FocusAsia ammonia on uptrend on strained supply, good demand

28 September 2011 06:23  [Source: ICIS news]

Asia ammonia to extend strong gains on strained supplyBy Gabriela Wheeler

NAGOYA (ICIS)--Asian spot ammonia prices are on an upward trend, supported by strained availability and healthy demand in the region, industry sources said on Wednesday.

Buyers are bracing for further increases as the tight supply situation is unlikely to ease, and with prices in other regions also on the rise.

In the week ending 22 September, ammonia prices were assessed at $520-550/tonne (€380-402/tonne) FOB (free on board) Middle East and at $600-610/tonne CFR (cost and freight) Taiwan, according to ICIS.

The Asian ammonia market is usually tightly linked with ammonia indications in Yuzhny, in the Ukraine, and in Tampa, in the US, given that ammonia can sometimes move between regions if there is a supply shortage in one particular area.

Yuzhny ammonia last traded at $588/tonne FOB for October, up $13/tonne from the previous week, and about $175/tonne higher than a year ago.

October contract prices in Tampa are also anticipated to see a huge price increase to around the $650/tonne CFR Tampa mark, from $590/tonne CFR Tampa currently. Contract discussions are expected to be finalised at the TFI conference taking place in Chicago this week.

“It seems that ammonia prices will continue to go up in the next few weeks.  We are waiting to hear what the Tampa price is for October, but I am afraid it’s going to be very high,” a Korean buyer said.

A Taiwanese buyer said that an increase of more than $10-15/tonne in ammonia prices in the Middle East in the past couple of weeks had been a “big jump”.

“If the next deal is concluded at $575-580/tonne FOB, which is the current offer level, the increase will be almost $30/tonne in two weeks. Since the beginning of the year, ammonia prices have gone up by more than $150/tonne, and that is crazy.” 

Spot ammonia prices were assessed at $405-410/tonne FOB Middle East in January 2011, according to ICIS.

One of the main sources of ammonia for Asia is the Middle East, but spot availability is tight even though production has increased in recent months with the start-ups of two new plants this year with a combined capacity of 1.85m tonnes/year.

Qatar Fertilizer (Qafco) started operations at its 750,000 tonne/year ammonia plant in Mesaieed early this month. However, the plant experienced some technical issues in mid-September and had to be shut down.  The unit is not expected to be restarted until the beginning of October.

In Ras Al-Khair, Saudi Arabia, a 1.1m tonne/year plant operated by Ma’aden Phosphate Co and SABIC came on stream in February.

But demand within the Middle East region is also strong and most production has been committed to term customers, industry sources said.

SABIC is in a sold-out position for October, and other suppliers report little to no availability for spot business, a company source said.

Japanese trading company Mitsui purchased one of the few November spot cargoes available from SABIC this week, likely for shipment to Asia, a Mitsui source said.

Mitsui bought 8,000 tonnes of ammonia at $561/tonne FOB Middle East, and the cargo will load in Al Jubail or Ras Al-Khair in the first half of November. The price is $11-16/tonne higher than a previous spot transaction, which Mitsui concluded two weeks ago.

Mitsui had purchased two spot cargoes from Kuwaiti producer Petrochemical Industries Co (PIC) at $545-550/tonne FOB Middle East for a total of 23,000 tonnes for September loading from Bahrain and Kuwait.

Given the tight market situation and the climbing price indications, producer Fertil in the United Arab Emirates (UAE) is now reported to be offering a 15,000-tonne late October/early November ammonia cargo at $575/tonne FOB Middle East.

An ammonia buyer said that while feedstock costs keep on increasing, the price of some downstream petrochemicals such as acrylonitrile (ACN) and ABS are plummeting, leading to sharp erosion in margins.

ACN prices fell by $100-150/tonne last week to $1,950-2,050/tonne CFR northeast (NE) Asia because of weak demand against ample availability.

Some downstream producers are starting to reduce operating rates because they cannot afford the cost of feedstocks, said the buyer.

“Those that use ammonia for downstream production may reduce rates or shut down production completely, but we use the ammonia as a fertilizer, so we have no other option than to accept the current price,” said another buyer.

“But it is very hard to absorb such a high cost, I don’t think many buyers can handle it,” the buyer added.

($1 = €0.73)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: Gabriela Wheeler
+65 6789 8828



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