By: Josh Linville, Vice President- Fertilizer
Each one of these weigh on the minds of the supply side of the equation. Unless we see another Black Swan event which hurts supplies or demand surprises us in stepping in to buy, it is hard to see prices going higher.
For the global phosphate complex, the phosphate market looks to remain weak as well.
Again, as mentioned above, Russian tons are now finding their way into the global market. While they may not be flowing to their "normal" destinations, they are flowing out which means the global supply is growing. Supply goes up, demand remains neutral, prices see weakness.
Also, we are on the doorstep of finding out what happens with China and their phosphate export ban. It seems many in the world have largely written off the hope of China starting to export again this year. That means that if they extend the ban thru Dec '22 (for example), prices would likely jump but most of that point is baked into current S&D's. If we find out that China is allowing either full or capped exports of phosphate, that is added supplies that the market didn't count on.
While anything is possible, it is hard to see a road where prices go up substantially from here. However, it is easy to see a scenario where we deal with a bearish market by way of death of a thousand cuts.
Now watch the market prove me to be all wrong!!
Again, this isn't to say that we couldn't see another Black Swan even completely turn the tide of the marketplace. The phosphate is in a very vulnerable position right now but with the facts I see, the market appears to have more downside than upside.
That is a...wide amount of scenarios and proves that ultimately, no one knows what will happen. It is all educated guesses. I probably wouldn't call mine an educated guess. Better to just call it a guess!!!!
I've spoken to several who are in the "exports banned thru 2022" camp. That means if the ban is extended, we will likely see prices spike but most of it is already baked into the current values. However, if the ban is reversed/dropped, that is going to be a tremendous amount of product that is making its way into the world that was not originally expected.
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A cluster of positives has finally tilted the fertilizer market toward buyers, from China's return to normal urea exports to fresh Moroccan phosphate cargoes bound for the U.S. Yet the whole picture still hinges on one waterway, and a prolonged standoff around the Strait of Hormuz could unwind those gains before spring.
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