Fertilizers at their most affordable since July 2018
Fertilizer prices in March were more affordable for farmers than they have been since July 2018, according to the Argus fertilizer affordability index.
Fertilizers became gradually less affordable from July last year until October, after which most prices began to flatten or fall. Falling fertilizer prices since October as well as robust crop prices in 2018 have encouraged farmers to plant more grains for this year, boosting fertilizer demand.
The index — which calculates the ratio of fertilizer price to major crop prices — indicates that fertilizers have become more affordable this year (see graph).
Fertilizer prices
Prices for urea have trended down for the past six months, and bottomed out in March, but have stabilised or increased slightly since then. Deferred buying from February and early-March helped stabilise prices, but the most important driver was an increase in US prices in March.
In phosphates, the market has been weak globally as a result of supply outweighing demand. Potash price momentum stalled in the fourth quarter of 2018, with lower demand in key buying regions dampening the price outlook. Weather-related problems and lower crop prices in southeast Asia, especially for crude palm oil, have prevented MOP prices rising.
Agriculture
The major crop reporting agencies — including the UN Food and Agriculture Organisation (FAO), the US Department of Agriculture (USDA) and intergovernmental body the International Grains Council (IGC) — forecast an increase in grains production for the 2019-20 season.
The expectation of higher output has led to a fall in crop prices, which hit multi-month lows in March.
A larger corn planting area is expected in the US — the world's largest producer — and this is likely to increase nitrogen consumption this year. The US corn planting area will rise by 3mn acres (1.21mn hectares) this year, according to the USDA, as the trade war between the US and China leads to a drop in the soybean area.
A similar situation is expected for wheat in Europe, where a larger planted area is expected to lead to higher fertilizer demand. The European Commission's first forecast for the 2019-20 season pushes regional output higher on the year, with production of soft wheat up by 9.5pc to 141mn t, compared with the drought-affected 2018-19 crop of 129mn t.
The Argus global fertilizer affordability index is calculated using the ratio between the fertilizer and crop price index, with the base year set at January 2004. The overall index is adjusted by the crop cycle average. An affordability index above 1 indicates that fertilizers are more affordable compared with the base year, while below 1 indicates lower affordability.
The fertilizer index includes international prices for urea, DAP and potash, adjusted by global usage. Argus' agriculture index includes all major grain prices — wheat, maize, soybeans and rice, and averages by crop tonnage.
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Bridge collapse disrupts Baltimore UAN imports
Bridge collapse disrupts Baltimore UAN imports
Houston, 27 March (Argus) — UAN distributors near Baltimore, Maryland, are holding off from issuing new offers until it becomes clearer when the port there will reopen following its closure from a major bridge collapse. There is limited spot availability for UAN in Baltimore, market participants told Argus . At least one UAN vessel was due to arrive in Baltimore in April. Vessels delivering to Baltimore could be diverted elsewhere, possibly to ports like Chesapeake, Virginia, Philadelphia, Pennsylvania, or Wilmington, North Carolina. The east coast terminal UAN price — encompassing the US eastern seaboard — has risen by 13pc since the beginning of the year because of seasonal demand to $300/st fot on 29 February, where the price has held since. When offers for UAN in Baltimore do re-surface they will likely do so at higher levels because of restricted supply to the port. By Calder Jett Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Baltimore bridge collapse forces freight changes
Baltimore bridge collapse forces freight changes
Washington, 26 March (Argus) — Vessel traffic in and out of the Port of Baltimore, Maryland, has been suspended indefinitely in the wake of a container ship collision early today that brought down the Francis Scott Key Bridge, an accident that will force the rerouting of coal, car and light truck shipments. The prolonged closure of one of the largest ports on the US east coast could have a ripple effect on trade flows across much of the US, as shippers grapple for alternatives in the absence of a certain reopening timeline. Search and rescue efforts are still ongoing in the Patapsco River, after the 116,851dwt Dali headed to Colombo, Sri Lanka, slammed into a bridge support. The crew had lost control of the vessel. The Dali is owned by Grace Ocean and managed by Synergy Marine Group. The Maryland Port Administration said it does not know how long it will take for the shipping channel to be cleared and for traffic to resume. Shipping companies are bracing for a closure of at least two weeks, but many expect the clean-up effort could take significantly longer. President Joe Biden vowed the federal government will provide whatever resources are needed to get the port "up and running again as soon as possible." The port is a major trade hub for steam and coking coal, automobiles and scrap metal. Many market sources are still trying to determine whether the disruption will be dramatic enough to move prices. But coal markets were already being affected today. Baltimore is home to two key coal export terminals: eastern US railroad CSX's Curtis Bay Coal Piers and coal producer Consol Energy's Consol Marine Terminal. The facilities are upstream of the bridge, meaning ships will not be able to serve them until the route reopens. The terminals handle thermal and coking coal from Northern and Central Appalachia. They have a combined export capacity of 34mn short tons (30.8mn metric tonnes). The two terminals loaded 2.4mn t of coal in February, up from 2.1mn t a year earlier, according to analytics firm Kpler, mostly exports to India and China. An India-based trader said that the suspension of coal exports will probably raise prices in India, as brick kilns enter the peak production season in the summer. Buyers could look to petroleum coke as a substitute, but the higher sulphur content may not be appealing to some users despite the higher calorific value. Prices for deliveries to northern Europe are also likely to rise given that the Netherlands, Germany and Belgium combined are the second-largest market for North Appalachian coal. April API 2 futures rose by $2/t to $113.30/t. The incident has added a "level of volatility [which] could have big implications," a European paper broker said. The lack of information has prompted some coal producers to hold off on activating force majeure clauses in their contracts. Curtis Bay is served only by CSX, while CSX and fellow eastern carrier Norfolk Southern serve Consol. CSX said it is in contact with existing coal customers and contingency plans are being implemented. The railroad at this point intends to keep Curtis Bay open but will continue to assess the circumstances moving forward. Norfolk Southern did not respond to questions. Some scheduled Baltimore coal exports may be redirected to the other three eastern US coal export terminals in Hampton Roads, Virginia, but such reroutings likely will entail increased costs. Not all coal mines will be able to shift terminals. Such decisions will depend on available capacity in Hampton Roads. Exports from the three terminals in January reached a five-year high , signaling somewhat limited capacity. Mine location and railroad access may also determine whether coal can be rerouted, an industry source said. But some producers do not have much of a choice about trying to send coal to Hampton Roads. They may need the cash so will be forced into a decision. The producers most vulnerable to delays may be Consol and Arch Resources. Arch's Leer coking coal mine may be in the best position because it co-owns Dominion Terminal Associates in Hampton Roads with Alpha Metallurgical Coal Resources. The sudden lack of export capacity could put a floor under US coal prices, which have mostly been falling since last year amid low domestic demand. The competition to replace Baltimore coal exports could prevent further cuts, another coal trading source said. Metals sources say the accident will have only isolated effects on the global ferrous scrap market, but many market participants are still assessing the situation. The port is the 10th largest ferrous scrap export port in the US, and over the last five years an average of 44,000 metric tonnes/month of ferrous scrap was exported from Baltimore, according to US Department of Commerce data. But the port closure is likely to affect other freight. Baltimore is the nation's top handler of automobile traffic. Motor vehicles and parts accounted for about 42pc of all Baltimore port imports and 27pc of all exports, according to state data. The Port of Baltimore handled 847,158 cars and light trucks in 2023. "It's too early to say what impact this incident will have on the auto business — but there will certainly be a disruption," said John Bozzella, chief executive of industry trade group Alliance for Automotive Innovation. Dry bulk freight rates likely unaffected Several sources told Argus Baltimore's closure is unlikely to have a major impact on dry freight rates despite short-term interruptions to coal transports. "We are in the shoulder months with less demand for thermal coal," a shipbroker said, suggesting mild global temperatures means the collapse "may not have too much of an impact" on freight markets overall. Vessel traffic in ports such as Charleston, South Carolina, and Savannah, Georgia, may increase on diversions from Baltimore. Kpler identified 17 vessels that will likely be impacted because they are either in the Port of Baltimore or were expected to load there in the coming days. By Abby Caplan, Gabriel Squitieri, Luis Gronda, Evan Millard and Brad MacAulay Port of Baltimore coal terminals Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Jera delays Hekinan NH3-coal co-firing test: Correction
Jera delays Hekinan NH3-coal co-firing test: Correction
Corrects trial period in first paragraph Osaka, 26 March (Argus) — Japan's largest power producer by capacity Jera has pushed back a trial to co-fire 20pc of fuel ammonia with coal at its Hekinan power plant to after the end of March. Jera previously said the co-firing demonstration at the 1GW Hekinan No.4 unit will start on 26 March at the earliest . But the company has decided to push this back. The trial will begin sometime after the end of this month, Jera said on 25 March. It took more time to test run equipment ahead of the demonstration, with safety the main priority, it added. It is unclear when exactly the company will start the trial to co-fire 20pc of ammonia with coal. Jera aims to demonstrate 20pc co-firing of ammonia with coal ahead of planned commercial operations in the April 2027-March 2028 fiscal year. It also hopes to achieve a 50pc mixture on a commercial basis in the first half of the 2030s. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Yara curtails 2023 European ammonia production by 19pc
Yara curtails 2023 European ammonia production by 19pc
London, 25 March (Argus) — Europe's largest fertiliser producer Yara operated its European ammonia plants at nearly a fifth below their capacity last year, despite its weighted-average gas costs more than halving compared with 2022. Yara curtailed 19pc — or 890,000t — of its ammonia production capacity last year, while it curbed its finished fertiliser production capacity by 15pc, it said in its annual report released last week. This was distinctly below ammonia curtailments of 35pc in 2022 , when the firm insisted it "will not produce or sell at negative margins". Yara's European plants have an average efficiency rate of roughly 36mn Btu per tonne of ammonia produced, according to Argus Consulting estimates, which implies that 890,000t of lost ammonia production is equivalent to about 786mn m³ of gas demand. That said, the firm prioritised production at its most efficient plants such as Sluiskil in the Netherlands and Brunsbuttel in Germany, from which it exported to its less efficient sites where production ran at lower rates. Yara curtailed nearly a fifth of its ammonia capacity, despite its European weighted-average gas cost more than halving to $14.90/mn Btu from $31.80/mn Btu in 2022. Prices were still much higher than in previous years — they were lowest at just $3.60/mn Btu in 2020 ( see prices graph ). Yara's global ammonia production edged down to 6.39mn t in 2023, from 6.51mn t in 2022. And it stayed well below a 2019 peak of 8.48mn t in 2019, suggesting the firm has moved more towards imports to bolster its own production, rather than prioritising strong run rates at its facilities. Yara operates in a "world of volatility" because of military conflicts in Ukraine and the Middle East, which affect global supply chains, the firm said. "Strengthened operational flexibility" remains a priority in this context, it said. The firm has warned repeatedly of geopolitical risks associated with an influx of Russian fertiliser output fed by gas that is much cheaper than in Europe. "Vladimir Putin is using fertilisers as a weapon of war," Yara said. "We're sleepwalking into repeating the same mistake with fertilisers as we did with Russian energy imports," Yara's chief executive Svein Tore Holsether told Argus in February . But Yara expects higher European production in 2024, as gas prices have continued to come down while fertilisers prices have held firm. Assuming stable gas purchases, gas costs in the first and second quarters could be $320mn and $100mn lower, respectively, than in the same period last year, Yara said in February . The firm suggested its European ammonia assets could run at or above 90pc of capacity. In regions with "efficient gas markets", Yara seeks exposure to spot market prices "unless exceptional market circumstances clearly give reason for deviation", it said. But in regions without such "efficient" gas markets, the firm prefers entering longer-term contracts "if favourable gas prices are obtainable". Yara has a "high" risk appetite for exposure to gas prices because securing access to, and stable supply of, favourably-priced gas is "imperative to our operations and competitiveness", the firm said. "All of our European gas contracts are hub-based, and we are well positioned to cover the risk of spot exposure," Yara said. At the same time, up to 70pc of its European plants can operate on imported ammonia. Yara's largest gas suppliers are Engie, Shell, Equinor, India's Gail, and Trinidad and Tobago's national gas company, it said. The firm consumed just under 6bn m³ globally in 2023, down from a peak of 6.87bn m³ in 2019 ( see gas consumption graph ). By Brendan A'Hearn Yara weighted-average gas costs $/mn Btu Yara global gas consumption bn m³ Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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