Nitrogen prices on the decline - with skid marks
With the end of last year's fertilizer season, nitrogen prices have taken a rapid dive. The background to this was a stagnation in demand, mainly in India, the desire to clear warehouses as much as possible with the end of consumption and also the clear fall in grain prices.
With the start of the new fertilizer marketing year, nitrogen prices have initially recovered somewhat. However, it is still doubtful whether it will be possible to push through a renewed increase in prices to cover storage costs.
It is known from many years of observation that the pricing of the few nitrogen suppliers follows a mono-/oligopolistic pattern. The primary orientation is not the cost development of the main cost carrier natural gas, but the grain prices. The graph impressively illustrates a trend-like parallelism between grain prices and the prices for the lead product urea, while natural gas prices have developed in the opposite direction.
The grain industry is currently still at the start of a new marketing year. Prices are continuing to fall in anticipation of a record harvest in 2013/14. Given these conditions, it will be difficult to push through higher fertilizer prices in the foreseeable future. In fact, potential stockholders are initially concentrating on the upcoming harvest. Only then will interest return to the fertilizer business for the coming spring. Alternatively, attractive storage discounts would have to be granted, which would tend to contribute to further price reductions.
In North America, demand is expected to fall in 2013/14 due to the price of maize, while an increase of 5% is assumed for India. Overall, the International Fertilizer Association (IFA) estimates growth of 2.3% in its June publication.
The expansion of the fertilizer industry continues unabated. Supply is therefore expected to rise in the coming years, with a tendency towards slight surpluses. China's export behavior is the linchpin of events in the nitrogen sector. This is directly opposed by India, the world's largest import region. Business between these two market partners also determines the rest of the market in many areas. Chinese supply behavior is often unpredictable, depending on its own supply requirements, and causes strong price fluctuations.
China is reducing its export taxes on urea for a limited period from July 2013. Production capacity is expected to have increased by 23% by the end of 2013. It is expected that Chinese fertilizer producers will use this opportunity to increase exports. This will have a global impact on nitrogen prices.
The usual early purchase of fertilizer is all the less attractive this year
