Many assess the market situation as favorable, despite the epidemic of coronavirus and even partly thanks to it.
Potash companies are looking to increase demand in Asia amid a bad year, and phosphate fertilizer producers are hoping for higher prices after China’s hub, Hubei Province, became the focus of the epidemic. Experts agree that in general, the year promises price recovery, but they warn that growth is unlikely to be significant.
In 2020, Uralkali expects the global sales of potash fertilizers to return to the level of 2018 of 65-66 million tons after a decline to 63-64 million tons last year, the company said in its statement to the annual report on IFRS. The company explains the positive outlook by the restoration of trading activity in Southeast Asia. In the fourth quarter of 2019, Uralkali reduced the volume of output due to the difficult market conditions (throughout the year by 3,5%, to 11,1 million tons). This was due, inter alia, to the absence of a Chinese maritime contract in the second half of the year, the late signing of a contract with Indian buyers and the active consumption of potassium from inventories in key markets.
The phosphate fertilizer market suffered last year due to severe price cuts caused by bad weather and rising supply. Fosagro notes that last year prices fell to historic lows and approached the cost of many even integrated producers who had to stop part of the production. But this year, the company expects a reduction in supplies from competitors from Morocco, the USA and China, combined with the development of seasonal demand in Western markets.
So, in China, the phosphorus fertilizer production center is located in the epidemic-ridden province of Hubei, and Fosagro expects a decrease in supplies from the country by 1,5 million tons. Prices in January have already risen by $ 20-50 per ton, depending on the market.
Eurochem also expects a positive effect from the situation with coronavirus due to rising prices for phosphate fertilizers. They explain that the main volumes of potassium are exported not to China (less than 2% of the sales structure), but to North and Latin America (about 70%). The company estimates its potassium capacities for 2020 at 2,3 million tons.
Elena Sakhnova from VTB Capital believes that last year was not so bad for potash fertilizer producers either. But for phosphate fertilizers, the year was disastrous, prices fell from $ 400 to $ 265 per ton. In 2020, it expects a recovery in the phosphorus market, given that about 30-40% of China’s capacities are in the quarantine zone due to coronavirus, as a result, the supply may be reduced by 2 million tons. Pressure on prices will have additional capacity Moroccan OCP and Saudi Maaden. Therefore, according to Elena Sakhnova, the price of phosphate fertilizers will increase to $ 310 per ton.
In the potash fertilizer sector, the expert expects the situation to worsen against the backdrop of the coronavirus, because of which China does not spend the available reserves (about 2 million tons) and, therefore, does not start negotiations on new supplies. “February-March is traditionally the best time for negotiations, but this year it was lost due to the extension of the New Year holidays. So their beginning may shift to the middle of the year, or this year negotiations may not take place at all, ”the expert said. She admits that the demand for potash fertilizers in 2020 will grow by 1 million tons, it will more than close the capacities commissioned in Russia (1,1 million tons of EuroChem) and Canada (0,2 million tons). At the same time, a Kommersant source in the market positively assesses the prospects for the supply of potassium from Russia to China.
According to Kommersant