INSIGHT: Ammonia market to remain firm despite new capacity

23 November 2011 16:25  [Source: ICIS news]

(recasts, clarifying start-up dates in paragraph eight)

By Rebecca Clarke

An ammonia plantLONDON (ICIS)--The global ammonia market looks set to remain firm through 2012. New capacity is due to come on stream over the next 12 months but downstream demand is also rising. Prices are likely to remain at historically high levels as a result.

Benchmark Yuzhny prices are currently around $590/tonne (€437/tonne) FOB (free on board), some $175/tonne higher than this time last year.

Middle East prices are $150/tonne higher than a year ago and the Tampa contract price for December has been agreed at $650/tonne CFR (cost and freight), up $190/tonne from December 2010.

Between 1.58m and 1.72m tonnes of merchant ammonia capacity is due to start production over the next year. But at the same time, around 1.3m tonnes of merchant availability will be lost to captive downstream urea and phosphates production and there will be another 500,000 tonnes of increased requirements from existing buyers.

Qatar Fertilizer Co (Qafco) is expected to start up a 2,200 tonne/day ammonia plant in Mesaieed, Qatar, in December.

The Qafco V plant initially started up at the end of August but problems were identified with the boilers, which are currently being repaired.

Once the unit starts, the downstream 3,800 tonne/day Qafco V urea plant will start up, using all the ammonia availability.

Qafco then has a number VI ammonia plant scheduled to start up in December 2011/January 2012, which also has a nameplate capacity of 2,200 tonnes/day. The unit will provide surplus ammonia for the merchant market, but this will only be on a temporary basis.

In the fourth quarter of 2012, the 3,800 tonne/day Qafco VI urea plant is due to start production and this will use all ammonia availability from the associated ammonia plant.

There is new merchant ammonia capacity due on stream in Algeria in the next six months. Sorfert, a subsidiary of Egypt’s Orascom Construction Industries (OCI), is expected to start up in the first quarter of 2012, with a capacity of 800,000 tonnes/year.

Additionally, Egypt’s MOPCO is expected to have a surplus of 80,000-100,000 tonnes of ammonia from the second quarter of 2012.

MOPCO is scheduled to bring on-stream two urea plants, each with a capacity of 1.2m tonnes/year, and each unit will have a surplus of around 40,000 tonnes/year.

However, this project may be delayed by recent protests over concerns that the plans to expand its urea production could harm local fisheries.

Around 600,000 tonnes/year of currently available merchant ammonia will disappear from the market once the Ma’aden Phosphate Plant (MPC) in Saudi Arabia starts full diammonium phosphate (DAP) production, which is currently expected in mid/second half of 2012.

The ammonia plant supplying MPC has a capacity of 1.1m tonnes/year and currently has around 80,000 tonnes/month available for export while production from the phosphates plant is ramped up. Once DAP (diammonium phosphate) production reaches full capacity of 3m tonnes/year, surplus ammonia availability will drop to 410,000 tonnes/year.

Looking ahead, ammonia export availability will decline further from Saudi Arabia in 2014 with the scheduled start up of the 1.1m tonne/year SAFCO V urea plant, which will require around 500,000 tonnes/year of ammonia.

Meanwhile, Asahi Kasai Chemicals in Japan will permanently close its ammonia plant at Mizushima in midwest Japan in March 2012.

The plant has a capacity to produce 320,000 tonnes/year of ammonia but has been producing 200,000 tonnes/year in recent years for acrylonitrile (ACN) production.

Asahi Kasai will continue production of ACN based on imported ammonia, which will have to be secured in the international market.

Looking at other increases in ammonia requirements, Orica’s new 300,000 tonne/year ammonium nitrate plant in Bontang, Indonesia, will come on stream in December 2011 and will require 150,000 tonnes/year of ammonia.

Meanwhile, Taiwanese requirements are set to rise by 70,000 tonnes/year from late 2011/2012.

In Korea, Samsung Fine Chemicals (SFC) has signed contracts for 850,000 tonnes/year for 2012/2013, up 50,000 tonnes from this year due to increased requirements for downstream chemical production.

It is likely that some of these projects on the supply and demand side will end up being delayed. But essentially, the additional demand coming on stream over the next year will absorb the extra supply, and should lead to a relatively firm market.

In recent years, new projects have focused on urea production, and not on having surplus ammonia for export.

Indeed, the expectation that ammonia demand will continue to rise has led to some talk about building new standalone plants to produce for the merchant market. But these will be several years away at the earliest.

Qafco has the space and infrastructure at Mesaieed possibly to build new plants, but will wait to see how the current projects operate after they start up.

Meanwhile, OCI’s Egypt Basic Industries Co (EBIC), which operates a 700,000 tonne/year standalone ammonia plant in Ain Sohkna, Egypt, is understood to be considering building a new plant.

Any new production facilities are likely to be in the Middle East or North Africa where gas is abundant and cheap.

($1 = €0.74)

For more on ammonia, urea visit ICIS pricing fertilizers

By: Rebecca Clarke
+44 20 8652 3214

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