LONDON (ICIS)--The benchmark Tampa ammonia contract price has jumped $50/tonne to $570/tonne CFR (cost and freight) for September loadings amid a tightening of the global/supply demand balance, a market source said on Friday.
The settlement between Norwegian fertilizer giant Yara and its customers was in line with most market expectations, given the recent global supply squeeze created by higher natural gas curtailments in Trinidad, unplanned plant shutdowns in North Africa and eastern Ukraine, and US and EU trade sanctions against ammonia produced at Russia's Rossosh plant.
The new price suggests a Black Sea price level of just under $500/tonne FOB (free on board) Yuzhny based on $75-80/tonne freight. Last Black Sea business for August was heard in the $450-460/tonne FOB range.
Earlier this week, Nitrochem and Transammonia (Trammo) concluded a spot deal for 23,400 tonnes of September ammonia that the buyer said gives a netback of around $490-500/tonne FOB, but other market players said was nearer $470/tonne FOB.
Adding to the firmness in the market is buyers' reluctance to purchase Rossosh ammonia and risk contravening strict sanctions. US firm Koch was due to load 40,000 tonnes of Rossosh product on the LPG tanker Clipper Orion in Yuzhny this week, but the vessel remains at anchorage and is unlikely to load for several more days, if at all.
With the Russian plant producing up to 50,000 tonnes/month, the consequences of such a large volume being removed from the normal spot market is bound to place further upward pressure on prices.
Increasing firmness is also due to higher gas curtailments in Trinidad – where Koch is expected to instead source its Far East-bound cargo – and planned and unplanned plant shutdowns in North Africa. Algeria's Sorfert was forced to completely halt ammonia output this week as its second line suffered technical problems, while the EBIC-OCI plant in Egypt remains offline due to a shortage of gas, and is not expected to restart until next month.
East of Suez, SABIC is now sold out for September after the producer concluded a deal for up to 23,000 tonnes of spot ammonia with Marubeni at $535/tonne FOB – up $10/tonne on previous Arabian Gulf business – for early September loading in Saudi Arabia.
Higher Middle East prices have yet to be reflected in contract cargoes for buyers in Asia Pacific due to the usual time lag, but traders are targeting above $600/tonne CFR for spot cargoes for September arrival in Korea and Taiwan.
The KPI plant in Indonesia is understood to have yet to restart despite two traders lifting 30,000 tonnes from the facility this week, which has created storage capacity. CJ Indonesia has issued a purchase tender for 24,000 tonnes of ammonia for delivery in several lots during the fourth quarter. The buyer normally tenders once a month but is understood to be looking to secure a solid supply channel for late 2014.
Elsewhere in southeast Asia, Petronas agreed a swap deal with Yara, and sold a spot cargo to Mitsubishi in a move that eased the supply situation created by the shutdown at KPI and three-week turnaround at the large Yara Pilbara plant in Western Australia. That turnaround process is due to end early next week.