Record nitrogen exports from China | Prices during the summer could drop almost $100 per short ton in the U.S.
A major manufacturer and retailer of nitrogen fertilizer expects prices to tail off dramatically this summer.
“We believe a global urea floor price will again hold through the summer months, although it will likely be at a slightly lower level than experienced last year,” said Chuck Magro, chief executive officer of Agrium.
He made the remark while presenting the company’s first quarter results to investment analysts.
Jason Newton, Agrium’s head of market research, gave investors his price outlook for nitrogen fertilizer. He said prices are starting to come off their highs, and that trend will continue into the summer.
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“We’re still seeing North American nitrogen and phosphate prices at a premium to the global market and (will) likely see that come down as we enter into the summer,” said Newton.
He said the nitrogen market will tighten up once the Chinese window for reduced tariffs on exports closes at the end of October.
“So you would expect that you can potentially see some upward mo-mentum in nitrogen prices in (the fourth quarter),” he said.
David Asbridge, president of NPK Fertilizer Advisory Service, agreed that the market has likely already seen the peak in nitrogen prices because of an influx of supply.
“We’re beginning to see a real increase in the imports of urea into the Gulf Coast,” he said.
More than one million tonnes of urea have been imported over the last month, and they are having an easier time getting to farmers because of improved transportation logistics.
Transportation problems earlier in the year could have been a huge market factor had there not been such a late start to the planting season.
Increased Chinese exports are the main reason nitrogen prices are slumping. The country is on pace to ship a record 8.8 million tonnes of urea this year, up from 7.5 million tonnes last year. Lower coal costs are encouraging Chinese plants to ramp up production.
“We are seeing some pretty severe drops in nitrogen and phosphate prices at the Gulf right now,” said Asbridge. He expects the best time to buy nitrogen fertilizer will be during the summer before prices head up for fall application.
“This year, I think it’s going to be a little bit bigger than normal drop,” said Asbridge.
Wholesale urea prices in the U.S. Midwest, which peaked at $455 US per short ton in the winter, could bottom out at $360 per ton in the summer. They were at about $440 per ton last week.
Prices in Western Canada should generally track what happens in the U.S. Midwest, although the price drop may not be as dramatic, said Asbridge.
“The Chinese producing more and exporting more this year is going to impact our urea prices more than it’s going to impact Western Canada because typically you’re not going to see any Chinese imports up there,” he said.
The wholesale price for urea dipped to $330 per short ton last summer. Magro indicated prices will be below that level this year, but Asbridge doesn’t think that will be the case.
Russia has threatened to turn off the natural gas it supplies to Ukraine, which is used for the production of nitrogen fertilizer.
Ukraine is one of the world’s top five exporters of nitrogen fertilizer. It isn’t as big as Russia, the Middle East and China but is large enough to be a market factor.
As a result, reduced exports from that region could keep prices from falling too far.
“It would tighten the market up somewhat,” said Asbridge.
Supply is also being constrained by problems at two Agrium production facilities. The Carseland plant, which has been shut down since March 22 because of a boiler failure, won’t be operating until mid-June. As well, a 45-day shutdown is planned for the Redwater plant in September to replace a failing exchanger.
