Fertiglobe reports mixed Q2 sales, delays low-carbon ammonia project
Analysts continue to promote the view that fertilizer demand is being hit hard by the Global economic slowdown. This does not appear to be the case for urea, the most widely used nitrogen fertilizer.
India, the second largest market worldwide has seen spectacular sales growth this year, a 66% increase in Q2 2020 to 6.5m. tonnes and for the first half a 31% increase. Australia, importing most of its urea, has seen the inflow from offshore swell by 40% January-May 2020.
In the West, Brazilian imports are ahead 13% January-June while in Europe the big four markets, France, Italy, Spain and the UK, have seen import volume increases over the comparable periods of 2019 ranging from 14% to 47%
And what of supply? Prices are certainly down this year on 2019, by 11-12% in Egypt, the Middle East, Black Sea and China.
However, the comparable drop in US prices by 11% to $225ps ton fob, while significant, has been more than offset by the decline in natural gas costs this year, from around $2.70mmBtu in first half 2019 to well below $2mmBtu.
The low-energy price environment has also been a big factor in Europe, permitting the restart of plants in Romania and, more significantly, two major complexes in Ukraine. With gas around $3mmBtu, Ukraine can now run 80% of its urea capacity. In NW Europe meanwhile, gas prices below $2mmBtu afford a return of over $7mmBtu for the feedstock basis current market prices.
Therefore, it is clear that for many formerly high-cost producers, this is not a bad year. The losers are those in gas rich countries in the Middle East and North Africa who have seen their competitive advantage eroded.
The Profercy Nitrogen Forecast in June included the following:
Even when urea prices hit a low of $210pt fob in the Arab Gulf (in May), urea retained its position as a premium energy value product, this despite oil rebounding to $40 per barrel. Further, the position with regard to gas is even more in favour of urea. Gas prices have not increased and remain at subdued levels, well below $2mmBtu in Europe and the USA, LNG at $2-2.10 in the Far East and, significantly, below $3mmBtu in Ukraine.
Clearly 2020 is not really a bad year for all demand areas or for all producers.
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