Phosphates: Marginal Price Weakness Despite Delay in Tunisian Start-up Source: Feedinfo News Service (dated 20/09/2011) 20 September

2011 - Feedgrade Mono Calcium Phosphate (MCP) prices for September/October deliveries to European customers have edged slightly lower as some Western suppliers attempt to recover market share lost earlier this year to Russian origin. According to end users in Europe, current quotations for MCP from traditional Western sources are approximately EUR 10.00 - 25.00 per MT cheaper than Q3 2011 contracts. However, some customers say there is still poor visibility regarding prices through to year end as most suppliers are still unwilling to offer fixed price contracts beyond end October 2011. Exceptions refer to one supplier who seems prepared to engage in fixed contracts through to year end for selected key accounts. Customers say Russian origin is currently slightly more expensive than traditional Western sources. Sales to Europe of Feedgrade Phosphate of Chinese origin have been limited so far this year due to some Chinese suppliers struggling to meet European standards on purity and granulometry. Mid sized end users say current offers for Western origin MCP 22.5% (min) for October delivery are around EUR 550 - 560 per MT, depending on geographical location. One traditional Western supplier is not offering competitively at present due to ongoing disruption to their production of Phosphoric acid in Tunisia. Current feed Phosphate prices are considerably lower than the record highs experienced last year but are still very expensive when compared to some years ago. The main reason for such high prices is due to continued strong global demand for Phosphoric acid. The International Fertilizer Industry Association (IFA) predicted that global phosphoric acid capacity would increase by an estimated 9.2 MT to 57.6 MT between 2010 and 2015 (about 19%) due to the expansion projects. However, due to delays, relief in IFP prices (initially forecast for the second of half of 2011), is expected to be relatively modest through to H1 2013. "Phosphoric acid pricing should remain at/near current levels through at least the first half of 2012. Even after that any relief on pricing is now expected to be relatively modest through to H1 2013", explains Andy Jung, who is Principal Consultant at CRU Strategies, the management consultancy division of CRU (formerly known as British Sulphur). He added: "The fertilizer market is the dominant force in the world of phosphates, and currently those fertilizer markets are experiencing very strong demand due primarily to strong grain prices".

Jung expects that by 2013, the market might see some higher global grain inventories (particularly if global economic growth continues to struggle), and therefore increased phosphates supply. "Supplies of phosphoric acid have been restricted with reduced production, namely in the Middle East and North Africa, due to the political upheavals experienced in a number of those countries. In addition, the start-up of a new phosphoric acid plant in Tunisia that was expected to be ramping up this year is now not expected to be commissioned until sometime in H1 2012", he added. This new plant in Skhira in the central-eastern part of Tunisia, which was initially expected to go on stream during 2011, is operated by Tunisian Indian Fertilizers (TIFERT) - a joint venture between Gujarat State Fertilizers and Chemicals Limited (GSFC) of India, Groupe Chimique Tunisien (GCT), Compagnie des Phosphates de Gafsa (CPG), and Coromandel Fertilisers (CFL) of Tunisia. The plant's annual production capacity is estimated at 360,000 tons. It is understood, however, that GSFC will be purchasing 50% of the plant's output to help run its own fertilizer facility in Sikka, Gujarat State. The CRU Strategies consultant also pointed out that the Ma'aden expansion project in Saudi Arabia, although moving forward, has been slow. He believes that the ramp up of this facility is unlikely to be completed until late H1 2012. In addition, about half of the global phosphoric acid expansion projects are in China, but these are unlikely to influence the current scenario. Jung commented: "The biggest issue with China pertains to their export policy, namely the tariffs they place on exports of phosphate products. Just a few years ago, China was an important exporter of phosphate fertilizer, but now that they have used tariffs on exports to keep their domestic market better-supplied (and prices lower), it has resulted in global phosphate supplies getting tighter. Expectations at present are that new Chinese capacity is unlikely to have a sizable impact on global markets, as they have backed themselves away from the export market". "The bottom line is that fertilizer demand is quite strong, particularly with the poor yield expectations for the US crops, particularly corn. This has meant a steady, across-the-board increase in phosphate pricing", Jung went on to say.