Fitch Ratings has announced an increase in its price assumptions for several types of fertilizers, including ammonia, urea, and phosphate rock. This adjustment is based on the year-to-date prices, higher gas prices, and favorable supply-demand trends.
Fitch stated that its ammonia assumptions for the years 2024-2025 are influenced by higher gas price assumptions and the growing demand, predominantly in 2024. Additionally, the lack of capacity additions in 2025 further supports these assumptions. The agency anticipates the commencement of a new Gulf Coast capacity of 1.3mt in the first quarter of next year. Following this, Fitch does not anticipate any significant merchant capacity additions in the foreseeable future. Furthermore, the commissioning of a new Baltic Sea terminal in the second half of 2024 will see approximately 2mt of Russian exports entering the market. Consequently, this terminal will act as a substantial replacement for the exports via the Black Sea (of 2.5mt), which are unlikely to resume.
Increased Urea Price Assumptions
According to Fitch, the increase in urea price assumptions is due to higher year-to-date prices and increased gas price assumptions. Despite delays in Russia’s capacity additions, there is still ample supply. Additionally, Fitch notes that India has achieved greater self-sufficiency, and Chinese exports have risen following the removal of restrictions. The sustained demand for urea is attributed to its relatively low prices compared to other nitrogen-based fertilizers.
Phosphate Rock Assumptions
Fitch’s updated 2023 phosphate rock price assumption takes into account year-to-date prices. The gap created by Morocco’s reduced exports has been filled by additional exports from the Middle East. Fitch predicts significant capacity increases in China by 2025 and Saudi Arabia by 2027.
Fitch’s increased assumption for diammonium phosphate (DAP) for the next year reflects supply restrictions. While Morocco has been increasing its exports, China has announced new export restrictions, which will maintain tight supply in the market. Fitch anticipates that the demand for DAP will be supported by the upcoming spring planting season in the United States.
Fitch states that its assumptions for potash remain unchanged.
Potash Exports Show Recovery, While Demand Remains Strong
Potash exports from Russia and Belarus have demonstrated a steady recovery, although they have yet to reach the levels observed in previous years. Despite seasonally weaker demand in Brazil, the market has stayed robust, primarily due to imports to China.
The global demand for potash continues to show resilience, with China playing a significant role in bolstering the industry. The consistent import activity from China has provided stability to the market, compensating for the temporary slowdown in Brazil.
Even though there is room for further growth in potash exports, the current recovery is a positive sign for the industry. As the demand remains strong, stakeholders can anticipate a potential rebound to historical levels in the near future.
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