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Potential for volatility to reignite in fertiliser markets

The sharp rise in container shipping rates and natural gas prices, alongside uncertainty regarding Chinese export restrictions, has the potential to reignite volatility for some fertiliser markets.

RaboResearch analyst Paul Joules said Ammonium Nitrate FOB Baltic Sea spot rates were virtually flat month-on-month, and waning demand will likely prevent prices from pushing higher in the short-term. UAN-30 prices in France were also subdued with limited transactions taking place.

On the supply side, Mr Joules said global availability received a boost in late April as Russia announced the extension of its fertiliser export quotas, which will run until November 30. The new quota is for 19.7 million tons (MT).

“One market where we are seeing some volatility is urea,” he said. “The Middle-East granular spot price dropped in the first half of May to $266/MT before sharply rebounding to $330/MT in early June.”

Mr Joules said recent upward price action can partly be attributed to rising global natural gas prices, which reached 2024 highs in recent weeks. “Since then, prices have modestly declined from their peak, but remain at elevated levels. Strong US/Asia cooling demand and the risk that Russian gas flows into Austria will be halted helped push global markets higher. This could lead to higher prices for fertiliser imports, depending on how the situation unravels.”

He said “Where we’re already seeing an impact for urea is Egypt – some fertiliser companies have temporarily halted operations as natural gas supply has been unable to keep up with domestic demand. There, an ongoing heatwave has been the primary catalyst for the supply issues. At present, it’s unclear how long this situation will go on for, although we are already seeing gas supplies back online for some fertiliser companies.”

The RaboResearch analyst said although the gas issues highlighted threaten to push import prices higher, the expectation is for Chinese urea exports to come back online in July, which should help to cap price upside. “Exports will likely be fairly modest in July, but more significant volumes can be expected in August. That being said, it’s not a given that exports will restart during this period (although China’s inventory replenishment suggests exports will soon resume) and any signs of delays could result in short-term price upside,” he said.

Mr Joules said one factor which adds additional procurement risk across fertiliser markets is the recent sharp rise in global container rates. “The WCI index increased 75 per cent since the beginning of May, which now means the index is trading at its highest level since September 2022. The rise can largely be explained by a combination of continued shipping delays/diversions amid the ongoing Red-Sea crisis, port congestion (particularly in Asia) and concerns regarding a US-China trade war.​”

“Clearly there are risks on the horizon,” Mr Joules said “which could have an impact on global and domestic fertiliser pricing. At present, Australian farmers are particularly sensitive to global nitrogen price volatility as recent adverse weather across parts of the country has resulted in less purchasing than normal, meaning more purchases are still to come. This is especially true given recent rains in Western Australia and South Australia might boost farmer confidence there.”

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