Ammonia prices and sentiment divided along Suez

Author: Richard Ewing

2020/06/05

LONDON (ICIS)--The international ammonia market is now fractured along geographical lines, with contract and spot prices falling west of Suez but proving more resilient east of Suez.

The latest fall in the monthly Baltic contract prices was widely expected given the clear looseness in the demand/supply balance amid weak industrial and agricultural demand.

The settlements for June loadings at $178-181/tonne FOB (free on board) put fresh downward pressure on the Yuzhny index, although no fresh spot sales were heard out of the Black Sea.

The recent trend for Ukrainian producers to target foreign markets means a further 35,000 tonnes/month has been tossed onto the table at time when the market is struggling to place volumes from other regions.

With major trader Trammo usually the only buyer of Black Sea cargoes on a FOB basis, the additional volume has seen it adopt more aggressive price targets at below $180/tonne FOB Yuzhny.

That figure is considered the break-even level for some producers, and any prolonged spell of prices below that threshold would likely prompt capacity cuts.

"All these new Ukrainian tonnes mean Trammo is having a party; there's really no-one else in a position to take them so they can target really low prices as the producers have no other outlets," noted one key market player.

In contrast, a surprisingly priced spot deal in the Middle East saw Trammo pay Saudi Arabian Mining Company (Ma’aden) a significant premium for a late-June/early-July cargo of 10,000-15,000 tonnes.

The producer’s recent plant problems have reduced regional availability, and the trader said it was left with little choice but to pay $220/tonne FOB, a figure around $70/tonne higher than some recent contract netbacks to the kingdom.

The buyer emphasised it was reluctant to pay such a price, but after exploring options in north Africa and southeast Asia, realised the additional freight costs would offset any savings from a cheaper deal.

Price hikes were also achieved by Malaysia’s PETRONAS as it sold a combined 20,000 tonnes on a FOB basis to Japanese trader Mitsui for July loading, and to Indonesia's Parna Raya for mid-June lifting.

Trammo agreed FOB spot deals in Algeria with AOA Edeola/Bahwan for 17,000 tonnes, and Mitsubishi for a 15,000 tonne Indonesia cargo for loading next week at Luwuk.

The trader also sold CFR (cost and freight) spot parcels into several countries, including to Hellagrolip in Greece, Bagfas in Turkey, and Deepak Fertilisers and Petrochemicals Corporation in India.

Similarly small cargoes were also offloaded to Philippine Phosphate Fertilizer Corporation (Philphos) in southeast Asia and Industries Chimiques du Senegal (ICS) in West Africa.

The outlook for early Q3 business could yet be determined by plant turnarounds or capacity cuts in key export-based countries like Russia and Indonesia.

In addition, any rebound in downstream demand from the industrial sector in Asia Pacific could prompt further price hikes over the coming weeks, with a small uptick in demand from South Korea's chemicals sector recorded.

ICIS Editorial Chart goes hereFocus article by Richard Ewing