Global ammonia prices jump as key plants go offline

Author: Richard Ewing

2021/02/12

LONDON (ICIS)--An unprecedented series of unplanned ammonia plant shutdowns both sides of the Suez was the catalyst for another rise in international prices as companies raced to find replacement tonnes.

At least five plants, including three involving Norway's Yara, are confirmed as offline, removing a combined 300,000 tonnes/month of product - about 20% of merchant seaborne trade - from an already bullish market.

Robust demand from fertilizers and chemicals manufacturers since the turn of the year has seen ammonia prices rebound strongly, with traders given no option but to pay premiums to secure spot cargoes.

The supply squeeze is perhaps most acute in the Americas, where two plants - the 760,000 tonne/year Nutrien No 4 plant and 500,000 tonne/year Tringen 2 unit - in Trinidad are offline, as well as Yara and BASF's 750,000 tonne/year unit at Freeport, Texas.

The temporary loss of the latter means majority owner Yara will move material from the Caribbean to the US Gulf, rather than send the volume across the Atlantic to its downstream plants across northwest Europe.

The Oslo-headquartered group reacted quickly to the deteriorating situation by securing around 13,000 tonnes of Russian spot material from Ameropa at $310/tonne FOB (free on board) Yuzhny for H1 March loading in the Black Sea.

A similar volume was acquired from the Baltic at an undisclosed CFR (cost and freight) price via an urgent spot deal with Fertiglobe, who only bought the cargo from EuroChem at $275/tonne FOB Sillamae last month.

Canadian fertilizer major Nutrien - the first producer to confirm plant issues in Trinidad - entered the spot market for the second time in as many weeks, this time purchasing a 25,600 tonne cargo from Algerian major Sorfert.

Sold at $355-360/tonne FOB Arzew, the cargo will load for the US Gulf - where there is unconfirmed talk of further plant outages - and will feature a CFR price of around $400/tonne.

Unplanned plant shutdowns also compounded the supply shortage east of Suez, with the 730,000 tonne/year export-oriented plant in the Red Sea operated by Egypt Basic Industries Corporation (EBIC) out of action.

While at least two 25,000 tonne capacity vessels are scheduled to load at Ain Sokhna in the next few weeks, any lengthy shutdown would be bad news for offtake partner Trammo.

Yara's unfortunate production situation was also evident in Australia, with its 850,000 tonne/year Pilbara plant on the Burrup Peninsula in Western Australia giving it a further headache.

Normally, substitute tonnes could be found in the Middle East or southeast Asia, but producers in both regions have had to reject approaches from various market players recently due to a lack of spot material.

Spot prices for Indonesian cargoes have soared by a third in the past two months, with buyers having to dig deep into their pockets for volume, so forcing up prices for big buyers in countries like South Korea, Taiwan, and China.

ICIS Editorial Chart goes hereFocus article by Richard Ewing