Oversupply Conditions will Result in Further Price Slashes of Ammonia for Fertiliser Application

Due to oversupply, the price of ammonia for fertiliser applications is prognosticated to be further reduced.

Despite a frenetic week and a new dip in the Tampa contract, numerous spot sales were completed as reduced prices enticed buyers back into the market after months of demand destruction.

While the USD 155pt drop in the US benchmark to USD 435pt cfr for April loading was along the winds of expectations, it was significantly overshadowed by two massive discounts sold out of Indonesia to China.

Both sales involved Mitsubishi.  While the trader sold an early April cargo to Henan Energy for USD 310pt fob Luwuk, the second sale was with Sailboat for a netback that was roughly 10% greater than the earlier sale.

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While those rates did not go down well with other suppliers on either side of the Suez, they did provide more evidence of a revival in Chinese import demand, with three spot cargoes recently traveling to the nation.

Mitsui has been linked to probably discounted deals in Qatar and Oman for April loading in the Middle East, with a tanker last utilised by the Japanese supplier arriving in Salalah in the last 24 hours to lift up to 25,500t sourced from OQ Trading.

For the time being, big Saudi manufacturers are focusing on contract commitments, with Ma'aden planning to load 150,000t across six ships in April, with all but one remaining East of Suez.

Trammo closed four purchases west of Suez totaling roughly 50,000t. The merchant completed transactions in numerous regions, including a formula-priced sale to Eurochem in Belgium and fob deals with two North African suppliers.

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While the market remains long for the time being, there is growing optimism that lower prices will entice purchasers to return and absorb the surplus.

Prices may have to go even more for a floor to emerge, with a rush of orders from Turkey and India expected as the new quarter progresses.

What is Ammonia?

Ammonia (NH3) is a colourless gas with a pungent, harsh odour. It has the chemical formula NH3 and is made up of one nitrogen atom and three hydrogen atoms. Because ammonia is extremely soluble in water, it is widely employed in the manufacture of fertilisers, cleaning agents, and other industrial operations.

It is also found naturally in the environment, where it is formed by a variety of biological processes such as organic matter breakdown and animal excrement. In high amounts, ammonia is poisonous and can be hazardous to both human health and the environment.

Ammonia: Price Trend and Forecast

APAC

Recently, ammonia prices fell as a result of lower upstream ammonia production costs throughout the quarter. Coal prices and production peaked early in the year before levelling off. As a result of the rise in operational costs caused by the drop in feedstock prices, the market witnessed a stockpile of commodities.

Europe

The price of ammonia has risen in the European region as a result of the recent surge in the price of crude oil. Europe witnessed high rates of inflation as a result of the blockade on Russian oil imports.

North America

Ammonia prices have lately fallen in the domestic US market due to a drop in demand from downstream sectors. Despite reducing feedstock and operating costs, supply and prices remained low due to purchasers' conservative purchasing habits in the face of rising interest rates and a weakening economy.

As per Procurement Resource, the price of ammonia for fertiliser applications will be cut further because of overproduction. Despite a hectic week and a new low in the Tampa contract, multiple spot sales were completed as lower prices encouraged buyers back into the market following months of demand destruction.

While the USD 155-point decline in the US benchmark to USD 435-point cfr for April loading was broadly expected, it was overshadowed by two significant discounts sold out of Indonesia to China. Mitsubishi was involved in both deals, with the trader selling an early April cargo to Henan Energy for USD 310pt FOB Luwuk, followed by a subsequent shipment to Sailboat for a net gain that was around 10% higher than the previous sale.