|No.2 December 2006|
|Global Market Analysis|
Urea prices moved up in October, as exporters continued to buy to cover their commitments for sale. Over 75 000 tonnes of urea were traded at around US$214 per tonne, free-on-board (fob) Yuzhnyy, for November loading, while Baltic prices rose to US$205-210 per tonne, fob, in the second week of October, reflecting continued inquiries from Brazil and other countries in Latin America and the Caribbean. Turkey is a strong buyer at the moment, but the rise in prices may induce it to withdraw from the market. Urea prices in the United States have risen, in line with gas prices, but remain lower than in the rest of the world. The significant volumes purchased by India were certainly a key demand-driver of the urea market during the third quarter of the year, despite low United States imports. India has also purchased substantial volumes for delivery in the fourth quarter of the year, which traders still need to cover with producers. India’s purchases have therefore continued to sustain prices in recent months. The Islamic Republic of Iran has withdrawn its tender, but, as Bangladesh and Pakistan, it is expected to re-enter the market in December.
Import demand for Diammonium Phosphate (DAP) is now largely limited to China, Ethiopia and the Islamic Republic of Iran. Domestic demand in the United States is also weak, which is putting United States prices under pressure. Demand by African countries is also faltering, as a tender that should have been called by Ethiopia in October never materialized. India appears to have largely satisfied its import requirements and is unlikely to return to the market to purchase a significant volume before early 2007. Imports by Pakistan, where the Government confirmed the granting of Rupees 250 subsidy per 50 kg bag of DAP in late September 2006, may rise. However, the Islamic Republic of Iran, which already purchased DAP from Jordan, the Russian Federation and Turkey in October last month, remains the most important potential importer, with a further tender already announced for November. China and, especially, India now appear to be the most promising markets, which, in the case of China, reflects the relaxation of tariffs on fertilizer imports. The improved access to the Chinese market is expected to contribute to closing the existing gap between (the much higher) domestic prices and world prices. Overall, given the lack of new deals on the horizon to match exportable supplies, DAP prices tended to weaken further over the last quarter of 2006.
The Muriate of Potash (MOP) market generally remained firm over the second half of the year. Potash suppliers were reported to be heavily committed, with large shipments directed to China, India and other markets. In North America, potash inventories have been cut, but their level at the end of the third quarter of 2006 remains one percent over the five-year average. The MOP market situation was less buoyant in Europe, where the prices of standard MOP for delivery over the 2nd half of 2006 weakened. A new deal for large deliveries of Belarusian potash to Colombia and Venezuela was signed in September, which injected new vigour to the market, offsetting the effect of falling imports by Brazil. As a result, prices improved markedly by the end of 2006. Attention in the final weeks of the year will be concentrated on China, which will soon start negotiating the prices of contracts for delivery in 2007.
|GIEWS||global information and early warning system on food and agriculture|