“The price slippage in the USA illustrates the extent to which this market supports both urea prices and supplier optimism in Q1. In the expectation that US demand for new cargoes will ease as February/March progresses, the paper market is already discounting Middle East granular prices for March.” Profercy Nitrogen Report, 15 January 2015
Profercy’s World Nitrogen Index fell back 2.60 points this week with both granular urea and prilled urea prices easing in the West. The dip in US barge values has brought prices in key export origins into focus. Traders have also been unwilling to meet Black Sea producers’ price ideas.
Wider economic factors are also causing some uncertainty in global markets. A challenge for the European market is the continued weakness of the euro, which was valued at a low $1.16 at close of business yesterday. Many expect the announcement of a fresh round of quantitative easing to put further pressure on the currency in the coming weeks.
Basis current Egyptian $ fob prices, the fall from $1.23 a month ago to $1.16 now has added a significant $17pt cost increase for importers. It is also worth noting in this respect that nitrates may be set for further gains with price adjustments to date failing to keep up with the euro devaluation.
There has also been a false expectation amongst some end-users in West Europe that the dramatic fall in oil prices will lead to an immediate drop in global fertilizer prices. In the long term falling energy values will have a bearing on prices, but this is unlikely while seasonal demand is sufficient to prevent a supply build up. Our analysis on the short term relationship between urea and oil prices is available here.
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Profercy World Nitrogen Index: Methodology
The Profercy World Nitrogen Index is published every week and is based on price ranges provided by the Profercy Nitrogen Service. This includes prilled and granular urea, UAN, AN, ammonium sulphate and ammonia. A full methodology can be found here.