Petrotahlil - Fertilizers prices are expected to remain low over the next six months owing to the plummeting cost of raw materials, growing production capacity, and mediocre demand, according to Dutch investment bank Rabobank.
In the bank's Semi-Annual Global Fertilizer Outlook, published in June, analysts said the decreasing energy prices on the back of the coronavirus pandemic would have the biggest impact on the industry in coming months.
Major feeds, such as natural gas and coal, used for the production of urea and phosphate, has lowered input costs, but farmer margins have also been squeezed.
"We expect that there is little upside for prices over the next six months across the nutrient complex. With relatively cheap inputs, utilisation remaining at low levels, and our outlook for commodity prices also staying low, we expect this low price environment will continue for at least the next six months," said Matheus Almeida, senior analyst at Rabobank.
The major question for nitrogen in the months ahead is global demand of Chinese urea.
India, a major importer of Chinese tonnes, is increasingly looking to becoming self-sufficient, resulting it being less dependent on Chinese imports.
For phosphates, Rabobank expects a mixed picture regionally, with their being a potential for less availability in some parts of the world owing to local shutdowns and shipping restrictions if there is a second wave of coronavirus.
Production costs will continue to remain low.
The short term outlook for potash also varies from region to region because of shifts in seasonal demand.
Soybean prices in South America may prove favourable, while low palm oil prices in Malaysia and Indonesia could push down potash demand.