Environmental concerns are resurfacing, driving up the price of synthetic ammonia sharply

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Environmental regulations are back in force, driving up the price of synthetic ammonia. Author/Source: Date: 2018-08-23 Clicks: 45 The second round of environmental inspections officially began on August 20. It is expected to continue until April 2, 2019. The key areas under inspection in this audit include the markets in the Beijing-Tianjin-Hebei region and its surrounding areas, such as Beijing, Tianjin, Shijiazhuang (including Xinji) in Hebei Province, Tangshan, Baoding (including Dingzhou), Langfang, Cangzhou, Hengshui, Handan, Xingtai City; Taiyuan, Yangquan, Changzhi, Jincheng City in Shanxi Province; Jinan, Zibo, Liaocheng, Dezhou, Binzhou, Jining, Heze City in Shandong Province; Zhengzhou (including Gongyi), Xinxiang (including Changheng), Hebi, Anyang (including Huaxian), Jiaozuo (including Jiyuan), Puyang, Kaifeng City in Henan Province, as well as regions such as the Fenwei River area and the Yangtze River Delta. As a result of environmental inspections, the prices of most raw materials and products are rising sharply, and synthetic ammonia products are no exception. 　　First, from the supply side, there have been cases of plant failures and production restrictions due to environmental regulations in the regions mentioned above. According to our calculations, the 13 manufacturing enterprises in Shandong currently supply around 3,060 tons per day; if all of these facilities operate at full capacity, there is still a potential increase in market supply of 1,500 tons. The same is true for other markets. As of the 22nd, the daily supply volume from 7 key manufacturing enterprises in Hebei was 2,210 tons ； The daily supply capacity of 5 manufacturing enterprises in Anhui is 2,130 tons ； 5 enterprises in Jiangsu have a daily supply capacity of 950 tons ； Seven enterprises in Henan supply 2,630 tons per day, excluding those with shut-down plants. According to the figures released by the **Statistics Bureau for July, the total production volume for that month was 4.026961 million tons, representing a 2.8% increase on a year-on-year basis. This increase was mainly due to low urea prices in the previous period, which prompted some manufacturers to switch to producing synthetic ammonia. The cumulative production volume from January to July was 27.759798 million tons, showing a 3.6% decline on a year-on-year basis. Considering the current environmental conditions, the overall production in August will be far lower than that in July. 　　From the demand side, the reduction in production and shutdowns of manufacturers due to environmental regulations have led to a decrease in supply, which has prompted some downstream traders to be more active in purchasing goods. With this sense of hesitation in buying or holding back supplies, the upward trend in prices in the market has exceeded expectations. Based on market reactions, it is reported that Dongying Tianhong and Korool have placed orders for 4,000 tons, valid for 1 month ； Jiangsu Sierbang has stocked over 1,000 tons for EOA devices ； Inner Mongolia Yuntianhua has recently received shipments. Apart from large contract orders, there is a shortage of supplies in regions such as Shanxi and the Northeast, and many downstream vehicle owners opt to have their goods shipped from other provinces. For the market, demand is currently satisfactory for purchasing, and sales prospects are optimistic. 　　Overall, manufacturers tend to be optimistic; under the pressure of environmental regulations, there is a relative shortage in the market, so manufacturers do not face high inventory pressures. Even if production facilities resume operation in the future, there is a possibility of shipments in the short term. However, the editor believes that the current upward trend is too rapid, carrying significant risks; the acceptance level among downstream traders varies, so careful handling is required in the future, with additional attention needed to be paid to the manufacturers’ production facilities and environmental protection measures.