Tom McIvor: How quickly things can change in the phosphates market...


Tom McIvor

Head of Phosphates at CRU - Fertilizer Week

Entering 2023 OCP reported it had secured Q1 phosphoric acid contracts with European buyers at $1,230-1,280/t CFR 100% P2O5, with the low-end of prices down as little as $50/t on Q4 2022.
Today India is understood to be fighting hard for below $950/t CFR in its benchmark Q1 phosacid agreements, which would mark at least a $225/t slump from $1,175/t in Q4.

The delay has only strengthened their argument. So what has changed in the last four weeks?
1. India's fertilizer subsidy support is waning. It is clear India cannot maintain such vast outgoing payments with the 2022-23 fertilizer year subsidy cost now surpassing $30 billion. Latest reports suggest the country is nearing an unprecedented cut in the P&K subsidy mid-way through the Rabi season for January-March sales, with the DAP subsidy possibly falling $93/t before a likely further subsidy cut in April.
2. India's DAP import prices have seen a sudden drop off. The latest reported deal for February loading from China was at $658-660/t CFR, marking as much as a $100/t decline since India's Q4 phosacid deal was signed. With roughly 1 Mt DAP already set for arrival in Q1, stocks are set to be comparatively high entering the Kharif season in April too.
3. Regional spot phosacid offers have also slumped. The lowest offer in BCIC Bangladesh's 18 January tender for 30,000 t phosacid was at $1,036.11/t CFR 100% P2O5, down $213-239/t from the lowest offers in BCIC’s October 2022 round.
4. N costs have collapsed. European gas storage has hit an all-time high for this time of year with benchmark Dutch gas futures prices down over 30% in the last month. February's US Tampa ammonia price has now been agreed at $790/t CFR, a drop of $185/t on January, $385/t on October 2022 and $835/t on April 2022.
Heading into the FLA Conference in Rio de Janeiro next week Brazil MAP prices have now been stagnant for three weeks at $655-660/t CFR with participants keenly aware of the ongoing talks on India phosacid. It is clear that the Indian benchmark will decline more than in Europe but can the deadlock be broken before February starts?

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