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Fitch Ratings cuts near-term ammonia, urea and potash fertilizer price assumptions

Published by , Deputy Editor
World Fertilizer,

Fitch Ratings has cut its 2023 ammonia, 2023 – 2024 urea and 2023 – 2024 potash price assumptions, reflecting lower gas feedstock prices, surplus supply and a slower-than-expected recovery in demand. Other fertilizer price assumptions are unchanged.

The reduced ammonia price assumption reflects lower feedstock gas prices and the market surplus due to merchant capacity additions in 2022 and low seasonal demand in early 1Q23. Demand is likely to increase when the planting season starts in the northern hemisphere, while further extra capacity is scheduled to come on stream in 4Q23 and 2024 – 2025.

Fitch’s lower assumptions for urea also reflect reduced gas prices, as well as supply from sanctioned nations, including Russia, Iran and Venezuela, some of which continues to find its way to the market and weigh on prices. We expect China to increase exports following 2023 spring application as it relaxes export restrictions enforced in October 2021. CRU expects exports to gradually return to 2019 levels by 2027. A faster return would increase downside to prices. There is further extra capacity in Egypt, Turkiye, Russia and Bangladesh expected in 2023 – 2024, after almost 8 million t was added in 2022, which will continue to weigh on prices in 2023. The start of the planting season in the US and Europe will support demand in the coming months, although high inventories in India have caused buyers globally to delay purchases in 1Q23 as prices fall.

The reduced potash price assumptions reflect a faster-than-expected fall in market prices in response to reactivation of idled Canadian capacity, and some Russian and Belarussian volumes still finding their way to the market, despite sanctions. Demand has been recovering in 2023, although CRU expects demand to remain below the 2021 levels until 2025. Despite softening prices in 2H22, affordability is still poor compared with the average level in 2010 – 2020.

The unchanged price assumptions for DAP continue to reflect our expectations that surplus supply, as seen in 2H22 and 1Q23, will continue to weigh on prices, while increased exports from China and Morocco will offset an expected demand recovery. We expect limited capacity additions in 2023 – 2025 (about a million tpy), mostly by OCP.

Fitch’s unchanged assumptions for phosphate rock reflect our expectation for demand to continue recovering in 2023, but remaining below 2021 levels until 2025 – 2026. China is still limiting phosphate fertiliser exports where phosphate rock is used as feedstock, while European downstream production of phosphates will remain low in the near term due to high input costs. CRU expects OCP to increase phosphate rock exports to 9.3 million t in 2023 from 6.7 million t in 2022, while Russian exports are unlikely to rise from their low levels in the near future.

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Urea news Ammonia news