Crop and Chemicals dashboard: February 2023

8 Mar 2023 , 10:18 AM

Highlight of the month was BASF outlaying measures to increase its competitiveness through fixed costs reduction and streamlining of asset base. The company has decided to shut down the TDI plant (~10% of global capacity) and caprolactam (~1.5% of global capacity), which would be positive GNFC (the only manufacturer of TDI in India) and GSFC (the only manufacturer of caprolactam in India) respectively. It also highlighted that competitiveness in Europe is declining, on the back of geopolitical tensions, Green deal and its ambition to go climate-neutral by 2050. Further, ~50% of the average annual capex (~EUR2.7 billion) is being incurred for China Verbund site and battery materials, while India does not find any mention (Negative for BASF India).

Government approves Nano-DAP

After Nano-Urea, the central government has approved the use of Nano-DAP. While the product is currently being launched by IFFCO, Coromandel is also in process of testing the efficacy of this product.

Global Agriculture update

Prices of key commodities in the US showed signs of cooling off, due to strong supplies and sharp rise in Russian exports. US wheat, corn, rice and soybean futures declined ~3-9% MoM. Soybean prices in Brazil fell a further ~3% MoM, on expectations of a healthy harvest this year. In line with global trends, commodity prices in India too have declined over the last month. Prices of paddy, maize and soybean declined ~1-3% MoM. Wheat prices declined ~15%, driven by the FCI's decision to launch open market sale.

Ongoing heat wave poses a risk of crop damage

Weather in the upcoming months will likely remain erratic. IMD has forecast a heat wave from March to May – which may negatively impact crop yields. The US government agency has forecast El-Nino to return as early as June 2023. El-Niño typically leads to lower-than-normal rainfall and erratic distribution.

Chemical prices

Trend in chemical prices through February 2023 was mixed. While prices of soda ash, phenol and acetone grew ~10-18% MoM, those of PVC, caustic soda and bromine corrected ~2-17%. TAN prices have started to cool off as export restrictions out of Russia have started to ease. Consequently, spreads of TAN have declined ~29% MoM. Phenol spreads increased ~18% MoM. Prices of key fertilizer inputs such as ammonia, phosphoric acid and sulphur corrected ~22-45% MoM.

Rainfall update

Season-to-date rainfall (since 1-January-2023) is ~76% below normal. Reservoir levels are below last-year levels, but above the 10-year average.

Fertilizer MRPs

Despite falling import prices, domestic MRPs of key fertilizers remained largely flattish in January 2023. As per news articles, IFFCO has taken price cuts in February 2023. Global prices of DAP and urea fell ~22-52% MoM in February 2023. Fertilizer subsidy disbursement remained healthy in January 2023, amounting to Rs258 billion.

Other highlights

1) The Centre is eyeing measures to lower the fertilizer subsidy outgo through a series of measures. Sources indicated that gas bids, which were upwards of $30 a unit, came down to a low of around $18. 2) Europe’s acetone, phenol and derivative chain has seen some small pockets of optimism, but challenges remain. 

3) US contract prices for polyvinyl chloride (PVC) increased in January for the first time in nine months, driven by rising export prices and tightening domestic supplies. 

4) Cooperative major IFFCO has cut the price of complex fertilizer (NPKS) with 20:20:0:13 by ₹200/bag to ₹1,200/bag. 

5) US ITC has issued antidumping duty (AD) and countervailing duty (CVD) orders on sodium nitrite from India. 

6) Aether Industries has acquired and taken possession of a new industrial premise in Surat. It has also signed a 10-year contract with Otsuka Chemical worth ~Rs51 million per year.

7) Adani Group’s CFO said their coal-to-PVC project will be scrapped – this had been a 2mtpa $4 billion project to produce various PVC grades. 

8) GHCL announced that a mechanical breakdown in one line of the lime kilns will likely result in ~30,000MT of lower production in Q4. 

9) Central government has issued a draft order to prohibit three insecticides (Dicofol, Dinocap and Methomyl) for use in India.