5 February 2020 - A higher-than-expected feedstock phosphoric acid settlement has pushed offers higher for quarterly feed phosphate contracts in Europe and suppliers are giving buyers less time to accept prices.
European feed phosphate prices for the first quarter began to firm in late December/early January, increasing in many cases on the back of healthy demand, supply tightness and rising feedstock costs.
Some of the European feed phosphate buyers were able to settle Q1 feed phosphate contract negotiations flat to up €10/tonne early before news of a higher phosphoric acid settlement spread.
In December and early January, feed phosphate suppliers were looking for increases of €10-15/tonne for dicalcium phosphate (DCP) and €15-20/tonne for monocalcium phosphate (MCP) in line with a then-expected lower phosphoric acid increase.
At that time, the feedstock price was expected to rise by $30/tonne. The Q4 feedstock phosphoric acid contract price was concluded at $689/tonne, representing an increase of $64/tonne from the Q3 contract.
The global benchmark Morocco-to-India quarterly contract price for feedstock phosphoric acid increased by more than players expected in late January, by $106/tonne (15%). The increase for Q1 brings the feedstock price up to $795/tonne.
A good portion of the Europe feed phosphate market was booked for Q1 prior to the settlement and would likely not see the increase until April, depending on market conditions. However, there was another portion of the market that had not yet settled Q1 feed phosphate contracts.
“We have been informed by our main MCP suppliers that we can expect a large price increase for Q2/Q3 (Q1/Q2 is covered) of maybe €40/tonne,” a European buyer said. “Expensive corn, soy and wheat creates an increasing demand for fertilizer which create an increasing demand for phosphoric acid which is the main raw material for producing feed phosphates like MCP.”
The phosphoric acid quarterly contract is a key driver of feed phosphate contract negotiations and has moved up as fertilizer prices soar across the globe.
“We are awaiting our new offer and were told that this offer will be valid for a very short period – 4 days or one week maximum,” another European buyer said. “This tendency with very short validity I am seeing for the other raw materials too.”
One European feed phosphate supplier called the settlement a “tragedy” as fertilizer prices have climbed much faster than feed phosphate prices.
“We are all waiting for the end of this tragedy. We are closing the last contracts which will be affected by the $106/tonne increase,” a European feed phosphate supplier said. “It is almost certain that in April there will be another increase due to adjustment to the new phosphoric acid prices.”
US diammonium phosphate (DAP) from Tampa was trading at $432/short ton, 52% higher compared to $284/short ton in the same week one year ago.
Chinese DAP was trading at $430/tonne this week, 49% higher compared to the same week one year ago.
However, the biggest increases in fertilizer prices began in the second half of 2020.
Most of the major phosphate producers in China, a significant global supplier, are based in Hubei, where the pandemic first broke, and plants started closing in the region at the end of Q1 2020.
Most other phosphate producers, such as Morocco, Saudi Arabia and Russia, increased their DAP offers due to the tight availability out of China.
Subsequent shipment and transport disruptions continued to weigh on supply as 2021 began.
For those feed phosphate suppliers who are not forward-integrated and had already negotiated Q1, it is possible that these early settlements before the cost of phosphoric acid was known could impact the European spot market. Either producers will put material into the spot market and sell high to recapture costs or make less feed phosphate and tighten the spot market.
Early settlements previously put Q1 delivered bulk prices for DCP at €400-420/tonne and MCP at €490-520/tonne, depending on volume and location, according to Feedinfo.
Some later settlements were discussed in the range of €420-440/tonne for DCP and up to €530/tonne for MCP, with Q2 talked much higher.
“Things in the phosphate market are now starting to filter through with higher prices for end Q1 and beginning Q2,” a European buyer said. “I got some higher indicative pricing this week, up to €555/tonne for MCP. The market price has increased due to the Indian phosphates index increasing by $100/tonne which has given rise to an increase in MCP and DCP of €30-50/tonne.”
“I was informed that prices on Q2 will increase with certainty by €40/tonne,” another European buyer said.
The European feed phosphate market has been tight for over a year since major supplier Aliphos left the business in 2020. In addition, another major supplier, Yara, closed a plant in 2019 and produced less feed phosphate in favor of fertilizers in 2020, according to its customers.
Logistical issues that began in Q4 continued to cause additional problems for feed phosphate buyers.
“There is one supplier that is the most expensive for Q1, but the other suppliers don’t have enough material to compete,” a French buyer said. “They are cheaper but not totally reliable regarding the delivery. There have been some delays because of the maritime transport issues to western Europe.”
“We are not seeing logistic issues right now,” a northwest Europe buyer said. “But the situation could worsen rapidly with this price increase of phosphoric acid.”
European Q4 2020 delivered bulk prices for DCP were previously assessed by Feedinfo at €385-400/tonne, with MCP prices at €480-500/tonne.
