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Phosphate prices to recover faster than urea values

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Phosphate prices have a better chance of gains ahead that urea ones, PhosAgro said, seeing a slowdown in the supply boom which has driven values to multi-year lows.

 

The Russia-based fertilizer group, unveiling plans to invest $3bn in “growth and modernisation” by 2020, acknowledged that prices of phosphate fertilizers had fallen by roughly one-quarter this year to $306 a tonne on the Baltic export market.

 

That was a far bigger loss than suffered by its other key product, urea, priced at $240 a tonne in the same market, and NPK, a mixture of nitrogen, phosphate and potash, worth $265 a tonne.

 

Phosphate prices had been undermined by the “ramp up of new capacities” by Saudi Arabia’s Ma’aden and Moroccan giant OCP, at a time when demand was curtailed by the historically wet US spring, and against a backdrop of long-term decline in Chinese application rates.

 

‘Demand growing faster than supply’

However, the outlook to 2025 shows a tightening trend, with “demand growing faster than supply”, PhosAgro said, forecasting a market deficit of “up to” 2m tonnes when comparing expansion in production and consumption.

 

Although an extra 20.5m tonnes in output capacity will come onstream, mainly in Morocco, Russia and Saudi Arabia, including this year’s additions, some 5.0m tonnes will disappear.

 

The shutdowns will centre on China - where output was seen at 25.4m tonnes this year, down 4.8m tonnes since 2015 – Mexico and the US.

 

In the US, Mosaic - the world’s second-ranked phosphate group after OCP – has already closed its Plant City operation in Florida, while two weeks ago announcing the temporary closure of a Louisiana site.

 

Global phosphate demand, meanwhile, will expand by 17.5m tonnes, to hit 190.0m tonnes in 2025, PhosAgro said.

 

‘Long-term balance’

By contrast in urea, the group said it expected “long-term balance” between demand, seen expanding by 23.6m tonnes to 185.9m tonnes between 2018 and 2025, and supply.

 

Although production growth of 42.0m tonnes over this timespan will be partly offset by 18.0m tonnes of closures, largely in China and Kuwait, this will still leave a net 24.0m tonnes in capacity additions.

 

The outcome will be relatively shallow gains in urea prices heading into 2020, with only modest acceleration reflected from 2021.

 

By contrast, phosphate values were seen staging a quicker recovery, with potential for values longer-term to return to some $380 a tonne in the Baltics.

 

Demand profile

The forecasts for phosphate demand expansion include growth of 3m tonnes by 2025 expected in India to 23m tonnes, including the likes of NPK as well as focused phosphate nutrient diammonium phosphate (DAP).

 

For Russia, expansion levels of 30 kilogrammes of phosphates per hectare as of last year, compared with 44 kilogrammes for eastern Europe and 55 kilogrammes in the European Union, offer “space for growth”, PhosAgro said.

 

In Brazil, demand for phosphate fertilizers, including NPK, was seen growing 2.2m tonnes to 10.5m tonnes between 2018 and 2025.

 

In the US, the shutting of capacity would see imports growth to 1.7m tonnes in 2025 from 1.5m tonnes expected this year.

 

Company ambitions

The comments came as PhosAgro unveiled plans to raise its own fertilizer production to 11.7m tonnes in 2025, from 9.5m tonnes expected this year.

 

Most of this will come in phosphates, for which output, including NPK will grow by 1.7m tonnes to 9.0m tonnes.

 

Output of nitrogen-based nutrients will expand by 500,000 tonnes to 2.7m tonnes.

 

The expansion will be completed under a $3bn investment programme which the group said would add an extra $450m to its ebitda by 2025, and see the group grow its sales in particular in European and Russian markets.

 

PhosAgro shares stood 0.4% lower at 2451 roubles in afternoon deals in Moscow.

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