CIBC NotesEQUITY RESEARCH
July 10, 2022 Industry Update
Potash Markets At A Crossroad
Key Points
The global potash market remains largely in wait-and-see mode with
attention almost entirely on Brazil, where granular MOP prices have now
slipped below $1,000/t CFR (down ~3% W/W). The re-emergence or lack
thereof of demand in Brazil in July will be key to determining the global
market direction.
Belarus Increases Potash Export Loading Options, But Volumes Still
Much Lower Than 2021 Levels: Belarus delivered 191kt of potash by rail to
several ports in Russia in H1/22. Total rail shipments from Belarus to China
in H1/22 reached 290kt. For context, the port of Klaipeda (which Belarus
does not have access to now) handled 9Mt-11Mt/year of primarily Belarus
MOP.
Surging European Gas Prices Limit Potential Nitrogen Price Downside:
European gas prices reached over $55/MMBtu this week, the highest in four
months. An average for the week of $56.86/MMBtu tips the ammonia cost of
production over $2,000/t. Spain's Fertiberia is taking its Palos facility offline.
China's Tougher Fertilizer Export Guidance Emerges: CRU highlights
unofficial reports that China could ban urea exports until April 2023. A dozen
urea producers confirmed they have been asked to suspend exports. CRU
expects Chinese urea exports will shrink dramatically from August.
Crop Prices Start Rebuild After Steep Selloff: The corn market rose back
(December corn up 16 cents for the week to $6.23/bu.) from a steep, post-
July 4 holiday slide to five-month lows with support from fund-driven
corrective buying and bargain hunting, as well as concern over a return of
dry conditions to the Midwest beginning mid-July.
U.S. Drought Footprint Expands Further: USDA estimates the drought
footprint at 29% for corn (up six points from last week), 22% for soybeans
(up seven points), 19% for spring wheat (unchanged) and 68% for cotton (up
seven points).
Methanol Prices Remain Dependent On China’s Ability To Recover:
Methanol spot prices remain under pressure, with prices down 2% W/W in
China, down 6% W/W in Europe and flat W/W in the U.S. Global spot prices
are down between 10%-12% vs. a month ago.
Northeast Asia Caustic Prices Continue Downward Trend From
Elevated Levels: Northeast Asian export prices fell further to $580-$610/dmt
(mid-point of $595/dmt down ~3% W/W) following five fixtures of Chinese
origin for August loading.