Ammonia producers cut output to halt price slide

06 January 2012 16:08  [Source: ICIS news]

LONDON (ICIS)--Russian and Ukrainian ammonia producers have moved to limit supply in January in the face of weak demand and sliding prices, market sources said on Friday.

January export ammonia availability from Yuzhny, a port city in Ukraine, is expected to be just 150,000-160,000 tonnes/month compared with around 280,000-300,000 tonnes/month normally.

Ukraine’s Odessa Port Plant (OPZ) shut down one of its two ammonia lines from the start of January because of weak market conditions and high production costs. One ammonia plant and two urea units continue to run, meaning there will be no ammonia spare for export.

There is understood to be around 10,000 tonnes of OPZ ammonia available for January shipment.

The OPZ shutdown is expected to continue through January, but it is unclear whether the outage will last longer.

Production at Ukrainian units at Gorlovka and Severodonetsk, as well as from Russia's Rossosh, is also running at reduced rates. It is understood that one of three ammonia lines at Gorlovka is down for maintenance and when it restarts all three will run at around 70% of capacity. Severodonetsk is understood to be running at around 90% capacity.

Russia’s Togliatti is running two out of six ammonia units and one urea plant at present. Ammonia availability in January is expected to be 70,000 tonnes/month, down from the usual 130,000-140,000 tonnes/month.

It is unclear at present whether the outages will continue into February, but will likely depend on how the market develops over the coming weeks.

Benchmark Yuzhny ammonia prices are currently indicated at $440-450/tonne (€343-351/tonne) FOB (free on board), down from $650/tonne FOB at the start of the fourth quarter of 2011.

However, since then prices have slid on the back of seasonally weak agricultural demand and a downturn in industrial demand due to economic uncertainty.

Downstream phosphate producers are also limiting output during the first quarter of this year. US producer Mosaic is reducing production by up to 250,000 tonnes, Russia’s PhosAgro is cutting output by 18% compared with the first quarter of 2011 and Moroccan producer OCP plans to cut production by 30% through to the end of March.

($1 = €0.78)

By: Rebecca Clarke
+44 20 8652 3214

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