CRU Fertilizers have over 13,000 different data points forecast for 2020 across their different market outlooks. CRU analyses everything from Chinese soybean demand through to natural gas prices to construct their view on the different fertilizer markets. They will be monitoring these calls throughout the course of 2020 to see how they are performing.
China urea and DAP exports to fall, but remain critical to prices
We forecast Chinese urea exports to fall to 4.1 Mt from 4.8 Mt in 2019 – on the back of continued capacity consolidation. DAP exports are forecast to drop only modestly, to 6.3 Mt from 6.4 Mt in 2019 – announced production cuts will be offset by continued poor demand.
India urea and DAP imports to also decline
2020 Indian urea imports are forecast to decline to 6.8 Mt from record estimated levels of 8.8 Mt in 2019, due to new domestic capacity being realised. High inventories and expected reduced subsidy rates will cap DAP imports at 5.6 Mt from the 5.8 Mt estimated for 2019.
China potash contract to finally be agreed at the end of Q1
There was no Chinese potash contract settlement in 2019. Inventories are at a record high, but with seaborne import restrictions now in force and spring demand on the horizon, they will be drawn down. We expect an agreement at the end of Q1, down $25/t at $265/t.
Chinese soybean imports to rebound above 80Mt
Soybean markets have been impacted by weak Chinese demand in 2019, owing to the wide scale cull of its pig herd. With pork prices at record highs and herd sizes being rebuilt, we anticipate Chinese soybean imports will increase almost 9% y/y, to 87 Mt.
Corn & soybean plantings to bounce in the US and Brazil
An easing in US-China trade tensions will boost US soy plantings to 82 M acres, up 7% y/y. Chinese demand will also boost soy plantings in Brazil, up 3% y/y to 38 M ha. Strong corn prices will see US plantings at 93M acres, while area for the upcoming safrinha crop in Brazil will be up 3% y/y, at 13.3 M ha.
United States fertilizer demand will finally rebound
We project a strong rebound in US demand in 2020, supported by affordable fertilizer prices and a need to replenish lost applications from the unprecedented 2019 season. We forecast nutrient demand to recover by 8% y/y - N demand 12.5 Mt, P2O5 at 4.7 Mt and K2O at 4.9 Mt.
Sulphur prices to slide even lower - but find a floor in the $30s FOB
Sulphur prices are expected to find a floor in the $30s FOB in 2020. Any price recovery will be contingent on improved demand and stock build by sulphur producers. Despite high end-user stocks and new supply growth, prices are forecast to trend higher after bottoming in H1.
The IMO regulations will push up freight rates by 10-20%
Freight rates are likely to increase as a result of new IMO 2020 regulations, as vessel owners seek to cover costs arising from the new rules. Ship brokers broadly expect increases of 10-20% across most routes, with the proportional increases greater on higher-priced routes.
Gas and coal prices will remain weak in 2020
Spot natural gas prices are forecast to remain weak in 2020, with the Henry Hub to average $2.40/MMBtu and the TTF $4.20/MMBtu. Coal prices in China are forecast to remain weak in 2020 as domestic output increases and industrial demand picks up slowly.
Dangote Nigeria urea plant will not commission in 2020
Media reports suggest Nigeria’s Dangote nitrogen plant will commission in 2020. However, we do not expect the facility to start in 2020, owing to gas pipeline disruptions, the slow construction of port infrastructure and the feedstock supply contract with Chevron Nigeria. This will result in a tighter global urea supply and demand balance.
Author: Chris Lawson