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International Fertilizer Market Forecast In The Second Half Of The Year

2022-07-13

Economic sanctions and political tensions due to the Russian-Ukrainian conflict have affected the global fertilizer market this year. Fertilizer trends are now increasingly unpredictable, with prices shifting in all directions, and fairly quickly. Nitrogen costs, which soared at the beginning of the year, were nearly halved at the end of June, while potash prices rose to record highs. What experts have talked about most recently is that the trend is reversing against a backdrop of high oil prices, pent-up demand and product shortages. But these discussions are only based on a large number of assumptions.


By mid-year, global quotes for major fertilizers were still at high levels, but had begun to move in different directions. At the beginning of the year, nitrogen fertilizer prices started to lead the way and caught up with phosphate fertilizers for the first time, and by the end of June, potash fertilizer prices were at multi-year highs. By June 30, granular potassium Baltic Sea FOB 817-1004 US dollars/ton, granular urea 500-550 US dollars/ton, monoammonium phosphate 920-942 US dollars/ton, diammonium phosphate 745-950 US dollars/ton.


According to expert Elena Sakhnova, by the beginning of July, nitrogen fertilizers were down 30-50% from the end of 2021.


For example, the price of ammonium nitrate in the Baltic region has fallen from $760 in December 2021 to $340 now. Urea also fell by nearly half. Meanwhile, in Brazil, another major sales market, Urea was down 25% from the end of 2021. At the time, its price was over $1,000, comparable to traditional phosphate fertilizer prices.


In general, Gazprom's Nina Adamova noted that the highest prices for fertilizers were observed during the March-April market panic: a prolonged energy crisis and supply problems in Russia affected fertilizer prices. But then adjustments were made against the backdrop of a short-term drop in natural gas prices, a review of Russian fertilizer export quotas and a general decline in trade activity in global markets. However, Ms Adamova stressed that the cost of fertilizer "remains very high". She argues that ongoing logistical difficulties in Russia, shortages in the global market and rising prices have led to a drop in demand for fertilizers in developed countries: farmers "try to delay buying fertilizers and wait for prices to drop".


An industry source noted that quotations for ammonia, the main raw material for nitrogen fertilizer production, are now more dependent on geopolitical factors than market factors. “The rise in the price of natural gas, which is a feedstock for ammonia, has led to a decline in its production and further increases in prices. The prospects for exporting ammonia itself from Russia are very murky due to the inability of transshipment terminals to access and pass through pipelines, and he also admitted that the high prices limit the purchasing power of customers.


Another source said urea prices "will be under pressure" until the end of the year due to competition from Russian and Iranian producers, restricted by sanctions. In the fourth quarter, delayed demand could support prices. At the same time, in the potash market, sanctions on Russia and Belarus will not promote competition but lead to shortages, which will lead to further price increases.


According to Elena Sakhnova, nitrogen fertilizer prices will remain at current levels until the end of summer. She explained that the planting season in Brazil will begin, as will autumn buying in the northern hemisphere, and if natural gas prices remain at current levels, nitrogen fertilizer prices could rise to $700-$800 a tonne. DAP and MAP prices have been corrected since March and will continue to the $650-700 level by the end of the year (FOB Baltic). Offers of potash fertilizers are also gradually decreasing, Elena Sakhnova said, related to the partial resolution of logistics problems in Belarus and the increase in Uralkali exports (in April, the company's monthly average exports to foreign countries were only 10% of normal levels, and in May already 60%, at least 70-75% in June).


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