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Global fertilizer markets are ending the year in a bearish mood

December 23/2011

(ICIS) -- Global fertilizer markets are ending the year in a bearish mood on the back of weak demand exacerbated by economic uncertainty, and the outlook for the first quarter of 2012 looks set to remain gloomy. Markets have generally been firm this year, with prices showing their highest levels since the peak of 2008, but this led to some fears that a re-run of the market crashes seen that year could be on the cards again, particularly with rising economic uncertainty.

The worsening eurozone crisis and broader economic slowdowns seen in developed countries worldwide has destroyed some European demand, and also had a knock-on effect on international currencies, decreasing purchasing power for major fertilizer users in markets such as Latin America and southern Asia.

Hesitant buyers, particularly in the US, have adopted conservative purchasing behaviour, more akin to the post-crisis behaviour seen in 2009, opting to buy on a hand-to-mouth basis. Fertilizers demand is expected to return, but buyers are not likely to step back in strongly until February and therefore prices will remain under pressure until then.

According to the International Fertilizer Industry Association (IFA), forecasts for demand levels in 2012/2013 are highly speculative at present due to the depressed economic context in many developed countries. However, global agricultural commodity prices remain attractive, driven by a disappointing US harvest and robust food, fuel and feed demand.

Consequently, global fertilizer demand is still expected to grow by around 2.3% to 182.2m tonnes next year. But IFA notes there is a downside risk as the economic downturn may impact fertilizer demand in the first half of 2012.

The early part of the year saw demand returning to pre-crisis levels. This, along with increased demand expectations from Pakistan  which failed to become self sufficient in urea production Ц contributed to a stark run-up in urea prices during the second quarter. From April-June, Yuzhny prices rose from USD315/tonne FOB (free on board) to USD510/tonne FOB.

Author:Marina Ivanova
Category:General News
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