 level. On the day that happened there was an immediate gain back up to the low $200s, as many fence-sitting buyers entered the market. Several large wholesalers have indicated to us they have almost no inventory and have been waiting for farmers/dealer to make a move. At month's end NOLA barges were trading in the $193-$202 range. We are now only a few weeks away from spring demand. Low crop prices might take the higher edge from demand, but overall demand should be close to normal. For the short term, we expect domestic urea prices at NOLA to keep moving higher. We also believe a substantial rise in domestic prices would stimulate a flood of imports and forestall any sustained price rally through the medium term.
NOLA UAN barge prices dropped $15, trading at $165/32% early and falling to $150 late. Despite the month-end rally in urea prices, many wholesalers remain unexcited about UAN prospects. UAN prices are still perceived as high relative to urea. New production is due into the market from several sources in the coming months and producer margins are huge. Demand is slow to get started and at month's end CF reluctantly posted a $15 per short ton decrease at many interior terminals as some move needed to be made to come more in line with decreased urea prices. As in the case with urea, however, strong spring demand for UAN is nearly upon us in the wheat belt which could begin to support UAN prices. For the short term we look for domestic UAN prices to run flat with undertone of softness.
Demand in the world phosphate market was quiet through January and prices drifted lower. Tampa export DAP prices traded at $400-$405 early and dropped to $380-$385 mt late. Asian and South American markets are out of season and many buyers believe deferring their purchases will yield yet lower prices. Demand in the U.S. remains extremely limited and barge prices for DAP late in the mid-month dropped $15/ston this week to $310-$315/ston fob NOLA. Russian DAP and MAP prices have been reduced to $380-$385 cfr delivered to East coast, South America; estimated netback is in the high $350s-$370 fob Baltic. The downward movement in world market prices led to announcements of DAP production curtailments in China. There was very little buying in European markets through the month and the prospects for Europe remain clouded by debt worries and exchange rate fluctuations. The lack of demand from the Indian sub-continent has encouraged Ma'aden Saudi Arabia, to turn to South America once more to find a home for product. Saudi product dropped from $400-$401 early to $388-$390 late. On the supply side, raw material costs (both sulfur and ammonia) are falling. This has increased the operating margins of all DAP producers, which may ease their resolve to maintain prices. We look for world DAP/MAP prices to run flat to lower in the short term. Domestic phosphate prices at NOLA continued to deteriorate over seasonally slow demand. NOLA DAP barge prices moved from the $330-$340 per short ton level early to $315-$325 late. Interior terminal prices were mostly flat through the month over inactivity. Large wholesalers continue to be wary of significant inventory build. With an increase in demand for spring imminent we believe domestic prices could run flat to slightly higher in the short term. Given the present supply/demand balance in the world market, however, we doubt there could be any sustained upside rally in domestic DAP prices.
NOLA potash barge prices moved lower through January, trading at $230-$250 early and dropping to $210 late. St. Louis terminal prices dropped from $280 early to $260 late. Slow demand and long supplies on consignment are keeping domestic potash prices under downward pressure. Continuing low crop prices seem likely to keep demand muted as well. We look for domestic potash prices to keep moving lower in the short term.
Ken Johnson may be reached at Talk@dtn.com
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