Updated to mid-August 2009
Asian market review by Heng Hui, ICIS pricing
Brought on by the strong Asian demand, ammonia prices dropped from $300-310/tonne CFR (cost and freight) Asia in mid-May to $240-245/tonne CFR Asia by early July, before increasing slightly to $260-275/tonne CFR Asia by mid-August.
The months of May to July were traditional off peak seasons in fertilizers and industrial applications. The availability of new Egyptian ammonia, as well as Trinidadian product, to Asian markets was a cause of concern for Middle East producers. Indonesian producers were then mulling plant closure to contain supply.
However by August ammonia prices started to firm, as demand was recovering while supply was tighter from a number of origins. The high operating rates of industrial chemicals such as acrylonitrile and caprolactam had customers asking for more cargoes for August/September delivery.
In general, the outlook for Asian demand was positive and prices were expected to rise into September. Demand from the Far East was expected to remain strong.
European market review by Mike Nash, ICIS pricing
The European ammonia market began the three month period to mid-August in a very bearish state. Yuzhny prices were pegged at $210-215/tonne FOB (free on board) in late May before falling to as low as $160/tonne in mid-June. European CFR levels similarly fell from $270-280/tonne to as low as $190/tonne in June.
This was due in part to poor demand in the US market, coupled with very high natural gas costs that made Yuzhny material the most expensive in the world. Poor European demand and cheaper ammonia from Trinidad lead to significant production cuts.
However, in late June/early July, market sentiment changed as an up tick in US demand for ammonia for refill ahead of the autumn season, coupled with production problems in Europe and strong demand for nitrates led to more imported demand for ammonia.
US prices firmed, demand in Asia was strong and Yuzhny availability was tight, all of which combined to raise prices to $250-260/tonne FOB Yuzhny at press time. Ukrainian producers were still out of the export market due to high gas costs, serving to tighten the market further.
US market review by Frank Zaworski, ICIS pricing
US ammonia prices strengthened in the three months to mid-August as stocks in the US Gulf were not adequate for domestic needs and imports from Yuzhny, Ukraine, and Ventspils, Latvia, were sought.
Demand for the autumn fertilizer application season began to bloom in late July and early August as major suppliers assessed their needs.
In May, the benchmark US ammonia contract settled at $260/tonne CFR Tampa, a 44% decline from the July contract.
Looking forward, US farm economics are very favourable as the 2009 corn crop appears to be big despite a late start to the growing season. Farmers will have the cash and the credit to invest in soil nutrients.
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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