Fitch Ratings Raises Most Global Fertiliser Price Assumptions

(The following statement was released by the rating agency)
Fitch Ratings-Moscow/London-25 March 2021: Fitch Ratings has raised all its
2021 and most of its medium- and long-term fertiliser price assumptions on
strong year-to-date prices, increased feedstock price assumptions and improved
medium-term demand expectations and high utilisation rates. We have increased
all ammonia price assumptions. The largest increases for 2021 and 2022 reflect
buoyant market pricing as agricultural demand remains strong, while industrial
use should rebound shortly led by Asia. We expect supply to remain restricted
in the short and medium term. Feedstock prices (gas) rose due to cold weather
in the US, which resulted in supply curtailments for multiple US nitrogen
plants. This coincided with Trinidad and Tobago's country-wide capacity
curtailments. Utilisation rates at ammonia plants have already been high, and
we expect further incremental increases. Ma'aden's 1.1 million tonne ammonia
plant's commissioning in 2023 would not materially change supply-demand
dynamics, while some of Russia's excess ammonia production will be integrated
into urea by 2023. Increased urea price assumptions reflect higher feedstock
prices (coal) so far this year, higher-than-expected demand growth in the
short and medium term and increased capacity utilisation rates. Industrial
demand for urea fell marginally in 2020 but has fully recovered this year.
Agricultural demand remains robust due to favourable planting conditions in
most regions and high corn prices, although some US urea production capacity
is still halted due to cold weather. New low-cost production capacity set to
come on stream in Brunei, the CIS and Nigeria in 2021-2023 will be partially
offset by planned closures of high-cost capacity. We expect utilisation rates
to remain high. We have raised our 2021 price assumption for phosphate rock to
USD95/tonne reflecting current price dynamics, but have kept the rest of the
assumptions unchanged at USD90/tonne. Demand prospects are weak in China due
to expensive imported ammonia and sulphur, and stringent policies focused on
normalisation of application rates, but strong elsewhere in emerging markets,
including Brazil, India, Indonesia, Morocco, Russia and Saudi Arabia.
Incremental increases in supply will balance the market. We have increased all
price assumptions for DAP, most significantly for 2021, on strong performance
so far this year, increased feedstock prices (ammonia and sulphur) and
favourable planting conditions, although we also incorporate incremental
supply additions. Medium-term demand trajectories are mixed: strong in the US,
stagnating in China and declining in the EU. Below-average utilisation rates
of DAP production capacity in China and India will continue to restrict supply
growth. The revised potash price assumptions from USD220/tonne to USD230/tonne
reflect our expectations that utilisation rates will remain at the highest
levels seen in the past decade until 2023, reinforced by supply discipline and
price-over-volume strategy in the most concentrated subsector. Higher
medium-term prices also reflect above-average demand prospects for this
nutrient, input price inflation, including energy and labour costs, as well as
risks of supply curtailments due to flooding. There are no large capacity
expansion projects in the pipeline until at least 2025, other than at the
CIS-based EuroChem and Belaruskali. Contact: Dmitri Kazakov, CFA Director,
Corporates +7 495 956 7075 Fitch Ratings Moscow Business Centre Light House,
6th Floor 26 Valovaya St. Moscow 115054 Angelina Valavina Senior Director,
Corporates +44 20 3530 1314 Monica M. Bonar Senior Director, Corporates +1 212
908 0579 Tatiana Kordyukova Senior Director, Fitch Wire +44 20 3530 1954

Media Relations: Elizabeth Fogerty, New York, Tel: +1 212 908 0526, Email:
elizabeth.fogerty@thefitchgroup.com
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Louisa Williams, London, Tel: +44 20 3530 2452, Email:
louisa.williams@thefitchgroup.com

The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article can be accessed at
www.fitchratings.com. All opinions expressed are those of Fitch Ratings.


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