March 15, 2024 (MLN): Due to lower gas feedstock prices and improved supply, Fitch Ratings has cut its 2024 price assumptions for ammonia, but has increased its 2024 price for DAP on renewed export restrictions in China that support prices.
The entity has added price assumptions for 2027 to the set. Other fertilizer price assumptions have remained unchanged.
The reduced 2024 ammonia assumption reflects lower gas price assumptions and improved supply as short-term disruptions have eased.
Exports from Russia via the Black Sea are likely to resume later in 2024, increasing total Russian exports to 2 million tonnes (mt) from 0.3mt in 2023.
Demand for ammonia is supported by improving affordability and robust crop pricing.
Global demand will increase by 3% in 2024, according to CRU, due to a recovery in most regions, particularly from downstream in Morocco.
The unchanged urea price assumptions incorporate our expectations that capacity expansion is likely to keep up with a recovery in demand in the medium term.
Supply is ample, as India’s increased self-sufficiency following domestic capacity expansion in 2020-2022 has reduced its need for imports.
In addition, Chinese exports have increased after export restrictions were eased. Russia continues to export urea, although its capacity expansion is delayed and will become operational only in 4Q24.
Higher demand in Latin America and Southeast Asia will compensate for lower Indian imports, while low inventories in the US should support overall demand.
The unchanged phosphate rock price assumptions reflect our view that a recovery in demand, driven by Asia and the Americas will be met with higher exports from Morocco, Jordan and Syria.
There will be only limited capacity additions in 2024, according to CRU. We continue to expect material capacity increases in China in 2025 and Saudi Arabia in 2027, although demand growth will outpace supply until end-2027, according to CRU.
The increased 2024 DAP assumption reflects renewed export restrictions by China in December 2023, although CRU expects these restrictions to apply only for 1Q24.
Fitch expects exports from Morocco to increase to 9.7mt in 2024 from 8.3mt last year. Demand is likely to rise in 2024 by about 5%, although not much of this growth has materialized yet due to higher DAP prices relative to other fertilizers.
The unchanged assumptions for potash reflect our view that the market will remain balanced, with supply meeting a recovery in demand given a material level of idled capacity that could become operational. Demand is supported by Chinese imports.
Exports from Russian and Belarus remain below their historical levels of 20mt-22mt, but are improving and are likely to reach about 19mt in 2024.
CRU expects that about 12mt of net capacity will be added to the global market by 2028, about half of which is coming from Russia, but demand will expand by 21mt by that time.
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Posted on: 2024-03-15T10:17:34+05:00
