Multiple factors are driving the liquid ammonia market to show steady improvement

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Multiple factors contribute to a stable and improving liquid ammonia market. Author/Source: Date: 2017-01-04 Clicks: 24. During New Year’s Day, fog was severe in most parts of the country; for example, highway traffic was restricted in Hebei province. This put pressure on liquid ammonia manufacturers to sell their products, leading some of them to reduce production in order to ease inventory pressures. As a result, the liquid ammonia market remained stable； After the festival, the overall liquid ammonia market remained stable; however, in some areas individual manufacturers saw an increase in the price of liquid ammonia. The main reason for this was that liquid ammonia producers experienced reduced output due to environmental regulations limiting production or temporary equipment failures, while weather conditions related to fog improved slightly. Currently, the prevailing spot price for liquid ammonia in China at the factory is around 1,950–2,720 yuan per ton (the same unit applies elsewhere); for some high-end grades, the price is 2,800 yuan per ton, and prices can be negotiated upon agreement ； So, apart from the adjustments in the operating rates of liquid ammonia producers affecting the trend of liquid ammonia prices, what other factors influence them? 　　Firstly, the price of urea at this stage greatly influences the trend of liquid ammonia; the two exhibit a relationship of mutual influence and competition ； The current situation in the urea market is somewhat complex. According to downstream markets, there is very little demand from the agricultural sector; while industrial compound fertilizer manufacturers are able to receive some orders, the volume of sales has not increased significantly. Fortunately, the operating rate of urea production plants remains low. Additionally, due to severe foggy weather during New Year’s Day and intensified environmental inspections, some urea producers were forced to reduce their production. According to statistics from Zhongfei Net, the operating rate remained at around 48.5% throughout that period ； Transportation in certain areas remains restricted; for example, it is difficult to export most of the urea produced in Xinjiang. Low-priced supplies have little impact on the mainstream market. These factors contribute to a slight increase in urea prices in those areas. Given the favorable development trends in the urea market, companies will gradually shift their production focus to urea. As a result, the supply of liquid ammonia in some regional markets will decrease, creating room for price increases. Secondly, regarding the needs of compound fertilizer manufacturers, according to statistics from Zhongfei Net, the overall operational rate of this industry remains stable at around 65%; there has been no significant increase in their purchases of liquid ammonia. Moreover, both liquid ammonia producers, compound fertilizer manufacturers, and chemical companies are subject to environmental inspections, which leads to a decrease in their operational rates. Such adjustments in operational rates will affect the price trend of liquid ammonia, though whether prices rise or fall will depend on the specific operating conditions of upstream and downstream industries ； Finally, the market for methanol is favorable; although its price fluctuates, it remains at a high level. Most methanol-producing companies say they are currently operating at a profit, and some of them choose to produce more methanol while reducing the volume of liquid ammonia shipped, which may thus support the development of the liquid ammonia market. 　　Among the factors mentioned above, the most significant one is the change in the operating rates of upstream and downstream industries; meanwhile, the main factor affecting these fluctuations is the environmental regulations that impose production limits, which deserves special attention. Starting from the second half of 2016 and the beginning of 2017, foggy weather remained a persistent issue; foggy conditions continued to occur in most parts of the country. As a result, the intensity of environmental inspections did not decrease at all – on the contrary, they continued on an ongoing basis. The operating rate of liquid ammonia production facilities also fluctuated from time to time. Thus, weather conditions, in other words, the intensity of environmental inspections, constitute an important variable that affects fluctuations in liquid ammonia prices. 　　Overall, the factors affecting the trend of the liquid ammonia market at this stage are mainly fluctuations in urea prices, changes in downstream demand, the operating rates of liquid ammonia manufacturers, and variable weather conditions. In the short term, driven by the continued slight upward trend in urea prices and the possible persistence of foggy weather, the operating rates of liquid ammonia manufacturers will remain low; as a result, there is room for local liquid ammonia prices to rise steadily. (China Fertilizer Network)