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Analysis: Spring concerns laid bare at fertilizer event

  • Market: Fertilizers
  • 01/10/21

Concerns about supply and consumption of fertilizers in Europe, particularly during spring 2022, were among the hot topics at this week's International Fertilizer Association (IFA) conference in Lisbon.

Delegates spoke of a potential "disaster" and "catastrophe" ahead, based on concerns over high prices, tight supply and logistics. The key to the entire situation is a sharp increase in gas prices, which have led to significant rises in costs for nitrogen-based fertilizer products and, recently, production curtailments in Europe.

CF in the UK, Achema in Lithuania and Yara at various locations across Europe have been among producers that have had to reduce or cease output of key raw material ammonia.

CF has received government support to restart operations at one of its two UK facilities, but that will not be enough to ease supply concerns in the country, particularly as the company already has an estimated order book exceeding 100,000t to cover.

Another key supplier in the region — one that, unlike CF, produces within the EU — said at the IFA that the likelihood of it receiving government support, to allow it to increase output, was low. When asked by Argus whether this was linked to potential complexities of an EU member state issuing such funding to a domestic firm, the contact was uncertain, but strongly felt that the backing was unlikely to come regardless.

Problems ahead, no matter which path is taken

Given that gas costs have risen further since the conference ended, a short-term rebound in ammonia production — and therefore, also in output of key fertilizers such as urea, AN, CAN and UAN — is unlikely in Europe.

The current tightness in supply is a problem in itself, but even a resolution of this initial quandary would lead to a subsequent issue. As it stands, the most immediate concern is that there will simply not be enough nitrogen available to farmers, come the key application season of spring.

But assuming a hypothetical situation in which gas prices fall and ammonia output increases in — for example — January, a subsequent problem would be an extreme backlog and bottleneck of deliveries in early 2022, as so few would have been made ahead of time.

The other key, related issue is prices — they are set to continue rising, because of the high gas costs and tight supply of nitrates, UAN and other products. Prices will also increase for any complex fertilizer with nitrogen content, assuming no — currently unlikely — counterbalancing fall in prices for other raw materials, such as MOP and DAP.

Indeed, given current trends, prices could easily become too high for many farmers to afford. If traders, wholesalers, co-operatives and others also foresee this, they too will buy less product.

The two key factors could cancel one another out — lower production and lower demand would result in a balance, easing concerns around the logistics of making timely deliveries.

But that would still mean problems with regard to arguably the most important factor — not enough nitrogen would be applied in a Europe-wide context during spring, which could significantly hit food production.

A potential winner in DAP

DAP had been set to lose out this season, as many around Europe considered prices for it to be too high and expected a significant number of farmers to go without. Generally considered to be less important in short-term agricultural thinking than nitrogen, it was felt that farmers would save as much of their input budgets as possible for the likes of AN or CAN, and/or use cheaper phosphates alternatives, including organic options. Meanwhile, DAP producers were relatively unconcerned, focused instead on other, larger phosphates markets across the globe.

But that was all before dramatic developments took place in the nitrogen segment. Now, the 18pc nitrogen content in DAP appears potentially highly attractive, and provides another supply option to buyers in the face of tight supply. Moreover, farmers would be able to apply the phosphates element that they may otherwise have dropped from their programme for the season.

Unsurprisingly, the above scenario has apparently not been lost on phosphates suppliers, which have increased offer prices. The right balance will be required to avoid a reignition of farmers' potential to dismiss the product this year.

European nitrogen prices

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London, 14 July (Argus) — Several Indian fertilizer importers have secured more Saudi DAP/NPS and Moroccan DAP and TSP through offtake agreements. The agreements come at a time when India has struggled to maintain comfortable DAP inventories, largely because of a lack of supply from China, which has drastically reduced its phosphates exports this year. Indian DAP stocks fell throughout June to begin July well below typical levels, at about 1.56mn t, provisional data show. Five-year deal with Saudi Arabia Indian importers IPL, Kribhco and Coromandel have signed an offtake agreement with Saudi Arabia for 3.1mn t/yr of phosphates over the coming five years. The quantity will mostly be DAP but also includes NPS. The deal covers five years starting from India's 2025-26 fiscal year (April-March), and includes an option for a five-year extension. The delegations discussed developing customised fertilizers specifically for India and have established a joint working group to explore long-term collaboration. The cargoes will be priced on a spot basis. The agreed quantity will surpass the 1.88mn t of DAP and 250,000t of NPS — totalling 2.13mn t — that India imported from Saudi Arabia over the 2024 calendar year, according to Argus line-up data. Additional DAP, TSP from Morocco's OCP Six Indian importers have signed another agreement with Moroccan producer OCP for the supply of DAP and TSP up to the end of the current calendar year, Argus understands. This brings the total agreed quantities between Morocco and India to 1.5mn t of DAP and 1mn t of TSP. The latest agreement is for an additional 300,000t of DAP and 200,000t of TSP, adding to the 1.2mn t of DAP and 800,000t of TSP agreed in April . The cargoes will be priced on formula. The importers are IPL, NFL, Hurl, PPL, RFC and Fact. OCP did not comment on the deal. India has imported 730,000t of DAP and 285,000t of TSP from Morocco since the beginning of April. India has so far not taken TSP from any other origin since it began importing the product in June 2024. By Tom Hampson Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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