FocusBlack Sea ammonia prices fall again on softening demand

14 December 2012 15:44  [Source: ICIS news]

LONDON (ICIS)--Ammonia prices in the Black Sea maintained their recent downward monthly trajectory on Friday when Yara purchased a 40,000-tonne cargo at $600/tonne (€456/tonne) FOB (free on board) for January loading, down $20/tonne on December business.

The purchase from Ukrainian ammonia producer Odessa Port Plant (OPZ) follows two weeks of deadlock between buyers and manufacturers amid softening demand from industrial users in Asia Pacific, as well as seasonally slow demand from Europe and the US.

While most market participants had expected prices to reverse the third quarter upward momentum that saw prices peak at $650/tonne FOB, the general feeling was that January's spot cargoes would be sold in the region of $605-610/tonne FOB rather than $600/tonne FOB.

The lower Yuzhny price for January will also lead to a lower price in Tampa for next month, with the $20/tonne slide in Black Sea prices likely to be mirrored in a new US Gulf price of $665/tonne CFR (cost and freight) rather than a rollover at $685/tonne CFR. Talks between Yara and its US customers will commence next week.

No new ammonia business was heard in the Baltic this week, with leading producers Acron and Uralchem understood to be targeting a rollover of $620/tonne FOB for spot loadings next month.

In Egypt, state energy authorities have still not restored natural gas supplies to EBIC-OCI's ammonia plant in the Ain Sokhna industrial zone. Supplies were cut on 6 November for routine maintenance and the producer had hoped to restart production in late November or early December.

However, while no new date has been given for the plant's reconnection to the gas grid, EBIC-OCI still hopes to load a 23,400-tonne ammonia cargo at the end of December, having loaded an identical-sized cargo for South Africa on 11 December.

East of Suez, little fresh spot business was seen this week, as Middle East ammonia supplies are still very tight and producers have been unable to offer spot cargoes as they strive to meet contract commitments.

However, the snug availability is expected to ease in coming months if all ammonia plants are run at full rates and reduced output is maintained at downstream acrylonitrile, caprolactam and nitric acid units in Asia.

Production rates at several industrial plants have been reduced or have been shut down because current prices in downstream markets remain weak and are not sufficient to cover high production costs.

At the Fertilizer Association of India (FAI) conference in Agra this week, many discussions centred on the conclusion of fresh supply contracts for next year. South Korean buyers Namhae and SFC are understood to have signed several 2013 supply contracts with leading producers.

Namhae is heard to have finalised annual supply contracts with Saudi Arabia’s SABIC for 150,000 tonnes, Yara for 150,000 tonnes, and Mitsubishi for 70,000 tonnes. The firm is also in discussions with additional suppliers.

SFC’s ammonia requirements for 2013 are expected to total 950,000 tonnes, although some tonnage will be carried over from this year given reduced consumption over the last couple of months. 

The company is understood to have concluded 2013 supply contracts with SABIC for 200,000-250,000 tonnes, Yara for 200,000-250,000 tonnes, Mitsui for 200,000-250,000 tonnes and Mitsubishi for 50,000-100,000 tonnes.

In the Middle East, major Qatari producer Qafco continues to experience problems with ammonia line No.1, which broke down following a routine turnaround late last month. In Bahrain, GPIC's ammonia line remains offline following an unplanned outage in early December that also followed routine maintenance.

In the key ammonia producing country of Trinidad, all ammonia plants are now running, albeit at reduced rates, as a 20% natural gas delivery curtailment is in effect across the island until the end of 2012.

The National Gas Company has apparently told several ammonia producers like Yara and PotashCorp that gas curtailments will average 7-10% next year.

($1 = €0.76)

By: Richard Ewing
+44 208 652 3214

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