Fertilizer market slows down, and final demand is still uncertain

Fertilizer sales in Brazil are behind by around 7 million tons compared to the same period last year, according to estimates presented by Mosaic. The movement occurs in a context of sharply rising raw material costs, especially sulfur, and geopolitical uncertainties that affect the global supply chain.

At the same time, the company decided to interrupt operations at units in Brazil and the United States due to the economic imbalance between production costs and prices charged in the fertilizer market.

At this time last year, around 32 million tons of fertilizers had already been delivered, while this year the volume is approximately 25 million tons, said Eduardo Monteiro, country manager at Mosaic, at an event promoted by Brazil Journal and The Agribiz this Tuesday (9).

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"The question that arises is: will the market reduce 7 million? We don't know", he said. According to him, some producers postponed purchasing decisions after missing the moment considered most favorable for purchasing inputs.

Monteiro highlighted that there is still room for demand recovery in the coming months, as, in some regions of the country, purchases for the summer harvest can take place until July, August and, in certain cases, even September.

In addition to the delay in negotiations, the supply also shows signs of restriction. Data cited by the executive indicate a drop of approximately 10% in imports of phosphate fertilizers and a 12% drop in nitrogen fertilizers. The executive highlighted, however, that the phosphorus situation is more critical.

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The scenario is worsened by rising production costs. One of the main factors is the appreciation of sulfur, an essential input for the manufacture of phosphate fertilizers. According to Monteiro, the product was traded at around US$500 per ton before the start of the conflict in the Middle East and currently fetches around US$1,250 per ton.

Geopolitical tensions have also increased logistical and supply difficulties. Monteiro cited the impacts of conflicts in the Middle East and between Russia and Ukraine, in addition to Russia's recent decision to restrict the transit of sulfur from Kazakhstan.

"Imagine what it's like to spend 11 weeks with logistics flows interrupted and prices rising, with raw materials increasingly restricted," he said.

According to him, Russia and Kazakhstan together account for around 15% of global sulfur production. The restriction on product transportation has increased pressure on phosphate fertilizer manufacturers, who, in some cases, face production costs higher than the sales prices of the final product.

In this context, Mosaic announced stoppages in its operations. The company has already stopped activities at five units, including two partially in the United States, located in Baton Rouge and Louisiana.

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In Brazil, the company permanently closed the operations of the Araxá (MG) unit, put up for sale, and temporarily suspended the activities of the Tapira (MG) and Catalão (GO) complexes.

According to Monteiro, the temporary shutdowns are directly related to the increase in the cost of sulfur and the difficulty of passing this increase on to fertilizer prices.

"What we have control over is effectively managing our costs, security and the way we interact with customers", he said.

The company also participates in discussions with sector entities and federal government bodies in search of measures to support the national production of phosphate fertilizers. Among the proposals under debate is the creation of temporary support mechanisms for the sulfur chain. According to the executive, the industry defends the adoption of temporary subsidies for the input, in a model similar to that already existing for diesel.

Despite the difficulties, Monteiro stated that it is not yet possible to determine whether there will be a shortage of fertilizers on the Brazilian market.

According to him, the combination of a possible reduction in demand and a reduction in supply makes it difficult to predict the market balance in the coming months.

"The debate today is whether there will be a shortage of fertilizer due to the war or whether the potential reduction in demand could act as a balancing point," he said.

For the executive, the months of August and September tend to concentrate the main logistical and supply bottlenecks.

Faced with this scenario, "the word that predominates within this market today is uncertainty", he stated.

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Source: CNN