Updated to mid-November 2009
Asian market review by Gabriela Wheeler, ICIS pricing
Ammonia prices in Asia rose steadily over the August-September time frame, boosted by strong demand and tight supplies as a result of production problems in the Middle East. Ammonia prices climbed from $260-275/tonne CFR (cost and freight) Asia in mid-August to $330-350/tonne CFR Asia in mid-November.
Requirements from India registered record levels in October and November, while demand from Korea and Taiwan was also very healthy. This, together with higher freight costs, provided impetus to increased indications from a majority of ammonia suppliers.
Plant turnarounds in Saudi Arabia in October and unexpected production problems in Australia in November sent some suppliers scrambling for product and resulted in a number of swap transactions to cover commitments.
The mood is bullish in the Middle East as Indian demand remains strong, but requirements in general are expected to taper off towards the end of the year as some producers’ idle downstream units for maintenance turnarounds, and a longer market could dampen higher price expectations.
European market review by Mike Nash, ICIS pricing
The Yuzhny ammonia price continued its rapid ascent witnessed since June thanks to strong demand in Europe and renewed interest from the US. As of mid-August, ammonia was pegged at $260-265/tonne FOB (free on board) Yuzhny, but rose to $282-283/tonne FOB in late September as demand kicked in.
Prices then stalled briefly in early October as tight availability meant a lack of liquidity in the market, limiting further trades. Suppliers were also cautious about producing too much material, putting downward pressure on prices.
However, in October prices rallied again to close to $300/tonne FOB as demand in northwest Europe (NWE) and the US emerged. This combined with reduced Ukrainian supply to send prices upwards.
Prices hit a ceiling in late October/early November as seasonal demand began to recede, and were pegged around $295/tonne FOB at press time. However, further price rises could not be discounted given fears over a lack of supply out of Yuzhny as November began, meaning that only European and North African requirements may be covered.
US market review by Frank Zaworski, ICIS pricing
US ammonia prices strengthened in the three months to mid-November as lowered production in the US Gulf and the Former Soviet Union (FSU) tightened supply.
For the second autumn in a row, wet weather in the US Midwest delayed the corn and soybean harvests in key crop producing states, narrowing the window farmers had to perform fall fertilizer applications.
In November, the benchmark US ammonia contract settled at $355/tonne CFR Tampa, an increase of $10 from the October contract.
Looking forward, fall ammonia demand will be pushed to the spring. A total of 4m tonnes of ammonia are applied annually in the US. The bulk of the material will be applied between March and May of 2010
Corn growers will apply nitrogen in needed amounts in the form that is most efficient and effective, either as anhydrous ammonia, urea or urea-ammonium nitrate.
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Ammonia
Uses and Outlook
Ammonia is the basic building block of the world nitrogen industry and is the intermediate product from which a wide variety of nitrogen-based fertilizers and industrial products are produced. Fertilizer use accounts for around 85% of ammonia demand.
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The heart of ammonia manufacture, the Haber process where nitrogen and hydrogen are reacted together under high pressure and temperature, goes back to before World War I. Hydrogen is usually produced by the steam reforming of hydrocarbons, with natural gas the dominant feedstock. It can also be produced by the partial oxidation of naphtha or residual oil using air or oxygen and from coal gasification. Nitrogen can be obtained by the liquefaction of air or from producer gas.
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