PotashCorp forecast a waning threat to Western phosphate and urea producers from Chinese exporters, even as prices of both nutrients continued to improve – although lagging the 28% surge in a week in ammonia values.
PotashCorp - one of the world's top potash producers, which is also a major force in nitrogen and phosphate markets – forecast that Chinese phosphate exports would fall for a second successive year in 2017, to 7.0m-8.0m tonnes.
At best, this would represent a 26% drop over two seasons in exports from China, the top producer of processed phosphates, with a figure at the bottom of the range representing a four-year low.
In urea, Chinese exports for 2017 will come in at 5.0m-7.5m tonnes, PotashCorp said - again a second year of decline – a period over which, at the lower end of the forecast range, shipments would have plunged by 74%.
The forecasts reflect ideas of Chinese producers of both nutrients being "pressured by costs", with the price of anthracite coal, for instance, a major raw material for the country's urea manufacturers, seen by PotashCorp as rising 17.0% to average $124 a tonne this year. Array
2017: 5.0m-7.5m tonnes
2016: 8.9m tonnes
2015: 13.8m tonnes
2014: 13.6m tonnes
2013: 8.3m tonnes
In urea, "higher production costs and environmental concerns in China forced some producers to idle capacity and some others to permanently shut down," PotashCorp said, estimating at 52% the proportion of Chinese capacity still in production, down from 62% last year.
"It is estimated almost half of the Chinese capacity is curtailed despite a rebound in global urea prices."
For phosphates, Chinese production ran at a lower rate of capacity last year than in 2015 for every month bar March, when the figure were in line. Array
2017: 7.0m-8.0m tonnes
2016: 8.3m tonnes
2015: 10.8m tonnes
2014: 7.2m tonnes
2013: 4.5m tonnes
Data for Dap, Map fertilizer exports. Source: PotashCorp
With higher costs challenging their export competitiveness, "China's domestic producers are reportedly working to decrease operating rates which have now trailed historical levels for several months," PotashCorp said.
"Furthermore, government enforcement of environmental regulation reportedly impacted several producers' ability to produce in the fourth quarter of 2016."
The data underline the reversal in fortunes facing Chinese fertilizer producers, whose producers enjoyed a surge in export growth over 2013-15, a period in which urea shipments soared 66% and exports of monoammonium phosphate (Map) and diammonium phosphate (Dap), the key phosphate products, by 140%.
US fertilizer prices, change on week and (over past four weeks)
Ammonia (Tampa): $320 per tonne, +28%, (+28%)
Dap (Tampa): $348 per tonne, +3.9%, (+10.5%)
Potash (Midwest): $243 per tonne, unchanged, (-1,8%)
Urea (New Orleans): $272 per tonne, +0.8%, (+4.2%)
Source: Raymond James
Nonetheless, prices of many fertilizers have made a firm start to 2017, with Dap values in the US port of Tampa, at $348 a tonne, up 3.9% over the past week and 10.5% over the past month, according to broker Raymond James
"Phosphate prices continue to trend higher on tight supplies and healthy demand in Latin America and India," the broker said, flagging data showing the Brazilian imports of Map soared 26% last year to 2.9m tonnes, while Argentine demand grew by 74% to 1.2m tonnes.
Urea prices are up 4.2% over the past month, although a bigger surge has been seen in nitrogen peer ammonia - values of which belied a flat start to 2017 by soaring 28% over the past week to $320 a tonne in Tampa, a knock-on effect of the revived unrest between Russia and Ukraine, a big ammonia-producing country.
"Ammonia prices spiked due to a [gas] pipeline dispute which has cut off significant supplies from Russia to Ukraine," Raymond James said.
The price rises have left potash by far the worst performer of the major nutrients so far in 2017, in the US at least, with Midwest values flat week on week at $243 a tonne, and down 1.8% over the past month, according to Raymond James.
However, the broker acknowledged that prices rose $5 a tonne week on week in Brazil, "despite slow demand", with values getting a boost from talk of low inventories.
"Multiple suppliers are reportedly sold out of product until the end of the January-to-March quarter."
Credit Suisse said that Brazilian potash prices rose by 2% last week to $240 a tonne.
According to PotashCorp, last year was the "first in more than a decade" when, at a global level, both producers and distributors saw inventory declines.
"Reduced inventories throughout the supply chain, combined with favourable affordability in key markets should support stronger global potash demand in 2017," the group said.
By Mike Verdin