Benchmark Black Sea ammonia price climbs again on supply squeeze

13 September 2013 17:13  [Source: ICIS news]

LONDON (ICIS)--The benchmark Black Sea ammonia price has continued its recent upward trajectory and risen to $450/tonne FOB (free on board) following a 10,000-tonne spot sale by leading producer NF Trading to iTrade for late September lifting in Yuzhny, one of several such spot deals concluded this week, market players revealed late on Thursday.

Prior to this deal with iTrade, the producer sold the majority of its September cargoes at $440/tonne (€330/tonne) FOB Yuzhny. Finland-headquartered NF Trading is now targeting a price level of $460/tonne FOB Yuzhny for October loadings as the demand/supply balance in Europe tightens due to the complete shutdown of the supplier’s Ukrainian units.

Prices levels of Black Sea ammonia have risen steadily in the past few weeks after slumping below the $400/tonne FOB during the traditionally slow European summer season. A combination of scheduled shutdowns and unplanned outages means around 110,000 tonnes of ammonia production from Ukraine will be lost this month.

Ammonia manufacturing has been suspended at Gorlovka, Cherkassy, Dniproazot and Severodonetsk and, in addition, Odessa Port Plant (OPZ) commenced a seven-day shutdown on its one functioning ammonia line on 9 September for urgent pipeline repairs.

Output of the agricultural and industrial feedstock in Russia remains at normal levels, with Togliatti planning to load its usual 150,000-160,000 tonnes in Yuzhny this month for destinations in Europe, North Africa and India.

While weak phosphate and urea prices continue to act as a drag on ammonia demand, the absence of any Ukrainian product, increased natural gas curtailments in Trinidad and Tobago and the pending start of the US refill season means producers are more optimistic than in previous weeks.

Earlier this month, Norwegian fertilizer giant Yara settled the key monthly Tampa ammonia price at $485/tonne CFR (cost & freight) for September loadings, up $15/tonne from August's price level of $470/tonne CFR.

Latest Yuzhny business would reflect a US Gulf price of $520-530/tonne CFR based on freight costs of $70/tonne for a large-sized vessel (40,000-tonne capacity), but it remains to be seen what level the Oslo-headquartered company and its customers agree when the next round of talks concludes in the second half of September.

East of Suez, leading Saudi producer SABIC sold a 23,000-tonne spot cargo to Marubeni at $440/tonne FOB for second half September loading in the Kingdom, while Kuwait’s PIC agreed a similar price with Transammonia (Trammo) for a 10,000-12,000 tonne spot cargo that loaded in Bahrain earlier this week.

Traders and producers report a spike in demand and buying enquiries from India, with PPL/Paradeep and Japanese trader Mitsui agreeing a fresh spot deal for 6,300 tonnes of ammonia and a steady flow of contract cargoes moving to India’s east and west coasts from the Arabian Gulf. Most of these ammonia cargoes will be used for phosphate fertilizer production such as diammonium phosphate (DAP) and monoammonium phosphate (MAP).

Further east, softening industrial demand for ammonia in Korea due to downstream shutdowns means the spot market is not particularly active, although the downstream situation appears healthier in Taiwan.

Samsung Fine Chemicals' (SFC) demand will be reduced in Q4, to around 30,000-40,000 tonnes/month due to lower downstream production in Korea. Capro Corp will take down its 60,000 tonne/year No. 1 caprolactam line for routine maintenance in October and the unit is then expected to remain down in November-December. There are also expectations that Capro Corp will only run two of its three units in Q1 2014.

Taiwan’s China Petrochemical Development Corp (CPDC) continues to run one caprolactam plant at 90% of capacity and the other plant at 50% of capacity and there are expectations that the units will remain at these rates for the remainder of 2013.

Routine maintenance on CPDC’s acrylonitrile (ACN) unit has finished and the plant is now running at 100% of capacity. However, the facility will go down for further maintenance in late October for around a month.

Taiwan Fertilizer Company (TFC) has postponed its next September contract shipment and will not receive any contract volumes this month. TFC’s ammonia requirements remain reduced as its nitrogen phosphorus potassium (NPK) plant at Taichung is not running at full rates because of high stocks and a traditional weakening in demand downstream due to the off season.

Meanwhile, Formosa will receive its next 10,000-tonne contract cargo from a long-term Japanese supplier at the end of September as the company’s ACN line is now operating at 100% of capacity.

($1 = €0.75)

By: Richard Ewing
+44 208 652 3214

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