LONDON, March 2, 2018 /PRNewswire/ --
Phosphate fertilizer prices have rallied over recent months, with the DAP FOB Tampa benchmark increasing 22% since September 2017, to USD 410/t. This rally comes despite the recent commissioning and ramping up of low cost capacity in Saudi Arabia and Morocco.
Prices have been underpinned by increases in key raw material values such as sulphur, which doubled in price within the space of four months in H2 2017. Strong global demand, a spread of capacity closures and Chinese supply control have provided further support. Will this new capacity and a return to lower raw material prices drag phosphate fertilizer values lower, or is the market approaching new horizons?
Drivers behind the price rise. A new divergence in the market?
Phosphate fertilizer prices have rallied beyond expectations since September 2017. Sharply higher sulphur and ammonia prices towards the end of 2017 lent support, but the supply and demand balance also tightened. This is despite the Ma'aden Wa'ad Al Shamal Phosphate Company (MWSPC, a joint venture between Ma'aden, Mosaic and SABIC) commissioning its new 3Mtpa phosphate fertilizer facility in August, and OCP continuing to ramp up its new capacity at Jorf Lasfar.
The fourth quarter of each calendar year usually marks a quiet demand period. However, demand through Q4 2017 remained steady and this has continued into January and February, helping to maintain high price levels. Exports from China, the largest exporting country, declined modestly in 2017. This was owed to tight supply following agreed output cuts between producers. Tighter environmental regulations also played a role, with temporary shutdowns commonplace throughout the year. The India market has also been supportive, with a USD 111/t increase in its Q12018 phosphoric price agreement, lifting that key price benchmark to USD 678/t.
In October 2017 Mosaic announced it would be idling its 2Mtpa Plant City facility at the beginning of 2018. This has further tightened supply and maintained strong price levels, despite recent declines in raw material prices.
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