Fertilizer prices likely to fall

WINNIPEG (CNS Canada) — Global demand for fertilizer has kept prices high but that should ease once more capacity comes online, according to an analyst.

“Urea prices globally have moved a little higher over the past few months. They’ve been relatively volatile, that’s just kind of a function of some better-than-expected demand,” said Chris Lawson, head of fertilizer analysis at CRU Group in London, United Kingdom.

Buyers from United States and Brazil have been active, but Lawson said CRU expects the supply to soon outweigh demand, which should pull down prices. The key global urea market in the Middle East has urea priced at US$250 per tonne. CRU predicts the price will fall to US$220 per tonne by mid-year.

Lawson said he expects the U.S. will have plentiful supplies available over the next few months and those should flow into Canada as well.

Phosphate pricing has also been very strong lately. Over the last five months, prices have been on the upswing. At the key global phosphate market in Tampa, Florida, phosphate was priced US$340 per tonne five months ago, but it is now at US$415 per tonne.

“We’re expecting the market to be relatively stable for the next few weeks. But there’s an ample amount of supply coming back onto the export market and we expect that will pressure prices lower through to kind of the middle of the year,” Lawson said.

CRU predicts the phosphate price will fall to US$360 per tonne by July. Saudi Arabia opened a new plant last year, which added three million tonnes of phosphate to the market. New capacity has also been commissioned in Morocco. However, closure of a Mosaic plant in the U.S. is offsetting some of the increased production.

There is uncertainty about global phosphate output, which could pressure the market. New environment regulations may affect China’s output, which usually accounts for about 30 percent of global phosphate exports.

Potash prices have also been on the rise. Demand for potash has been higher than for phosphates and nitrogen. There has been new capacity commissioned and Lawson expects that will bring down prices.

The potash price in Brazil, a major exporter, is US$300 per tonne.

“We’re expecting prices to remain relatively steady around that level and start to tail off a little bit towards the middle of the year, back closer to kind of US$290 per tonne,” Lawson said.

In the long run, fertilizer prices could be affected by a recent announcement from Nutrien. At the start of February in its fourth quarter report, Nutrien announced it would be converting its phosphate plant at Redwater, Alta., to an ammonium sulfate plant.

“It makes a lot of sense for them to do that because that Redwater facility is very high cost as a phosphate facility. They don’t have fantastic margins on it,” Lawson said, adding there is good ammonium sulfate demand in Western Canada due to the large canola acres.

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