Market and product
Nitrogen prices 'to stay volatile'
A "spike" in ammonia prices prompted by disruptions to natural gas supplies in Trinidad and Tobago, the top exporter of the nutrient, besides by concerns over former Soviet Union stability, looks "sustainable" for now, Credit Suisse said.
"We believe current price structures will hold as natural gas curtailments in Trinidad and Tobago continue and concerns over Eastern European supply persist," the bank said.
However, "prices will likely moderate going forward", although potentially not until after the end of demand from the US autumn sowing period, with prices likely to average $527 in the key Tampa market in the last three months of 2014, down $20 quarter on quarter.
'Tidal wave'
For urea, prices in the key US market of New Orleans will also decline in the October-to-December period, by $25 a tonne quarter on quarter to $315 a tonne, dented by a "tidal wave of Chinese exports".
Chinese urea exports more than doubled in the first seven months of 2014 to 5.3m tonnes, and could top 9m tonnes by the end of the year, Credit Suisse said.
While a "greater degree" of Chinese urea supply has been offset by a squeeze on supplies out of Eastern Europe and the Middle East-North Africa region, supplies from Algeria, where the government has reportedly mulled a ban on exports, appear "to be partially back on line".
And in the US "while the plethora of Chinese product availability has yet to have material effects on US pricing due to logistical issues during the first seven months of the year, we believe this will become a more prevalent theme during the balance of the year," the bank said.
"As a result, we believe recent firmness in the NOLA [New Orleans, Louisiana] price is unsustainable and anticipate it will decline through year end."
Supply vs demand
However, the bank acknowledged some risks that prices may outperform, including the threat to Russian ammonia exports from the Ukraine crisis.
"[Russian] companies currently still utilise the Ukrainian port of Yuzhnyy - in excess of 2mm tonnes of Russian ammonia travels via Ukraine," the bank said.
Longer term, Credit Suisse forecast that world nitrogen demand and supply would grow at similar rates, at about 2% a year, a factor which would imply stable prices.
"The biggest theme on the supply front remains the potential for significant increases in US capacity owing to the abundance of shale gas," a key raw material.
"But we stress this has become less of an investor concern due to several projects being cancelled due to labour, construction and financing issues."
While agricultural co-operative CHS last week confirmed it would press ahead with a nitrogen plant in North Dakota, it is paying far more than it envisaged when unveiling the scheme two years ago.
'Traders looking at losses'
Separately, Rabobank took a more upbeat view of urea prices, saying that prices in China "continue to edge higher", lifted by the prospect of the domestic autumn application season.
"Additionally, it seems some market players have overestimated China's seemingly infinite urea supplies," Rabobank said.
"With higher prices, traders short on Chinese material are looking at losses on their positions, as the prompt availability… is lower than expected, and other sources of cheap urea are not globally available."
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