the dap, map, tsp trade outlook - acefer · 2018. 6. 20. · convergence shows tight 2010-11...

The DAP, MAP, TSP Trade Outlook

Estrategia, sincronización y

oportunismo

Tom Jago, CEO, Profercy Phosphates SC

Jornada Tecnica Acefer, Madrid, 22 Octubre 2014


Today’s presentation: 3 Sections

(Profercy: Basics & intro)

• Big picture: China, India, S&D 2015

• Detalle: Donde hay que acertar China, N América, India, Brasil

• “End game” (zona de definición):

Respuestas: Cuando comprar, vender China impuesto bajo ya cerrado… ...ahora tierra desconocida

Tom Jago CEO Profercy Phosphates SC


Lo que hacemos

• Intel de mercado & Pronosticar precio

• Estudios S/D, simulaciones

• Escenarios “Trade balance & trade flow”

• Asesoramiento de estrategia, táctica

Como lo hacemos • Informes de mercado: Diaro, Semanal, Trimestral

• 5-year Profercy Phosphates Horizon

• Servicios de consultoría a medida


“El peor enemigo del estrategista

es el cronómetro...”

Gary Kasparov, Gran Maestro del ajedrez

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a. New, narrower trading range ($100pt) emerges near mid point of the wider $235pt price band (b) over the last 3 years

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c. We see the US industry able to hold DAP export above $450pt fob for most of October, but slippage may be seen into November when India can no longer afford more (subsidy spent). Heavy loads for Australia may not come until December.

Assumptions

Chinese exports 6.2m tonnes in 2nd half, 10.6m tonnes for 2014 versus 8.3m tonnes in 2013. Low prices result in slightly reduced volumes July-December compared with 2h 2013 (7m tonnes).

Indian imports in second half 5.5m tonnes. Added to 1.5m tonnes imported to date brings April-December to 7m tonnes, in line with April-December 2013.

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Potash vs Palm oil: CPO consolidates revival, set to challlenge current RM2,200 "ceiling"

As a result, palm oil prices stay just 10% under the mid 1H 2013 range at +/-RM2,350, sMOP was then (a) $100pt above today

gMOP cfr Brazil gMOP cfr NOLA metric equ. Spot sMOP cfr SE Asia

Palm oil

Palm oil slips again Biggest sMOP move up or down since Q4 '13. Price now regaining Q3 levels of last year

a. sMOP & CPO futures in July 2013

China, India: Global context

China, India: Global context

1) China 2014

• Urea: Produccion 70mt Total mundial de 170m (41%)

Exportacion 9m Total comercio mundial de 55m (16%)

Consumo local 60m

• DAP, MAP: Produccion 29mt Total mundial de 58m (46%)

Exportacion 5.8m Total comercio mundial de 20m (29%)

Consumo local 23m

Gran sensibilidad al mercado local. Con relacion al uso domestico se exporta proporcionalmente mas DAP, MAP (25%) que urea (15%),

China e India en el contexto global

2) India 2014

• Urea: Produccion 24mt Consumo local total (75%)

Importaciones 7.5-8.0m Total mundial de 55m (14%)

• DAP: Produccion 3.5mt en 2014 Consumo local (40%)

Importaciones 3.5-7.8m Total mundial de 20m (40%)

y 45% de DAP solo

Impacto: Urea puntual, intensifica; DAP fundamental, constante

Retos el comercio internacional del P2O5

• Phosphates S&D: Trade balance y curva de valor más volátil de todos los nutrientes principales en los últimos 5 aňos. El precio DAP lleva oscilándose en un rango de precio de $235pt en el período 2011-14; y de $175pt solo en los últimos 10 meses

• Oportunismo, sincronización [ingles: “timing”]: Ha llegado a ser casi siempre fuera los periodos traditionales de la estancionalidad o del “cost-of-carry”. Asi que esta sincronización resulta clave para lograr una estrategia eficaz de compra a corto plazo

• Exposición: Los dos lados opuestos del S&D ya están lo suficientement expuestos a los vaivenes de valor del P2O5, sin entrar en otros impactos secundarios e.g. divisa, costo del dinero, flete, precious a futuro del cultivo


Section 1

• Big picture


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Global Phosphoric Acid: Net new capacity vs fertilizer acid S&D projection

Convergence shows tight 2010-11 bull-run Diverging for a soft 2012-13 Another tight convergence for 2015-16

Existing phosacid capacity (cum.)

Net New Capacity

Industry operating rate (83-85% cap)

Phosacid avails to fert sector

Phos fertilizer acid demand

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Specialisation: DAP yields space on output slate to MAP, NPs

DAP MAP TSP Acid-based NPs, NPKs

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Notes: S&D estimates are for DAP & MAP combined worldwide, up to & incl. 44 units P2O5. Totals include India DAP & MAP imports only (ie they omit local Indian output & local deliveries;

exports are prohibitied). Supply totals include exports only from minor off-shore sellers eg: Turkey, Korea; Vietnam; No more exports from Spain, nor Philippines, nor S Africa recently.

Outlook today: Global DAP & MAP S&D combined

Output stable: Integrated industry margins strong, no incentive to cut back; New OCP JPH unit in Q1 2015

Demand volatile: In sharp contrast to supply, cash-flow controls, risk aversion, preference for low channel stock-carry all contribute to making demand volatile and opportunistic

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Global DAP, MAP Balance: Trade Surplus & Deficit

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Highly volatile trade climate: Global DAP, MAP Trade Surplus & Deficit Market moves in a 1.5m tonne surplus/deficit range (a) near quarterly basis

Intense demand swings as many markets defer, bottom-fishing & ultimately missing opportunities. Monthly demand extremes in a wide arc.

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Section 2

• Detalle: Donde hay que acertar

Más de parte de Kasparov


Donde hay que acertar

• China: Capacity nears 20mt P2O5

• North America: 8mt P2O5 local output, 1m in US & Canada imports

• India 8mt P2O5

• Brazil 5mt P2O5

• Juntos representan 85% del mercado global de los fosfatados concentrados

(mas de 44 unidades P2O5)

Global impact

Donde hay que acertar

• China: Capacity nears 20mt P2O5

• North America: 8mt P2O5 local output, 1m in US & Canada imports

• India 8mt P2O5

• Brazil 5mt P2O5

• Together these are 85% of world trade in contrated phosphates

Global impact

Mas volatiles, exposicion mas grande a importaciones, y donde se gana o se pierde la partida del ajedrez

”nos reduce a todos al reflejo puro, a la reacción, y a jugadas tácticas....

...la emoción y el instinto nos enturbian vista estratégica, cuando ya no queda tiempo para una evaluación debida....”

Gary Kasparov, Chess Grand Master

China

• Usage plateau? Food grains targets

• Demand today is strong

• 20% price increase in 2 months

• Perception of value, still 15% below 5 year ave.

• Output stable: 1.3-1.4m tpm DAP, 900tpm MAP

• Slowdown in new capacity coming on stream

• Surplus & Export call: 3.5-4.0m tonnes DAP and 1.5-2.0m tonnes MAP

• Traditionally not a market for stock carry, except for a few years of bonded warehouse loophole

Export surplus

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a China export tax: New territory from Jan 2015?

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Mar April May June July Aug Sept Oct Nov Dec Jan 12

Feb '12 Mar April May June July Aug Sept Oct Nov Dec

Jan 13 Feb '13 Mar April May June July Aug Sept Oct Nov

Dec Jan 14 Feb '14 Mar April May June July Aug Sept Oct

Nov Dec Jan '15 Feb '15 Mar April May June July Aug Sept

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DAP fob Tampa (month end) China DAP export tax (%)

New territory: China’s Low export tax windows were seen as incentives for deferral in all world markets in recent years. If, as is universally expected, export tax will be uniform in 2015, “opportunity” buyers will have to think harder about the global S&D in 1H 2015

North America

• Capacity migration, specialisation: Less DAP, MAP, more NPs.

• Detail: By 2016 Mosaic will have 3.5m tpa capacity of NPs, substituting DAP, MAP. 12 units less P2O5 per product tonne vs MAP & NPs

• So greater scope for imports. US, the world’s export benchmark is now a big import reference. Competition with Latin America

• Supply-side consolidation: Mosaic, CF; followed by PotashCorp & OCP

• Canada almost exclusively supplied from the US in recent times 700ktpa MAP, DAP

Specialisation, imports

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Brazil P2O5: Chinese 11-44 boosts share of total imports, but does little to stem widening total import need

No major Brazil domestic capacity expansions till 2018-20, so strong imports are a big local priority

Local production All imports (MAP light blue) TSP import DAP imports SSP imports NP/K Imports¹ Local deliveries (all P2O5)

Conventional MAP 11-52 & DAP imports growth rate slows, but total just over 3m tonnes product is the backbone of Brazilian import security.

No firm board decisions on new P2O5 capacity …. Like India keeps a clear “ceiling” on local capacity, but around 2 million tpa P2O5

Scope for over 3.0mt P2O5 total phosphates imports or near 6mt MAP 11-52 equivalent, approaching 60% of total needs

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India phosphates usage "gap" develops, as imports decline during subsidy & rupee crises 2012-13 Chart below assumes DAP imports in 2014 near 5mt plus some NP/NPK imports.

Even at this level, 1.8mt P2O5 (3.9mt DAP) is missing vs peak years

NP/K Imports DAP imports Local NP/K & SSP prodn Local DAP prodn DAP $pt cfr India (each May)

"Phosphate gap" = 1.8-2.5m tpa P2O5

If covered by DAP (cheapest source of NP), implication is for +/- 4m tpa in additional DAP imports Local production “ceiling” in gradual decline, but still at near 4 million tonnes P2O5 all products

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India DAP imports 2010 - 2014

India DAP imports DAP fob Tampa (month end)

2013: 3.3m

2014: 3.6m (5m 2014-15 6m 2014-15)

2012: 5.7m 2011: 6.9m

2010: 7.4m

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India DAP imports, China export tax: Indian seasonality fitted the low-tax windows...

...especially in the major contract years 2010-13

India DAP imports

China DAP export tax (%) 2013-14: 3.3m

2014-15: 3.2-3.7m (this year unfinished)

2012-13: 5.7m 2011-12: 6.9m 2010-11: 7.4m

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India DAP S&D 2010-14: Hand to mouth

DAP stocks DAP Imports Local DAP Output (white bar) Local DAP Sales Local DAP price (Rs/t x 10) Sales total P₂O₅ (yellow line)

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DAP stocks (green)

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India DAP S&D 2010-14: Inventory heads to historic in-season low

DAP stocks DAP Imports Local DAP Output (white bar) Local DAP Sales Local DAP price (Rs/t x 10) Sales total P₂O₅ (yellow line)

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Last forecast and recent forecasting performance

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Trade bal. m/m US$ pt fob Tampa Current forecast

Our end June price call: We thought the market was about half-way down a 1.3m tonne deficit run June-Sept ‘14. We estimated this would lift prices $85pt to end Aug, peaking near $520pt fob Tampa ($515pt was the eventual top-out). By October, we foresaw prices would have lost most of these gains, sliding back down below $450pt fob Tampa, even to $420pt fob in Nov. This is still a reasonable expectation, in our opinion.

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Blue line: Actual spot moves

30 June Surplus / Deficit take

Section 3: End game: Sincronizacion, oportunismo, respuestas

Despite useful tools at our disposal Like Kasparov, the clock is a major challenge to our game plan

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Global DAP & MAP* Trade Balance: Surplus, Deficit, Price *(both grades combined)

Supply Demand Trade bal. m/m US$ pt fob Tampa

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We see more gradual trade surplus build during Q4 ‘14 vs that in April/May 14. As a result, market spends longer time to erode lower in the typical Q4 doldrums. At the same time, India will have spent its subsidy allocation, unable to take advantage of a return to low prices, even if it sees value. In parallel, none of the other game-changing markets (China, USA or Brazil) are in a hurry.

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Global DAP & MAP Trade Balance: DAP Price Outlook near-term Q4

Trade bal. m/m

US$ pt fob Tampa

Current forecast

Today

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Near-term price call: We are now half-way up a likely 600kt switch to surplus August to end November. The last comparable volume switch to the long side, in Q3 2013 cut prices around 50-60pt in a 60-day window. This would imply further, though limited downside from today’s $460pt fob Tampa through into late November .

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Global DAP & MAP* Trade Balance: DAP Price Outlook into 1H 2015

Trade bal. m/m US$ pt fob Tampa Current forecast

Today *

We see more gradual deferred demand return Dec 14 to Jan 15 than in the early-2014 scramble that triggered $175pt, 12-week bull run. Knowing the troubled situation India faces for 2015, many markets may buying DAP, MAP in anticipation, at a careful pace. The rhythm will depend on crop prices & specifics on farm economics in different regions. Most, however, will aim to keep channel stocks at working minimums. India will likely move late, undermining prices momentarily in Q2 prior to a spree, & rapid Q3 rally.

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Global DAP & MAP* Trade Balance: DAP Price Outlook; Florida cash cost context

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Current forecast Today

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Florida DAP cash margins: Despite Mosaic’s cutback announcement last week, Florida cash margins are decent under current input costs (blue arrow above). This is contrast to late 2013. At that time, and on seeing the Florida cash cost threshold within $50pt of the spot market, US domestic buyers moved quickly to restock. This was the detonation for the major international rally. If ammonia continues rising into Q4, NOLA buyers – well informed on the cost profile – will probably take the cue.

Est. Florida DAP cash cost Nov ‘13 Oct ‘14

Respuestas: Puntos de entrada, sincronización

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[email protected]

www.profercy.com

the dap, map, tsp trade outlook - acefer · 2018. 6. 20. · convergence shows tight 2010-11...

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