Fitch Ratings Revises Global Fertiliser Price Assumptions
Tue 21 Jun, 2022 - 10:21 ET
Fitch Ratings-Barcelona/New York/London-21 June 2022: Fitch Ratings has increased near-term global fertiliser price assumptions on supply constraints and increased feedstock prices.
The higher near-term ammonia price assumptions reflect high gas prices, its main feedstock. Ammonia supply is also affected by significantly reduced shipments from Russia, which accounted for 23% of global exports before the invasion of Ukraine. These supply constraints will be partially alleviated later this year with additional export capacity in Saudi Arabia and Oman, as well as Indonesia, particularly due to the restart of Petrokimia Gresik. The prices should moderate in the medium term, reflecting lower feedstock prices.
High near-term gas and thermal coal prices support our urea price assumptions for 2022 and 2023, along with reduced supplies from Russia and China, which are only partially offset by increased exports from Nigeria and Brunei. China’s exports restrictions expire this month, but we anticipate exports levels in 2H22 to be lower year-on-year. We expect lower urea imports in the US (due to domestic production increases) and Brazil to affect demand, partially offset by increased demand from India. Demand from India will also affect urea price assumptions in medium term as the lack of such demand will bring prices to the levels consistent with the marginal cost of supply.
The increased phosphate rock assumptions for 2022 and 2023 reflect sustained demand from India and the limited supply response. Exports from Russia have significantly reduced, while Chinese production is declining this year due to export restrictions. Still, we expect supply from the Middle East and Africa to increase in the medium term, leading to price moderation.
Our raised 2022-2023 DAP price assumptions reflect supply disruptions, primarily from China and Russia. However, prices will continue to moderate from their record levels seen in March due to reduced demand from the US and deferred purchases. We also expect OCP, one of the world’s largest diammonium phosphate exporters, to increase production and exports by 5%-10% this year, while exports from China should increase from the current low levels. This will gradually rebalance the market.
The increased potash assumption for 2022-2024 reflects supply disruptions from Russia and Belarus, which had a combined pre-war export market share of about 40%. However, we expect prices to fall because Canada, the largest potash producer, has material spare capacity that should come onstream in the medium term. Also, trade flows from Russian and Belarus will be redirected to jurisdictions with lower sanction risks.