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Share | 2016-02-23 10:58:38 From:topfert Comment:0 Look:1904 [ L M S ]

Prices dropped dramatically in the last week of January. Both producers and traders, facing dreadful demand west and east of Suez, have been obliged to cut prices drastically to attempt to shift some tonnage. The price cuts have been most severe in North Africa, where OCP sold 20,000t DAP to Turkey at around $400/t fob, with only the weak freight clawing back some of the netback. This is $50/t below what OCP had been asking, and reflects the extraordinary disparity that had hitherto been apparent between European prices for phosphates and those in the rest of the world. GTIS data reveal that China exported over 8mn t DAP in 2015, buoyed by increased Indian demand last year. That is roughly half of global DAP trade. The question now becomes at what point China begin to turn the export tap off in 2016. Breakeven costs for an integrated producer are around $330/t fob - perilously close to where prices are now in Latin America. In this scenario, potential Indian netbacks are considerably superior, even though cfr prices fell into the $380s/t cfr for fresh tonnage and demand is thin on high stocks. Overall, the market looking forward is decidedly bearish. With prices dropping so far so fast, buyers will continue to stay out of the market for as long as possible. Fundamentally, the lack of Indian and Brazilian demand will continue to weigh on prices. No market is pulling in product in any meaningful amounts. Q1 will be painful for suppliers. Brazilian credit lines need to be restored and India needs to draw down stocks and announce its subsidy. The only possible upside is in the US, where barges actually firmed marginally. But there will be no shortage of supply with OCP agreeing two cargoes already with a trader and PhosAgro shipping in late Q1. Production cuts appear inevitable.


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