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The Outlook Ammonia: Market overview
Updated to Q2 2018
The imminent start-up of the new PAU ammonia plant that will provide Mitsubishi with around 660,000 tonnes/year of ammonia means all eyes will be on Indonesia in the coming weeks. Due to come on-stream shortly, the $830m facility will pump more material into an already oversupplied market. No turnarounds have been disclosed by other producers in the region, while scheduled maintenance at Middle East plants run by QAFCO and Ma’aden might squeeze supply for Indian buyers during April, but no wider impact is expected.
With no confirmed spot business for April or May delivery to Taiwan or Korea heard at the start of the quarter, suppliers are expected to target India and China instead. Malaysia’s PETRONAS sold 25,000 spot tonnes to Yara at $303/tonne CFR basis for April discharge in Thailand, while the downward price trajectory in India is expected to tempt more buyers out of the shadows.
Suppliers in the Black Sea and north Africa who all serve customers in Europe have yet to disclose their production plans for the second quarter, but general sentiment is run rates will have to be eased to match soft demand. With plenty of tonnes heading to Antwerp and northwest Europe from the Caribbean, capacity cuts at Russia’s Togliatti and Algeria’s Sorfert, among others, are considered likely by market participants.
Apart from the usual purchase tenders from Turkish buyers, little spot demand was noted at the start of the second quarter. With spot activity limited during the first quarter, spot demand from India is expected to emerge sooner rather than later, albeit most probably at favourable prices for buyers. Scheduled plant shutdowns in Qatar and Saudi Arabia are unlikely to have much impact on the supply/demand balance given the number of suppliers seeking to place FOB or CFR tonnes.
Given the relatively stable production levels, and with the recent disruption in Trinidad said to be close to a conclusion, the volume of ammonia to be manufactured domestically and imports arriving during the period should keep the US supply balance stable as the planting period advances over Q2.
"Given the weather delays in starting the crop season there is anticipated to be a surge in additional demand as soon as conditions turn more favourable.
The lag in starting will result in a more compacted period and there could see some applications deferred to after the crops emerge, with side-dressing runs later in the quarter potentially growing if farmers find conditions not prime for inputs when sowing the corn acreage.
While plantings of this crop may be reduced the still large amount of acreage forecasted bodes well for levels of consumption over the next three months."
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About The Outlook Ammonia
Ammonia is one of the main sources of nitrogen in fertilisers, as it contains 82% of nitrogen (N), which is essential for the life of plants. Ammonia (NH3) is produced through a chemical reaction (electrolysis). Most of the world’s ammonia production is based on the Haber-Bosch process which was developed by BASF in 1910.
It involves the reaction of hydrogen and nitrogen in the presence of a catalyst under high temperatures and pressures. The hydrogen is usually obtained by the steam reforming of natural gas (methane) but can also be made from the partial oxidation of naphtha and the gasification of coal. The nitrogen is usually obtained by the liquefaction of air.
This reaction requires a large amount of energy and, nowadays, this is provided mainly in the form of natural gas, as it is the most economic, but there are still some ammonia plants, for example in China and Japan, which operate based on naphtha and coal.
Since the 1970s, the production of ammonia, which was born in Europe, has gradually migrated to countries rich in cheap natural gas, such as Russia, Ukraine, Trinidad, Libya, Algeria, Egypt, the Arab Gulf and Indonesia .