Spring of 2020 in North America created a near perfect storm for phosphates.
Strong demand cleaning out channel inventories coupled with lower than normal summer imports tightened up supply as distributors and dealers restocked for fall season. Prices have since strengthened from the lows seen in December 2019.
Lower than normal application seasons back to back during the fall of 2018 and spring of 2019, in combination with imports, really weighed heavily on oversupply and ultimately pressured prices lower.
NOLA prices got to a level in December 2019 that were below production cost for domestic producers. While the network enjoyed these prices, they were not sustainable for maintaining a competitive market.
The system worked down channel inventories during the spring of 2020, but this was not enough to lift prices as imports continued a strong lineup.
North America remains an import dependent phosphate market after the closure of facilities in Plant City, Florida and Redwater, Alberta that eliminated roughly 2.6 million tons of domestic production.
Exporting countries of Morocco and Russia have increased their sales to NOLA to help balance the supply and demand of North America.
At the end of June, a domestic producer petitioned the International Trade Commission (ITC) and the Department of Commerce (DOC) seeking countervailing duties against Russian and Moroccan phosphate imports citing unfair subsidies. The initial determination of the petition was to be known on Sept. 21, but now has been postponed until Nov. 23.
The uncertainty around possible retroactive duties has drastically limited fall imports. Case in point, July through September imports are estimated below 300,000 tons, well short of historical imports of 800,000 tons during the same period.
Even though the North American market has temporarily closed on the Moroccan and Russian producers, they still have been able to enjoy strong demand in other world markets to keep their production plants running.
India’s DAP consumption between January and August totals 6.4 million metric tons, up 59% year on year. Brazilian importers have booked a record 4.1 million metric tons of DAP/MAP, up 36% year on year. Strong demand is also evident in Europe and Ethiopia.
While the USA market struggles with a supply gap for fall, imports from non-duty origins have not been able to keep up with current demand and prices have rebounded from the lows of 2019. Will stronger prices pull harder for more imports or will it ration usage for fall application?
Time will tell, but in the meantime, the derecho storm and drought impacts on harvested yield may prove that our current supply will be sufficient to meet demand for the fall season. Unfortunately, until the DOC makes a ruling regarding the countervailing duty petition, the market will be sensitive to slight adjustments in supply and demand.