Phosphate Market Insights and Analysis

hello and welcome to the new episode of inside fertilizer analytics today we're going to be looking at phosphates and I'm very glad to have Clara Lloyd join us she's senior manager in our Consulting team responsible for our phosphate research and Tim Evans is joining us he's a senior analyst Works in our phosphates team as well and looks at some particular areas of Interest which we're going to be talking about today we are just in the process of publishing as we record this with new issue of processed phosphates Analytics and we have the next issue of process Rock analysis coming out the end of August and so all the research behind the discussion States very fresh in your minds Clarion Tim and your team and so I would like to really dig into some of the key issues and the markets for these products is very interesting and we'll have a really good time for a discussion especially to introduce myself I'm Tim chain I'm the head of fertilizers and agriculture at Argus and we cover of course raw materials and finished fertilizers and phosphates covers neatly both of those categories and uh you're really glad to have this opportunity it's been a while since we did one of these podcasts and hopefully this will be the first of a new series um so looking forward to it let's start with the demand side where everything starts clearly let me start with you really I always ask about India and these podcasts very important in phosphates but over the last six months they've been exploring again some plans to become more self-sufficient in the production of phosphates so I know you've looked at this for the latest issue of analytics what's the latest that's going on in terms of how they plan this party's of sufficiency hey Tim and good to be back doing another podcast it's good to chat all things pee yeah I mean Indian as you said it is the most important Market really when we come to the merchant trade for phosphates it is taking a bit of a Bellwether but India has been pushing more and more towards or trying to push more towards being less reliant on that external market and there's two initiatives really which have been bubbling and starting now to make some real traction the first is the production of what's being called nanodap which is basically little tiny liquid form granules pellets like bath pearls of dap basically which would be produced domestically if Co has a factory at the moment which they are starting up and that will they hope will be able to really replace imported dap potentially conventional adapt about 9 million tons per year which is very significant and the other one is SSP you know India's always had hugely underutilized SSP capacity but it's there you know and it is you know very low cost to produce it is e205 plus sulfur in essence so it takes out that urea element there's that lack of concern about oversupply of nitrogen so there's that act as well so there's two real paths that are being pushed I would say maybe is a word to use because the government and private companies are kind of both moving towards these as ways to make p205 more self-sufficient in the country yeah these are both interesting topics um the Nano deck must of course follow the the uh the discussion and the promotion of Nano urea which has been something we've been discussing for a couple of years uh they're very different ways of reaching this in the goal of being more more independent of global markets but how effective do you think they're going to be are they going to change the landscape of Indian Imports or the global debt Market in any significant way I think starting with nanodap I I do think it's too early to tell I mean the producers have very big Ambitions you know they hope to have 100 I think 180 million bottles produced across 25 and 26 which could you know technically if you converted b as I said 9 million tons of well conventional dap but operations have only just started in one plant I've not should we say heard the best feedback on it when it comes to its efficiency as a product so I think it's too early maybe to call that on the nanodap side SSP we have seen that it is some of these measures have worked they've temporarily or been trialling adding a subsidy on the freight for SSP to get to Farmers under the nutrient-based subsidy scheme and also there's been sort of re-education programs where the government has been holding them with um the fertilizer Association of India to re-educate Farmers to trust SSP a little bit more so and we did see last year record consumption of SSP in India at about 782 000 tons p205 which is incredible it's you know increased 150 000 hands b205 of SSP when considering it's a product that hasn't been necessarily trusted by the Indian farmer is significant but we are still seeing these quality control issues in May the government revoked 112 SSP production licenses because the quality of the product was not good enough so for us we see yes SSP this sort of no 780 800 000 tons p205 consumption level a year will not necessarily drop it's there people are trusting it it's increased significantly but if it'll grow again we are very skeptical of that I think there's a lot of re-education needed to really utilize it to that level so for us you know we maybe have hit this seven eighty eight hundred thousand tons level and we expect growth will continue but at the general rate of p205 consumption across the board in India we don't necessarily see it being able yet to supplant or supersede the DAP general standard p205 consumption path but they're interesting ones to keep an eye on and we definitely will be for the long term do you think there'll be any Trend in terms of SSP Imports to India rather than domestic production no I mean the whole of this initiative is to become self-reliant and produce it domestically in what you've got capacity is so underutilized in the country even 780 000 that leaves over a million tons of capacity untouched right got it thanks Tim turning to you welcome to the podcast so we want to stay on the on the theme of demand but move across to non-fertilizer demand and the topic that comes up all the time with our customers and is very exciting is lfp batteries so the the obvious question and the one I've had many times from people is what is our view of future p2o5 demand for lfp batteries and and how are you deriving that forecast what are the key assumptions behind our view well first of all pleasure to be back and yeah look forward to getting new series up and going again when we look at lfps really we're looking at it as a added Market rather than something that will come along and sort of displace p2o5 demand and the general expectations is on a 2023 basis we're expecting somewhere around 370 000 tons of p205 demand generated from the from the lfp market and in short by the end of the decade we're expecting it to rise to about 2.7 million tons a year and and breach above 4 million tons by 2033 which is sort of our forecast period at the moment so it's not the largest amount of p205 relative to the rest of our industry but it is definitely not insignificant amounts and when it comes to how we are deriving this p25 demand it's almost entirely generated from electric vehicles and energy storage capacity so I just want to be clear that these these demand estimates are not taking into account the potential for growth in the electronic equipment sector for example but simply we're taking forecast that expectations of electric vehicle sales across different regions and we are estimating a penetration rate of lfp batteries among the different battery chemistries and we are using EV sales as a proxy of of production and this gives us overall the number of units sold and with the estimate of how much of that is going to be lfp we can derive a p205 demand from that and we take a similar approach to the energy storage sector where we come up with a overall forecast of expected lfp capture of that market and it gives us a nice p05 demand expectation from the sector is most of this demand expected to be or is it currently in China and do you think that most of those numbers you've mentioned by the end of the decade and into the 2030s will that be in China too or do you see this being a more Global pattern in terms of consumption China is by far and away well ahead of the curve of the rest of the world China's both domestic production of lfp I think it's you know over 90 percent of global uh LF pre-production currently and it's domestic electric vehicle growth is you know outpacing all other markets by a fair way the the expectation is that Europe will trail behind second but it's still significantly lower than our expectations from China the U.S is also expected to to grow in the sort of the third largest market but there are significant challenges Europe's got a supply chain in its infancy still so even though there are projects expected to come online in the coming years for um Lithium-ion batteries and lfp batteries and more energy storage and there's also policy sorts promoting electric vehicles in Europe in particular but it's got a supply chains and its infancy and it's going to rely on a lot of raw materials from China regardless at least for the uh the first few years of of that lfp development so I'd say China's dominating by a long way and we think it's going to stay that way but it's it's not to say that these markets don't have potential elsewhere in Europe and and the Americas America has a bit more of a let's say cultural hurdle to achieve petrol cars and diesel cars and and the vast distances make it slightly more difficult to implement and the way that their politics is orientated with this uh States separated everywhere so it's a little harder to implement sort of a concentrated unilateral policy whereas in Europe it's much more easy yeah it's a much more ambitious plans in Europe to Electrify I guess that links into the demand for the batteries how much of the of the phosphate Market would lfp demand represent I suppose the real question is how will this lfp demand affect more general p2fr pricing do you think yeah so you know in our latest analytics we've done a little bit of a special focus on lfp's and we did some price analysis looking at the relationship and of the value of p205 and in-depth and using that as a benchmark looking at its corresponding relationship to the costs of lfp cathode materials and the conclusion we've sort of come to is is the cost of lfp production um seems to be almost entirely driven by lithium and lithium carbonate we tried to look at the incremental rise in phosphate prices as its production cost Rose and we found that because such small amounts of p205 get used per kilowatt hour of production it has quite a small impact on on the production costs of The lfp Producers but it doesn't mean that the p25 isn't price sensitive you know when we looked at it on a p205 level it in for example phosphoric acid um or dap it does seem relatively price sensitive so what we're seeing is a sort of skewed risk towards fertilizer producers where the added demand from lfp and because it's such a small incremental cost on their overall cathode materials they may be more willing to pay a premium price for the phosphate which may have an impact upstream and enter into across sectors but we're also thinking that given it's such a small Market we have to take into account you know the expected demand levels are some five to eight percent of the overall p205 market so it's really not picking up and although it's not insignificant it's not some majority of the market here or anything so we don't think it's going to significantly affect the p25 value on a proportional basis as much in the fertilizer Market because we don't think those premiums will translate or potentially it won't it won't translate as much backup stream or across sectors right so I guess there could be some disruption coming from LLP demand but the overall level of ptr5 for phosphate fertilizer sounds like it's unlikely to be affected certainly in terms of long-term trends what about the interest that lfps is generating for investments in you know from investors particularly purified phosphoric acid do you think there's going to be an impact on where Investments are made will this redirect interest away from traditional phosphate markets and is economic fertilizers in that fashion through red diverting Supply and development yeah so we've sort of since the beginning held the view that lfp's demand for phosphates isn't necessarily going to redraw and sort of displace existing Supply what we think it's going to do is it's going to incentivize new added value Alternatives that you know for example you might find projects that would have struggled to receive financing or come online to service the fertilizer Market especially in the phosphate Rock world but given their properties and their advantages for servicing purified phosphoric acid production they may seem more interest because it's economically advantageous to produce purified acid with certain Rock deposits if they can get the premium from the PPA markets but can't get it from the fertilizer markets for example so what we're expecting is that there's going to be certain oil deposits that may and potential projects that may receive a bit of a push and bring on new additional capacity that will be directed to the lfp market but it's not going to be in really in competition with the fertilizer Market because you know they were always sort of intended for that market anyway makes sense yeah and I guess there's a way in the background there's always The crucial role that ocp plays in terms of managing investment profiles for the view they have in the position they have for Global markets which I guess supersede any impact of lfp demand and the volumes going into that sector yeah exactly well let's tendency to clear again talking about Supply and just running through some of the key developments that you've been looking at for the next analytics Services I I guess an important thing to assess is the impact of Euro Kim's announcement that they considering shattering lafoza how do you think that's going to impact the market balance well I think with Le fosa they've announced that they are considering its closure we we've been quite brutal I'm going to be honest in our numbers and we've shut it indefinitely and already um in our short-term balance for our Outlook we haven't included exports more than their stockpiles of dap which they've had for the last four months the plant really has been suffering they struggle to get raw materials they have struggled with Freight they have struggled with not sanctioned sanctions um so for us it's been basically out of action already for 18 months and the European market really has survived without it probably what has helped that is the demand Destruction for DAP in the European market so really the loss of what maximum 70 000 tons a month hasn't necessarily been a problem and you know the U.S did used to take some lefosa product as well but when the duties on the Imports are put on um you know lefosa is owned by Hurricane which is a Russian company so those exports even though they were coming from Lithuania stopped then more or less anyway so I think that's not for us something we see as much of a disruption in the short term maybe we could consider when demand returns to more normal levels in Europe it could be something that need that may help push prices a little bit you know give a bit more support in that sort of first few I know could be months when that does return to normal in a couple of years time but it's not a material I think what's the thing we're considering now would be the interesting part is if it's bought so I know eurochem are looking at one of the options being finding a buyer for it but the this plant has been basically out of action more or less for 18 months it's not going to be in very good health so it's going to be a big project you're going to have to restart it from cold and as I said you know nearly 18 months of being cold so it's a big project it could be you know we consider it might be if it is board stripped for parts is an option we've heard that has been floated or just completely repurposed for a different product it does produce at the moment dapple NPS largely dap but will something else be produced in the European market itself is something that's evolving to look at more targeted more specific more streaming lined fertilizing fertilizer technology so dap may not be the route the route for it but for us it's been shut for such a long time we don't see it impacting the market much but we have as had been very brutal and we've shut it to the immediate effect and indefinitely just from what we see as its current status and existing position interesting it's all about balance already in terms of SMD it's staying on the closure theme I'd like to ask you about rock um moving after drink uh we know that nutrients White Springs mine is set to close in the early 2030s I know you did some some analysis on this in the second quarter of the rock analytics service but thinking about this and also the future of many of several maybe even more than five or six other U.S mines being considered or perhaps in Jeopardy how do you see the future of phosphates production in the U.S you know within that framework of that much Rock production being considerable possibly looking at enclosed yeah I think this this for me I'm a bit of a rock nerd as you know people who work with me know I loved it so this with me was when we were looking at this in more detail last quarter was really interesting so to put some even bigger numbers on it we expect by 2037 61 of us current Rock capacity will be offline you know it's nearly 20 million tons a year of capacity which is crazy for any Market to see it to be lost you know 60 odd percent this will result in the US being about 9 or 10 million tons per year short on phosphate Rock for fertilizer production I mean we saw with mines coming to an end in Canada which same with nutrient a couple of years later they closed processed phosphate production this could be a very realistic option some phosphate producers unfortunately we could see plants closed just because if you can't Source the raw material competitively why are you going to stay open another factor which we have to consider as well for the US is obviously a greater Reliance on Imports but that increases your production costs potentially significantly it also leaves you with the U.S Farmers paying again possibly some of the higher higher prices going for domestically produced product and already affordability has been of such a huge concern to the US the last two years and we've seen consumption and imports applications drop significantly They Don't Really necessarily need to add fuel to that fire another thing we're thinking as well as we could see a switch in production of products to maybe be less p205 heavy that is another option we could see or generally just more Imports of finished product you know when you've got maybe you know with the more of the impact will be seen in the medium term we'll start to see mines starting to close from late 2020s and set into early 2030s that is when it falls in quite nicely with the USD duties coming to an end on Russia and Morocco so it is the time when the cheaper producers can come back into the U.S market potentially so that could be a Saving Grace but really for me there's very little I would say at the moment expectation of any mind which lives are in Jeopardy because they need a mine life extension to be granted Coldwell Canyon in Idaho for example has had its decision to allow a new pit to be open reversed because of environmental problems or environmental concerns shall we say mosaic has two very significant Minds down in Florida it's been trying to get environmental permits for the best part of five years and they have made no moves no no progress so far so really the us could be in that position I said well we could either see plant closures repurposing of plants to produce lower p205 intensive products or really we will just see greater Imports of rock and greater Imports of finished product but maybe that greater import of Rockside of thing will make domestic fits in the U.S less competitive and the end product Imports come up but for me I think the option of more Minds opening is a very very slim one yeah given that the some of the issues are to do with permitting and the environmental impacts of traditional phosphates production do you think there's a chance of a technology Revolution you know I've heard of moving from small sulfuric acid basis to a hydrochloric acid technology do you think do you think that could be anything that dramatic could happen or would those Technologies just not be competitive economically well then you should ask that there is one mine which started production of mine I call it mine in inverted commas which started production earlier this year in bone Valley in Florida from a company called mineral development this is processing it's using secondary recovery so it's processing tailings from a mine which I believe stopped mining I want to say best part about 30 35 years ago so the tailings ponds are a huge environmental concern mainly in Florida which is why Mosaic in particular are struggling to have new permits because people don't want the tailings ponds we saw one I think it was last year that burst and the ground contamination and water contamination but this secondary recovery they're pulling out 1.2 million tons a year of rock just from a tailings pond this is not only producing Rock it's clearing up sort of the mess left by Rock historical Rock mining so if that technology can become even better and be more widely adopted that could be a savior we're helping the environment and you're getting rocked into the bargain as well so that for me I I think on the Rock side is something that could if utilized and developed further be one thing that could help the us but is it only one company doing it at the moment but uh yeah could be options yeah well waste recycling it would obviously be a very popular environmentally and if it's economic it could have good prospects talking about Supply and thinking more about the investment side and expansion side the uh I guess some of the biggest news or the biggest prospects for new Investments are in North Africa so talk us through what's coming up uh what you see on the horizon for a new capacity in that region cool I'm going to leave the big guys to last and it's ocp you know obviously everyone's you can't not talk about but there's two other I would say countries who've got some interesting things going on first I say Tunisia these guys have not had the best run in the last four or five years as we've seen with strikes and the Arab Spring and what have you but GCT are looking to open a new tsp line at um hinder end of next year gonna be tsp it's an interesting one to see you know the tsp Market is run that ocp themselves are exploring and exploring thoroughly and promoting the greater use of tsp so to see a new line come from the guys next door is an interesting one to happen they will have the flexibility for SSP as well but they're likely they said to produce tsp so that's one interesting one from a company that's been pretty quiet I would say over the last few years next I'd say we've got Algeria there's two projects there which are interesting somifos The Rock miners they are looking to expand their mining they have grand Ambitions to really up their export game you know their rocks have pretty decent quality they're very well cemented in the supply chain so they're looking to expand 2026 they've been pushed out back slightly for their expansion and the other one is acfc this is the big project that's been in the pipeline for a while which has Chinese backing which dropped out twice now they have Chinese backing again this is going to be a 6 million ton per year fertilizer project of which about 4.5 million tons will be phosphate-based fertilizers and it's rock all the way through to end product and when the new Financial Chinese Partners were found still pretty skeptical of this project because it's seven billion dollars worth of investment and that's just for the Rock Mine ammonia plant the urea plant and the phosphates plant that was not including the infrastructure investment required which is a further two billion dollars because these guys are planning to basically service the African Market they want to build a rail structure going from Algeria basically as far in as they can go and we were I would say slightly skeptical of this happening because that two billion dollars for the infrastructure where is it coming from but they've got government backing for this infrastructure and the government are willing to pay so that has made us a little bit more positive on the project and also they're making the final investment decision by the end of this year which is another interesting one the only concern they have is uh sulfur they will have to rely on a third party for that and import it so to find someone who can help service you know 4.5 million tons per year of phosphate production with sulfur is no mean feat so that's one hurdle now that is left seen as the financing and that two billion dollars of infrastructure is there but it has the potential to change a bit of the face of African phosphate Supply and because the partner's Chinese there will be a certain percent that's exported as well so it could really put Algeria on the map finished fertilizers and not just rock on the phosphate side so that one for me is pretty interesting to definitely watch what could be quite rapid developments from the start of next year but ocp everyone's favorite dual phosphate Hub we've had four units and then we have been well I've been waiting since 2018 for unit number five to come online and it's here and it's ramping up they say two more will come this year six and seven which we think could be possible we hold them in our firm forecast at the moment eight nine and ten are now the question they are pretty committed ocp we understand to having 22 million tons per year of phosphate granulation capacity by 2027 which would mean those three units would ramp up 25 to 27. we do still have them in our firm forecast but we're expecting their startup to be fluid and we are maybe expecting we'll have to push them back again we are also hearing ocp is skewing them towards tsp production export numbers for tsp are not necessarily backing that SKU at the moment but again you know farmers can be re-educated consumers can be re-educated so this is something again we're closely monitoring the other interesting one I would say is mazinda so ocp have this project that they announced very quietly in their annual results for last year and we've been doing a bit more digging into it and this is going to be a 1.5 million tons per year fully flexible on a p205 basis production granulation capacity across of course dap map tsp and npks but we again expect it really to be skewed more towards tsp but we're not keeping this in our firm forecast as it has been quite quietly announced it has been quite quiet please have almost slipped under the radar with very few details published openly by ocp in their own documents we are you know hesitant to put this in our firm forecast and the timeline again is very flexible you know there's a possibility of 2026 but we are expecting delays and rock the same originally they were going to go up to 66 million tons a year of rock capacity now they're going to 77 and they have a new field which has always been there ready to roll but they are looking to develop that to come online by 2027 with 7 million tons per year capacity so we're keeping that out of our firm for house now as well because again we don't see where necessarily that rock will pretty much go there's a lot of rock projects not just ocp coming online in the near term so really to bring an extra 11 million tons on top of your 66 you have to get to planned by 27. you think seems a little bit ambitious and with the fluidity and flexibility you've always seen of ocp deadlines and targets we think that's a safe a safe bet for now shall we say yeah absolutely I like you say I already mentioned we'll see ocp being flexible on how they manage the supply increases in line with what they think Market requirements would be lots of capacity coming on though so uh good to hear the latest updates and and we'll keep tracking those developments I'm sure uh Tim turning back to you I'd like to have just a a quick discussion about policy and especially duties countervailing duties the U.S duties on Russian and Moroccan products have been important how they changed I I think I heard that they were revised down recently what's changing and what's the impact on the market of those changes yeah well some some have gone down some have gone up in May the U.S essentially preliminarily raised the import duties imposed on the Russian producer fossa group to 53 and that's up from the lows of nine percent but they also simultaneously dropped the duty rate for Moroccan phosphates from 19 well basically 20 down to 15 14 and a half percent and if we're looking at fossil grow the changes can largely be attributed to a review or a recalculation of the advantages provided to false agree and that's whether it be through government subsidies or favorable loan rates or raw material benefits particularly around natural gas which essentially the US has determined that it's sort of distorting for a supplier competition and when we look at the original duties they caused us and dap and map imports from from Russia and Morocco to decline but Force agro's duties were low enough to allow sort of manageable netbacks and we saw something around 200 000 tons of maps shipped into the US in 2022 despite the duties so this revision brings Los agro's Duty rate in line with the other producers and if they are finalized which is essentially expecting all business to hold so on the Russian side what does it do well it sort of roughly puts 100 to 200 000 tons of Russian map Supply and it jeopardizes it for U.S supply the changes to Morocco the duty reduction is largely driven by a lower calculated raw material benefit for ocp after the company filed an appeal for a review and you know we may see some more opportunistic shipments to the US especially if there's a sort of sufficient premium in the US over other markets but we don't really expect it will reintroduce significant trading levels between the US and Morocco it's a lack of trade that we've seen between them since the duties appears to be driven by strategy rather than economic viability so even with the slight reduction in GT's ACP may not be incentivized to return supply to the us at the levels we've seen so ultimately the duties revision leaves the US with somewhat reduced sourcing options and because the US has a tendency to sort of carry minimal stocks from season to season I guess it leaves the US slightly more Exposed on a supply side and more exposed to some price volatility especially if there's some some buying during a narrow window I think the main takeaways are if the duties are fine wise we're going to see no more Russian tons and it's unlikely to really pick up Moroccan levels so I think the increased share we've seen from Saudis the jordanians and a plethora of smaller contributors have picked up and will likely stay that way for the duration of the deities which is until I think 2026 so I think overall it's definitely going to have some some sort of impact particularly around trade routes but we don't think it's posing a significant risk to U.S supply it's just going to create a slightly shifted and more Diversified trading plays and and potentially create some volatility during a more narrow buying Windows let's say really interesting how the those those duties have changed trade flows and the pattern of where product is moving you mentioned volatility so let's finish this discussion about the future year of prices and perhaps looking at firstly at the short term the markets have been bearish recently but map has been a little bit more firm how do you see the dark map Market looking for the rest of 2023 where to start I'll split this into really Eastern and west of Suez markets phosphate prices globally both east and west of sewers are are generally expected to decline across the rest of this year despite some periods of stability or even support that we are seeing recently I think conditions in Europe and U.S are expected to be more sensitive to Market balance Evolutions which we'll get into but but in general if we look at East of sewers first I think you know that prices are largely being driven by India at the moment and they actually have been for for a while now what we're seeing is delayed demand emerging from alternative major consumers and importers which has really concentrated a lot of the demand to to India is the only major outlet for dap suppliers and it's creating asymmetric imbalance between price pricing power for or negotiations for Indian buyers and Indian buyers are basically continuously held or maintained significant Imports of dab across the year even and during unseasonal periods and what it's done is it's allowed them to build up significant healthy stock levels and the government subsidies uh for dap uh have been held at a sufficient level which has basically allowed them to retain healthy margins on both a production level importer level doesn't even matter which way you're producing whether it's imported rock or false acid and what this really done is it's basically distorted the incentive for choosing a particular route and made all routes of procuring dap rewarding so we're seeing very strong Imports as they build their stock levels and it's giving the Indians as the only major Outlet of dap a lot of power to push prices lower we've seen China come back as well with a bit of a Vengeance on exports to India particularly in the last quarter and because of how much availability there is the Indians can be slightly more selective and and push prices lower so we see little opportunity for that to to change going forward you know they've essentially covered their demand for Abby and we're expecting you know deliveries to to keep going but you know they're going to want to push for lower prices with Pakistan's demand hasn't yet emerged Bangladesh's tender has seen some some delays and complications and there's not many traders who seem too interested in getting involved so in the overall private tender from Bangladesh came out a lot lower than what suppliers were hoping for so reduced alternative options is kind of driving downward prices on the DAP side and we've just got continuous Outlets that really are need to find somewhere to put their product and then Europe we are expecting demand across Europe to come back and this will provide some some level of price support on the on the higher end of fob prices we think this will create a bit of a Divergence a bit more of a spread between the low and high end of let's say Moroccan fob for example people the idea being that Europe's going to come back which will help support some prices but the overall price momentum is still down and then if we look to Western markets and in the US and and Brazil Brazil's imported again strongly throughout the year they've got healthy stock levels that are now moving through the systems and it's difficult to see how Russians markers and Saudis all vying for the remaining tons in the last push to Safra outside of temporary price support which we're seeing now we think that that will dissipate fairly quickly once September Comes an application begins and we think prices will begin to drop as as demand tapers off the US is slightly more sensitive we alluded to them earlier because they now have reduced sourcing options they have little carryover so they're potentially more exposed to some some price volatility but we think this time around compared to the last season which saw a spike in prices during the narrow buying window we've got slightly different conditions in the us both the map and dap we're going to see buying over a more consistent period We Believe affordability has now reached a point where it doesn't really reward buyers as much by waiting for lower prices so we think we'll see that that more consistent buying which will then reduce the potential for sort of a narrow buying window which would alternatively offer some price support so I think the main takeaway here is prices are probably going to decline well we've we see prices declining further across the year but we see the increments in which they're going to decline as being slightly reduced you know we're seeing some more stability in the raw material side of things and we're seeing some general resilience emerge out of some suppliers and with China then returning to serve as a domestic markets later in the year we expect suppliers we'll have the ability to be slightly more resilient towards downward price pressure so still declining prices but we think at a slower rate thanks for that review of the regional differences of pricing but it does sound like continued bearishness to the rest of the year Clara how do you see things moving beyond the end of the year into 24 and and the medium term is there Trend towards the more bullish prices or is the market likely to remain depressed in that time frame I'll be as Speedy as I can to know we've said a lot there is still I would say both producers to come next year and we are looking at prices still declining on an average in into 2024. you know we're going to get back on an average if you're thinking of Morocco dap for bases into the 400s the very very low 400 once again but after that be too bigger until about 25 26 a period of relative stability I mean part of this is fed by some of the stability in the raw materials markets but also we are going to see the market finally hit a point where consumption has recovered we're seeing affordability will have improved substantially you know from when we're seeing thousand dollar Doubt last year down into the 400s people will need to buy but that buying that ability to pick up the product you need will not result in the 24 25 26 period in price is increasing just because there's still plenty of capacity coming online you know I mentioned ocp's capacity that wasn't even mentioning the Saudi capacity we've got coming we've got the tunisians coming you know we've got the kazakhs are still ramping up with their product the uzbeks are now making noises and they're bringing you know a couple of million tons of capacity online as well for maps so yes demand is improving but Supply is picking up as well again so it'll be that period of almost balance shall we say where prices hold pretty steady you know to that 23 20 24 25 26 so beyond 24 there is that rest Spike from continuously falling prices but 2027 onwards is when we see that revert to firming and it will be great joy for those producers out there and again that's partly led by firming raw materials it's led by the fact that the new capacity really doesn't come online you know much Beyond 2027 any firm projects we see in this current business cycle and also when we go a bit further beyond that we're seeing also the rock element of it becoming something to be a concern particularly irrelevance to the us we mentioned earlier potentially losing in the early 2030s Israel as a supplier as well so there is a lot of moving pieces not just on the are we having new capacity is consumption improving it is turning into that period of raw materials now being a certain driver of prices going upwards as well so soft again next year a bit of a respite a bit of a time of stability a bit of a reset on the market and then medium term view 27 28 onwards we'll be back into that reversion to that firming Trend in the end thank you so really the theme is applied different pricing we're all sure it costs a key issue good to know that the pattern you see in terms of pricing going out for the next five years I would love to have asked you more about China I haven't had much time to speak about China along the supply side and demand and also in Brazil I think we'll have to wait for the next podcast to tackle some of those topics I'd like to just close off by saying to everyone listening thank you for taking the time from Clara Lloyd and from Tim Evans and for myself we appreciate your interest if you would like to know more about Argos process Foster facts analytics or Argos phosphate Rock analytics or even our monthly process phosphates Outlook then please get in touch with any of us or your account manager we'd be very glad to get you the information you need and we look forward to tracking the markets and speaking to you next time thank you

hello and welcome to the new episode of inside fertilizer analytics today we&#39;re going to be looking at phosphates and I&#39;m very glad to have Clara Lloyd join us she&#39;s senior manager in our Consulting team responsible for our phosphate research and Tim Evans is joining us he&#39;s a senior analyst Works in our phosphates team as well and looks at some particular areas of Interest which we&#39;re going to be talking about today we are just in the process of publishing as we record this with new issue of processed phosphates Analytics and we have the next issue of process Rock analysis coming out the end of August and so all the research behind the discussion States very fresh in your minds Clarion Tim and your team and so I would like to really dig into some of the key issues and the markets for these products is very interesting and we&#39;ll have a really good time for a discussion especially to introduce myself I&#39;m Tim chain I&#39;m the head of fertilizers and agriculture at Argus and we cover of course raw materials and finished fertilizers and phosphates covers neatly both of those categories and uh you&#39;re really glad to have this opportunity it&#39;s been a while since we did one of these podcasts and hopefully this will be the first of a new series um so looking forward to it let&#39;s start with the demand side where everything starts clearly let me start with you really I always ask about India and these podcasts very important in phosphates but over the last six months they&#39;ve been exploring again some plans to become more self-sufficient in the production of phosphates so I know you&#39;ve looked at this for the latest issue of analytics what&#39;s the latest that&#39;s going on in terms of how they plan this party&#39;s of sufficiency hey Tim and good to be back doing another podcast it&#39;s good to chat all things pee yeah I mean Indian as you said it is the most important Market really when we come to the merchant trade for phosphates it is taking a bit of a Bellwether but India has been pushing more and more towards or trying to push more towards being less reliant on that external market and there&#39;s two initiatives really which have been bubbling and starting now to make some real traction the first is the production of what&#39;s being called nanodap which is basically little tiny liquid form granules pellets like bath pearls of dap basically which would be produced domestically if Co has a factory at the moment which they are starting up and that will they hope will be able to really replace imported dap potentially conventional adapt about 9 million tons per year which is very significant and the other one is SSP you know India&#39;s always had hugely underutilized SSP capacity but it&#39;s there you know and it is you know very low cost to produce it is e205 plus sulfur in essence so it takes out that urea element there&#39;s that lack of concern about oversupply of nitrogen so there&#39;s that act as well so there&#39;s two real paths that are being pushed I would say maybe is a word to use because the government and private companies are kind of both moving towards these as ways to make p205 more self-sufficient in the country yeah these are both interesting topics um the Nano deck must of course follow the the uh the discussion and the promotion of Nano urea which has been something we&#39;ve been discussing for a couple of years uh they&#39;re very different ways of reaching this in the goal of being more more independent of global markets but how effective do you think they&#39;re going to be are they going to change the landscape of Indian Imports or the global debt Market in any significant way I think starting with nanodap I I do think it&#39;s too early to tell I mean the producers have very big Ambitions you know they hope to have 100 I think 180 million bottles produced across 25 and 26 which could you know technically if you converted b as I said 9 million tons of well conventional dap but operations have only just started in one plant I&#39;ve not should we say heard the best feedback on it when it comes to its efficiency as a product so I think it&#39;s too early maybe to call that on the nanodap side SSP we have seen that it is some of these measures have worked they&#39;ve temporarily or been trialling adding a subsidy on the freight for SSP to get to Farmers under the nutrient-based subsidy scheme and also there&#39;s been sort of re-education programs where the government has been holding them with um the fertilizer Association of India to re-educate Farmers to trust SSP a little bit more so and we did see last year record consumption of SSP in India at about 782 000 tons p205 which is incredible it&#39;s you know increased 150 000 hands b205 of SSP when considering it&#39;s a product that hasn&#39;t been necessarily trusted by the Indian farmer is significant but we are still seeing these quality control issues in May the government revoked 112 SSP production licenses because the quality of the product was not good enough so for us we see yes SSP this sort of no 780 800 000 tons p205 consumption level a year will not necessarily drop it&#39;s there people are trusting it it&#39;s increased significantly but if it&#39;ll grow again we are very skeptical of that I think there&#39;s a lot of re-education needed to really utilize it to that level so for us you know we maybe have hit this seven eighty eight hundred thousand tons level and we expect growth will continue but at the general rate of p205 consumption across the board in India we don&#39;t necessarily see it being able yet to supplant or supersede the DAP general standard p205 consumption path but they&#39;re interesting ones to keep an eye on and we definitely will be for the long term do you think there&#39;ll be any Trend in terms of SSP Imports to India rather than domestic production no I mean the whole of this initiative is to become self-reliant and produce it domestically in what you&#39;ve got capacity is so underutilized in the country even 780 000 that leaves over a million tons of capacity untouched right got it thanks Tim turning to you welcome to the podcast so we want to stay on the on the theme of demand but move across to non-fertilizer demand and the topic that comes up all the time with our customers and is very exciting is lfp batteries so the the obvious question and the one I&#39;ve had many times from people is what is our view of future p2o5 demand for lfp batteries and and how are you deriving that forecast what are the key assumptions behind our view well first of all pleasure to be back and yeah look forward to getting new series up and going again when we look at lfps really we&#39;re looking at it as a added Market rather than something that will come along and sort of displace p2o5 demand and the general expectations is on a 2023 basis we&#39;re expecting somewhere around 370 000 tons of p205 demand generated from the from the lfp market and in short by the end of the decade we&#39;re expecting it to rise to about 2.7 million tons a year and and breach above 4 million tons by 2033 which is sort of our forecast period at the moment so it&#39;s not the largest amount of p205 relative to the rest of our industry but it is definitely not insignificant amounts and when it comes to how we are deriving this p25 demand it&#39;s almost entirely generated from electric vehicles and energy storage capacity so I just want to be clear that these these demand estimates are not taking into account the potential for growth in the electronic equipment sector for example but simply we&#39;re taking forecast that expectations of electric vehicle sales across different regions and we are estimating a penetration rate of lfp batteries among the different battery chemistries and we are using EV sales as a proxy of of production and this gives us overall the number of units sold and with the estimate of how much of that is going to be lfp we can derive a p205 demand from that and we take a similar approach to the energy storage sector where we come up with a overall forecast of expected lfp capture of that market and it gives us a nice p05 demand expectation from the sector is most of this demand expected to be or is it currently in China and do you think that most of those numbers you&#39;ve mentioned by the end of the decade and into the 2030s will that be in China too or do you see this being a more Global pattern in terms of consumption China is by far and away well ahead of the curve of the rest of the world China&#39;s both domestic production of lfp I think it&#39;s you know over 90 percent of global uh LF pre-production currently and it&#39;s domestic electric vehicle growth is you know outpacing all other markets by a fair way the the expectation is that Europe will trail behind second but it&#39;s still significantly lower than our expectations from China the U.S is also expected to to grow in the sort of the third largest market but there are significant challenges Europe&#39;s got a supply chain in its infancy still so even though there are projects expected to come online in the coming years for um Lithium-ion batteries and lfp batteries and more energy storage and there&#39;s also policy sorts promoting electric vehicles in Europe in particular but it&#39;s got a supply chains and its infancy and it&#39;s going to rely on a lot of raw materials from China regardless at least for the uh the first few years of of that lfp development so I&#39;d say China&#39;s dominating by a long way and we think it&#39;s going to stay that way but it&#39;s it&#39;s not to say that these markets don&#39;t have potential elsewhere in Europe and and the Americas America has a bit more of a let&#39;s say cultural hurdle to achieve petrol cars and diesel cars and and the vast distances make it slightly more difficult to implement and the way that their politics is orientated with this uh States separated everywhere so it&#39;s a little harder to implement sort of a concentrated unilateral policy whereas in Europe it&#39;s much more easy yeah it&#39;s a much more ambitious plans in Europe to Electrify I guess that links into the demand for the batteries how much of the of the phosphate Market would lfp demand represent I suppose the real question is how will this lfp demand affect more general p2fr pricing do you think yeah so you know in our latest analytics we&#39;ve done a little bit of a special focus on lfp&#39;s and we did some price analysis looking at the relationship and of the value of p205 and in-depth and using that as a benchmark looking at its corresponding relationship to the costs of lfp cathode materials and the conclusion we&#39;ve sort of come to is is the cost of lfp production um seems to be almost entirely driven by lithium and lithium carbonate we tried to look at the incremental rise in phosphate prices as its production cost Rose and we found that because such small amounts of p205 get used per kilowatt hour of production it has quite a small impact on on the production costs of The lfp Producers but it doesn&#39;t mean that the p25 isn&#39;t price sensitive you know when we looked at it on a p205 level it in for example phosphoric acid um or dap it does seem relatively price sensitive so what we&#39;re seeing is a sort of skewed risk towards fertilizer producers where the added demand from lfp and because it&#39;s such a small incremental cost on their overall cathode materials they may be more willing to pay a premium price for the phosphate which may have an impact upstream and enter into across sectors but we&#39;re also thinking that given it&#39;s such a small Market we have to take into account you know the expected demand levels are some five to eight percent of the overall p205 market so it&#39;s really not picking up and although it&#39;s not insignificant it&#39;s not some majority of the market here or anything so we don&#39;t think it&#39;s going to significantly affect the p25 value on a proportional basis as much in the fertilizer Market because we don&#39;t think those premiums will translate or potentially it won&#39;t it won&#39;t translate as much backup stream or across sectors right so I guess there could be some disruption coming from LLP demand but the overall level of ptr5 for phosphate fertilizer sounds like it&#39;s unlikely to be affected certainly in terms of long-term trends what about the interest that lfps is generating for investments in you know from investors particularly purified phosphoric acid do you think there&#39;s going to be an impact on where Investments are made will this redirect interest away from traditional phosphate markets and is economic fertilizers in that fashion through red diverting Supply and development yeah so we&#39;ve sort of since the beginning held the view that lfp&#39;s demand for phosphates isn&#39;t necessarily going to redraw and sort of displace existing Supply what we think it&#39;s going to do is it&#39;s going to incentivize new added value Alternatives that you know for example you might find projects that would have struggled to receive financing or come online to service the fertilizer Market especially in the phosphate Rock world but given their properties and their advantages for servicing purified phosphoric acid production they may seem more interest because it&#39;s economically advantageous to produce purified acid with certain Rock deposits if they can get the premium from the PPA markets but can&#39;t get it from the fertilizer markets for example so what we&#39;re expecting is that there&#39;s going to be certain oil deposits that may and potential projects that may receive a bit of a push and bring on new additional capacity that will be directed to the lfp market but it&#39;s not going to be in really in competition with the fertilizer Market because you know they were always sort of intended for that market anyway makes sense yeah and I guess there&#39;s a way in the background there&#39;s always The crucial role that ocp plays in terms of managing investment profiles for the view they have in the position they have for Global markets which I guess supersede any impact of lfp demand and the volumes going into that sector yeah exactly well let&#39;s tendency to clear again talking about Supply and just running through some of the key developments that you&#39;ve been looking at for the next analytics Services I I guess an important thing to assess is the impact of Euro Kim&#39;s announcement that they considering shattering lafoza how do you think that&#39;s going to impact the market balance well I think with Le fosa they&#39;ve announced that they are considering its closure we we&#39;ve been quite brutal I&#39;m going to be honest in our numbers and we&#39;ve shut it indefinitely and already um in our short-term balance for our Outlook we haven&#39;t included exports more than their stockpiles of dap which they&#39;ve had for the last four months the plant really has been suffering they struggle to get raw materials they have struggled with Freight they have struggled with not sanctioned sanctions um so for us it&#39;s been basically out of action already for 18 months and the European market really has survived without it probably what has helped that is the demand Destruction for DAP in the European market so really the loss of what maximum 70 000 tons a month hasn&#39;t necessarily been a problem and you know the U.S did used to take some lefosa product as well but when the duties on the Imports are put on um you know lefosa is owned by Hurricane which is a Russian company so those exports even though they were coming from Lithuania stopped then more or less anyway so I think that&#39;s not for us something we see as much of a disruption in the short term maybe we could consider when demand returns to more normal levels in Europe it could be something that need that may help push prices a little bit you know give a bit more support in that sort of first few I know could be months when that does return to normal in a couple of years time but it&#39;s not a material I think what&#39;s the thing we&#39;re considering now would be the interesting part is if it&#39;s bought so I know eurochem are looking at one of the options being finding a buyer for it but the this plant has been basically out of action more or less for 18 months it&#39;s not going to be in very good health so it&#39;s going to be a big project you&#39;re going to have to restart it from cold and as I said you know nearly 18 months of being cold so it&#39;s a big project it could be you know we consider it might be if it is board stripped for parts is an option we&#39;ve heard that has been floated or just completely repurposed for a different product it does produce at the moment dapple NPS largely dap but will something else be produced in the European market itself is something that&#39;s evolving to look at more targeted more specific more streaming lined fertilizing fertilizer technology so dap may not be the route the route for it but for us it&#39;s been shut for such a long time we don&#39;t see it impacting the market much but we have as had been very brutal and we&#39;ve shut it to the immediate effect and indefinitely just from what we see as its current status and existing position interesting it&#39;s all about balance already in terms of SMD it&#39;s staying on the closure theme I&#39;d like to ask you about rock um moving after drink uh we know that nutrients White Springs mine is set to close in the early 2030s I know you did some some analysis on this in the second quarter of the rock analytics service but thinking about this and also the future of many of several maybe even more than five or six other U.S mines being considered or perhaps in Jeopardy how do you see the future of phosphates production in the U.S you know within that framework of that much Rock production being considerable possibly looking at enclosed yeah I think this this for me I&#39;m a bit of a rock nerd as you know people who work with me know I loved it so this with me was when we were looking at this in more detail last quarter was really interesting so to put some even bigger numbers on it we expect by 2037 61 of us current Rock capacity will be offline you know it&#39;s nearly 20 million tons a year of capacity which is crazy for any Market to see it to be lost you know 60 odd percent this will result in the US being about 9 or 10 million tons per year short on phosphate Rock for fertilizer production I mean we saw with mines coming to an end in Canada which same with nutrient a couple of years later they closed processed phosphate production this could be a very realistic option some phosphate producers unfortunately we could see plants closed just because if you can&#39;t Source the raw material competitively why are you going to stay open another factor which we have to consider as well for the US is obviously a greater Reliance on Imports but that increases your production costs potentially significantly it also leaves you with the U.S Farmers paying again possibly some of the higher higher prices going for domestically produced product and already affordability has been of such a huge concern to the US the last two years and we&#39;ve seen consumption and imports applications drop significantly They Don&#39;t Really necessarily need to add fuel to that fire another thing we&#39;re thinking as well as we could see a switch in production of products to maybe be less p205 heavy that is another option we could see or generally just more Imports of finished product you know when you&#39;ve got maybe you know with the more of the impact will be seen in the medium term we&#39;ll start to see mines starting to close from late 2020s and set into early 2030s that is when it falls in quite nicely with the USD duties coming to an end on Russia and Morocco so it is the time when the cheaper producers can come back into the U.S market potentially so that could be a Saving Grace but really for me there&#39;s very little I would say at the moment expectation of any mind which lives are in Jeopardy because they need a mine life extension to be granted Coldwell Canyon in Idaho for example has had its decision to allow a new pit to be open reversed because of environmental problems or environmental concerns shall we say mosaic has two very significant Minds down in Florida it&#39;s been trying to get environmental permits for the best part of five years and they have made no moves no no progress so far so really the us could be in that position I said well we could either see plant closures repurposing of plants to produce lower p205 intensive products or really we will just see greater Imports of rock and greater Imports of finished product but maybe that greater import of Rockside of thing will make domestic fits in the U.S less competitive and the end product Imports come up but for me I think the option of more Minds opening is a very very slim one yeah given that the some of the issues are to do with permitting and the environmental impacts of traditional phosphates production do you think there&#39;s a chance of a technology Revolution you know I&#39;ve heard of moving from small sulfuric acid basis to a hydrochloric acid technology do you think do you think that could be anything that dramatic could happen or would those Technologies just not be competitive economically well then you should ask that there is one mine which started production of mine I call it mine in inverted commas which started production earlier this year in bone Valley in Florida from a company called mineral development this is processing it&#39;s using secondary recovery so it&#39;s processing tailings from a mine which I believe stopped mining I want to say best part about 30 35 years ago so the tailings ponds are a huge environmental concern mainly in Florida which is why Mosaic in particular are struggling to have new permits because people don&#39;t want the tailings ponds we saw one I think it was last year that burst and the ground contamination and water contamination but this secondary recovery they&#39;re pulling out 1.2 million tons a year of rock just from a tailings pond this is not only producing Rock it&#39;s clearing up sort of the mess left by Rock historical Rock mining so if that technology can become even better and be more widely adopted that could be a savior we&#39;re helping the environment and you&#39;re getting rocked into the bargain as well so that for me I I think on the Rock side is something that could if utilized and developed further be one thing that could help the us but is it only one company doing it at the moment but uh yeah could be options yeah well waste recycling it would obviously be a very popular environmentally and if it&#39;s economic it could have good prospects talking about Supply and thinking more about the investment side and expansion side the uh I guess some of the biggest news or the biggest prospects for new Investments are in North Africa so talk us through what&#39;s coming up uh what you see on the horizon for a new capacity in that region cool I&#39;m going to leave the big guys to last and it&#39;s ocp you know obviously everyone&#39;s you can&#39;t not talk about but there&#39;s two other I would say countries who&#39;ve got some interesting things going on first I say Tunisia these guys have not had the best run in the last four or five years as we&#39;ve seen with strikes and the Arab Spring and what have you but GCT are looking to open a new tsp line at um hinder end of next year gonna be tsp it&#39;s an interesting one to see you know the tsp Market is run that ocp themselves are exploring and exploring thoroughly and promoting the greater use of tsp so to see a new line come from the guys next door is an interesting one to happen they will have the flexibility for SSP as well but they&#39;re likely they said to produce tsp so that&#39;s one interesting one from a company that&#39;s been pretty quiet I would say over the last few years next I&#39;d say we&#39;ve got Algeria there&#39;s two projects there which are interesting somifos The Rock miners they are looking to expand their mining they have grand Ambitions to really up their export game you know their rocks have pretty decent quality they&#39;re very well cemented in the supply chain so they&#39;re looking to expand 2026 they&#39;ve been pushed out back slightly for their expansion and the other one is acfc this is the big project that&#39;s been in the pipeline for a while which has Chinese backing which dropped out twice now they have Chinese backing again this is going to be a 6 million ton per year fertilizer project of which about 4.5 million tons will be phosphate-based fertilizers and it&#39;s rock all the way through to end product and when the new Financial Chinese Partners were found still pretty skeptical of this project because it&#39;s seven billion dollars worth of investment and that&#39;s just for the Rock Mine ammonia plant the urea plant and the phosphates plant that was not including the infrastructure investment required which is a further two billion dollars because these guys are planning to basically service the African Market they want to build a rail structure going from Algeria basically as far in as they can go and we were I would say slightly skeptical of this happening because that two billion dollars for the infrastructure where is it coming from but they&#39;ve got government backing for this infrastructure and the government are willing to pay so that has made us a little bit more positive on the project and also they&#39;re making the final investment decision by the end of this year which is another interesting one the only concern they have is uh sulfur they will have to rely on a third party for that and import it so to find someone who can help service you know 4.5 million tons per year of phosphate production with sulfur is no mean feat so that&#39;s one hurdle now that is left seen as the financing and that two billion dollars of infrastructure is there but it has the potential to change a bit of the face of African phosphate Supply and because the partner&#39;s Chinese there will be a certain percent that&#39;s exported as well so it could really put Algeria on the map finished fertilizers and not just rock on the phosphate side so that one for me is pretty interesting to definitely watch what could be quite rapid developments from the start of next year but ocp everyone&#39;s favorite dual phosphate Hub we&#39;ve had four units and then we have been well I&#39;ve been waiting since 2018 for unit number five to come online and it&#39;s here and it&#39;s ramping up they say two more will come this year six and seven which we think could be possible we hold them in our firm forecast at the moment eight nine and ten are now the question they are pretty committed ocp we understand to having 22 million tons per year of phosphate granulation capacity by 2027 which would mean those three units would ramp up 25 to 27. we do still have them in our firm forecast but we&#39;re expecting their startup to be fluid and we are maybe expecting we&#39;ll have to push them back again we are also hearing ocp is skewing them towards tsp production export numbers for tsp are not necessarily backing that SKU at the moment but again you know farmers can be re-educated consumers can be re-educated so this is something again we&#39;re closely monitoring the other interesting one I would say is mazinda so ocp have this project that they announced very quietly in their annual results for last year and we&#39;ve been doing a bit more digging into it and this is going to be a 1.5 million tons per year fully flexible on a p205 basis production granulation capacity across of course dap map tsp and npks but we again expect it really to be skewed more towards tsp but we&#39;re not keeping this in our firm forecast as it has been quite quietly announced it has been quite quiet please have almost slipped under the radar with very few details published openly by ocp in their own documents we are you know hesitant to put this in our firm forecast and the timeline again is very flexible you know there&#39;s a possibility of 2026 but we are expecting delays and rock the same originally they were going to go up to 66 million tons a year of rock capacity now they&#39;re going to 77 and they have a new field which has always been there ready to roll but they are looking to develop that to come online by 2027 with 7 million tons per year capacity so we&#39;re keeping that out of our firm for house now as well because again we don&#39;t see where necessarily that rock will pretty much go there&#39;s a lot of rock projects not just ocp coming online in the near term so really to bring an extra 11 million tons on top of your 66 you have to get to planned by 27. you think seems a little bit ambitious and with the fluidity and flexibility you&#39;ve always seen of ocp deadlines and targets we think that&#39;s a safe a safe bet for now shall we say yeah absolutely I like you say I already mentioned we&#39;ll see ocp being flexible on how they manage the supply increases in line with what they think Market requirements would be lots of capacity coming on though so uh good to hear the latest updates and and we&#39;ll keep tracking those developments I&#39;m sure uh Tim turning back to you I&#39;d like to have just a a quick discussion about policy and especially duties countervailing duties the U.S duties on Russian and Moroccan products have been important how they changed I I think I heard that they were revised down recently what&#39;s changing and what&#39;s the impact on the market of those changes yeah well some some have gone down some have gone up in May the U.S essentially preliminarily raised the import duties imposed on the Russian producer fossa group to 53 and that&#39;s up from the lows of nine percent but they also simultaneously dropped the duty rate for Moroccan phosphates from 19 well basically 20 down to 15 14 and a half percent and if we&#39;re looking at fossil grow the changes can largely be attributed to a review or a recalculation of the advantages provided to false agree and that&#39;s whether it be through government subsidies or favorable loan rates or raw material benefits particularly around natural gas which essentially the US has determined that it&#39;s sort of distorting for a supplier competition and when we look at the original duties they caused us and dap and map imports from from Russia and Morocco to decline but Force agro&#39;s duties were low enough to allow sort of manageable netbacks and we saw something around 200 000 tons of maps shipped into the US in 2022 despite the duties so this revision brings Los agro&#39;s Duty rate in line with the other producers and if they are finalized which is essentially expecting all business to hold so on the Russian side what does it do well it sort of roughly puts 100 to 200 000 tons of Russian map Supply and it jeopardizes it for U.S supply the changes to Morocco the duty reduction is largely driven by a lower calculated raw material benefit for ocp after the company filed an appeal for a review and you know we may see some more opportunistic shipments to the US especially if there&#39;s a sort of sufficient premium in the US over other markets but we don&#39;t really expect it will reintroduce significant trading levels between the US and Morocco it&#39;s a lack of trade that we&#39;ve seen between them since the duties appears to be driven by strategy rather than economic viability so even with the slight reduction in GT&#39;s ACP may not be incentivized to return supply to the us at the levels we&#39;ve seen so ultimately the duties revision leaves the US with somewhat reduced sourcing options and because the US has a tendency to sort of carry minimal stocks from season to season I guess it leaves the US slightly more Exposed on a supply side and more exposed to some price volatility especially if there&#39;s some some buying during a narrow window I think the main takeaways are if the duties are fine wise we&#39;re going to see no more Russian tons and it&#39;s unlikely to really pick up Moroccan levels so I think the increased share we&#39;ve seen from Saudis the jordanians and a plethora of smaller contributors have picked up and will likely stay that way for the duration of the deities which is until I think 2026 so I think overall it&#39;s definitely going to have some some sort of impact particularly around trade routes but we don&#39;t think it&#39;s posing a significant risk to U.S supply it&#39;s just going to create a slightly shifted and more Diversified trading plays and and potentially create some volatility during a more narrow buying Windows let&#39;s say really interesting how the those those duties have changed trade flows and the pattern of where product is moving you mentioned volatility so let&#39;s finish this discussion about the future year of prices and perhaps looking at firstly at the short term the markets have been bearish recently but map has been a little bit more firm how do you see the dark map Market looking for the rest of 2023 where to start I&#39;ll split this into really Eastern and west of Suez markets phosphate prices globally both east and west of sewers are are generally expected to decline across the rest of this year despite some periods of stability or even support that we are seeing recently I think conditions in Europe and U.S are expected to be more sensitive to Market balance Evolutions which we&#39;ll get into but but in general if we look at East of sewers first I think you know that prices are largely being driven by India at the moment and they actually have been for for a while now what we&#39;re seeing is delayed demand emerging from alternative major consumers and importers which has really concentrated a lot of the demand to to India is the only major outlet for dap suppliers and it&#39;s creating asymmetric imbalance between price pricing power for or negotiations for Indian buyers and Indian buyers are basically continuously held or maintained significant Imports of dab across the year even and during unseasonal periods and what it&#39;s done is it&#39;s allowed them to build up significant healthy stock levels and the government subsidies uh for dap uh have been held at a sufficient level which has basically allowed them to retain healthy margins on both a production level importer level doesn&#39;t even matter which way you&#39;re producing whether it&#39;s imported rock or false acid and what this really done is it&#39;s basically distorted the incentive for choosing a particular route and made all routes of procuring dap rewarding so we&#39;re seeing very strong Imports as they build their stock levels and it&#39;s giving the Indians as the only major Outlet of dap a lot of power to push prices lower we&#39;ve seen China come back as well with a bit of a Vengeance on exports to India particularly in the last quarter and because of how much availability there is the Indians can be slightly more selective and and push prices lower so we see little opportunity for that to to change going forward you know they&#39;ve essentially covered their demand for Abby and we&#39;re expecting you know deliveries to to keep going but you know they&#39;re going to want to push for lower prices with Pakistan&#39;s demand hasn&#39;t yet emerged Bangladesh&#39;s tender has seen some some delays and complications and there&#39;s not many traders who seem too interested in getting involved so in the overall private tender from Bangladesh came out a lot lower than what suppliers were hoping for so reduced alternative options is kind of driving downward prices on the DAP side and we&#39;ve just got continuous Outlets that really are need to find somewhere to put their product and then Europe we are expecting demand across Europe to come back and this will provide some some level of price support on the on the higher end of fob prices we think this will create a bit of a Divergence a bit more of a spread between the low and high end of let&#39;s say Moroccan fob for example people the idea being that Europe&#39;s going to come back which will help support some prices but the overall price momentum is still down and then if we look to Western markets and in the US and and Brazil Brazil&#39;s imported again strongly throughout the year they&#39;ve got healthy stock levels that are now moving through the systems and it&#39;s difficult to see how Russians markers and Saudis all vying for the remaining tons in the last push to Safra outside of temporary price support which we&#39;re seeing now we think that that will dissipate fairly quickly once September Comes an application begins and we think prices will begin to drop as as demand tapers off the US is slightly more sensitive we alluded to them earlier because they now have reduced sourcing options they have little carryover so they&#39;re potentially more exposed to some some price volatility but we think this time around compared to the last season which saw a spike in prices during the narrow buying window we&#39;ve got slightly different conditions in the us both the map and dap we&#39;re going to see buying over a more consistent period We Believe affordability has now reached a point where it doesn&#39;t really reward buyers as much by waiting for lower prices so we think we&#39;ll see that that more consistent buying which will then reduce the potential for sort of a narrow buying window which would alternatively offer some price support so I think the main takeaway here is prices are probably going to decline well we&#39;ve we see prices declining further across the year but we see the increments in which they&#39;re going to decline as being slightly reduced you know we&#39;re seeing some more stability in the raw material side of things and we&#39;re seeing some general resilience emerge out of some suppliers and with China then returning to serve as a domestic markets later in the year we expect suppliers we&#39;ll have the ability to be slightly more resilient towards downward price pressure so still declining prices but we think at a slower rate thanks for that review of the regional differences of pricing but it does sound like continued bearishness to the rest of the year Clara how do you see things moving beyond the end of the year into 24 and and the medium term is there Trend towards the more bullish prices or is the market likely to remain depressed in that time frame I&#39;ll be as Speedy as I can to know we&#39;ve said a lot there is still I would say both producers to come next year and we are looking at prices still declining on an average in into 2024. you know we&#39;re going to get back on an average if you&#39;re thinking of Morocco dap for bases into the 400s the very very low 400 once again but after that be too bigger until about 25 26 a period of relative stability I mean part of this is fed by some of the stability in the raw materials markets but also we are going to see the market finally hit a point where consumption has recovered we&#39;re seeing affordability will have improved substantially you know from when we&#39;re seeing thousand dollar Doubt last year down into the 400s people will need to buy but that buying that ability to pick up the product you need will not result in the 24 25 26 period in price is increasing just because there&#39;s still plenty of capacity coming online you know I mentioned ocp&#39;s capacity that wasn&#39;t even mentioning the Saudi capacity we&#39;ve got coming we&#39;ve got the tunisians coming you know we&#39;ve got the kazakhs are still ramping up with their product the uzbeks are now making noises and they&#39;re bringing you know a couple of million tons of capacity online as well for maps so yes demand is improving but Supply is picking up as well again so it&#39;ll be that period of almost balance shall we say where prices hold pretty steady you know to that 23 20 24 25 26 so beyond 24 there is that rest Spike from continuously falling prices but 2027 onwards is when we see that revert to firming and it will be great joy for those producers out there and again that&#39;s partly led by firming raw materials it&#39;s led by the fact that the new capacity really doesn&#39;t come online you know much Beyond 2027 any firm projects we see in this current business cycle and also when we go a bit further beyond that we&#39;re seeing also the rock element of it becoming something to be a concern particularly irrelevance to the us we mentioned earlier potentially losing in the early 2030s Israel as a supplier as well so there is a lot of moving pieces not just on the are we having new capacity is consumption improving it is turning into that period of raw materials now being a certain driver of prices going upwards as well so soft again next year a bit of a respite a bit of a time of stability a bit of a reset on the market and then medium term view 27 28 onwards we&#39;ll be back into that reversion to that firming Trend in the end thank you so really the theme is applied different pricing we&#39;re all sure it costs a key issue good to know that the pattern you see in terms of pricing going out for the next five years I would love to have asked you more about China I haven&#39;t had much time to speak about China along the supply side and demand and also in Brazil I think we&#39;ll have to wait for the next podcast to tackle some of those topics I&#39;d like to just close off by saying to everyone listening thank you for taking the time from Clara Lloyd and from Tim Evans and for myself we appreciate your interest if you would like to know more about Argos process Foster facts analytics or Argos phosphate Rock analytics or even our monthly process phosphates Outlook then please get in touch with any of us or your account manager we&#39;d be very glad to get you the information you need and we look forward to tracking the markets and speaking to you next time thank you

Transcript for:Phosphate Market Insights and Analysis

Transcript for:
Phosphate Market Insights and Analysis