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Liquid ammonia: Despite a decline, it remains at high levels. Author/Source: Sinochem New Network. Date: June 27, 2019. Clicks: 11. Since June, the price of liquid ammonia has shown a downward trend; the current average ex-factory price is around 2,800–2,900 yuan per ton. Compared to the previous peak of 3,100 yuan, this represents an overall decline of over 5%. The industry believes that despite the price correction, the outlook for liquid ammonia in the coming period remains cautiously positive, with prices expected to remain at a relatively high level of around 2,700 yuan. Increased market supply \"This decline is the most severe drop in liquid ammonia prices this year, with prices falling by 100–300 yuan on average, and in some cases by more than 400 yuan. The main reason for this is the increase in supply.\" ”Xiao Wenxiang, manager of Hunan Haibo Chemical Co., Ltd., analyzed. Looking at the production situation of nitrogen fertilizer companies, the energy supply is currently good, and the profit margin from liquid ammonia production is high, which encourages these companies to keep producing. According to industry monitoring, the operating rate of nitrogen fertilizer manufacturers is currently 72.7%, 9.3 percentage points higher than the same period last year. Among them, the operating rate of nitrogen fertilizer plants using coal as raw material was 73.7%, an increase of 10.2% on a year-on-year basis; the operating rate of nitrogen fertilizer plants using natural gas as raw material was 70.1%, an increase of 7.1% on a year-on-year basis. Additionally, methanol prices are low this year, so the profit margin from liquid ammonia production is much higher than that from methanol. As a result, manufacturers of both substances reduce their methanol production and increase their liquid ammonia production, which further increases the supply in the market. Sun Yingmei, an analyst at Zhuochuang Information, said that from early June to the present, the export volume of liquid ammonia from the main production areas has reached 174,000 tons, an increase of about 4% compared with the same period last year. An increase in market supply has led to a decline in liquid ammonia prices. Demand is moderate. Looking at acrylonitrile, caprolactam, and phosphate ammonium – the products derived from liquid ammonia – most of these markets are operating in a weak condition, resulting in reduced demand for liquid ammonia. Regarding acrylonitrile, entering June, the market for this substance has seen a significant decline due to weakening demand from end-users and falling prices in international markets; currently, its price is 10.3% lower than it was at the beginning of the month. “Due to the rapid decline in prices, the profit per ton for acrylonitrile has dropped by around 1,400 yuan, which has reduced companies’ enthusiasm for production; the operating rate has fallen by 6% compared to May, leading to a corresponding decrease in demand for liquid ammonia. ”Qing Wei, head of the marketing department at Guangxi Mingyi Chemical Co., Ltd., said. Regarding caprolactam, although the decline in prices in June slowed down significantly, the market remained in a range-bound pattern at relatively low levels; the current average price is 11,766.7 yuan, down 8% from May and 27.2% compared to the same period last year. Therefore, manufacturers as a whole have low confidence. Coupled with prices approaching the cost level, many companies are shutting down their facilities for maintenance and reducing production volume, resulting in low overall operational capacity and limited demand for liquid ammonia. Regarding ammonium phosphate, over half of China’s diammonium phosphate is used for export, and it is highly affected by the international market. Since May, international prices of diammonium phosphate have continued to fall; the export FOB price has dropped to $343–348, with international traders pushing for a price of $340. After deducting shipping and port fees, this price is now lower than the production costs for manufacturers. The export price of monoammonium phosphate is also not high; currently, the FOB price for 55% granular monoammonium phosphate is 310 dollars, while the FOB price for 60% granular monoammonium phosphate is 330–340 dollars. The FOB price for 63% granular monoammonium phosphate is 380–385 dollars. However, as compound fertilizer manufacturers began purchasing raw materials to produce autumn fertilizers, the market trend for monoammonium phosphate was slightly better than that of diammonium phosphate. Overall, however, the monoammonium phosphate market remains sluggish, providing little support to the liquid ammonia market. Furthermore, environmental regulations have become increasingly strict in recent years, leading to a growing use of liquid ammonia in desulfurization and denitrification processes. However, this year, the achievement of air pollution control targets in some provinces was not satisfactory; as a result, initiatives such as intensified campaigns to combat air pollution were launched in certain areas. The operating capacity of energy-intensive and polluting industries such as cement and glass production was restricted, and some power generation companies were also subject to production limits. This directly affected the demand for liquid ammonia used in processes such as desulfurization and denitrification. The decline in prices in the future is likely to be limited. Although there are many negative factors in the liquid ammonia market at present, it is difficult for liquid ammonia prices to drop significantly in the coming period. Xiao Wenxiang believes there are three main reasons for this: first, the problem of overcapacity has improved considerably. With the advancement of supply-side reform, significant progress has been made in eliminating outdated production capacity in the nitrogen fertilizer industry over the past few years. According to statistics from the China Nitrogen Fertilizer Industry Association, by the end of 2018, the total annual production capacity of synthetic ammonia across the country was 66.89 million tons, a decrease of 4.54 million tons compared to the previous year. With stricter safety and environmental policies this year, some ammonia synthesis capacity will still face shutdown. Second, the price of urea is relatively high. Thanks to tenders in India, international urea prices have risen again recently, by 5–15 dollars. On the one hand, this increases China’s opportunities for urea exports; on the other hand, it raises domestic prices. By the end of July, domestic urea prices are expected to remain at a relatively high level of over 1,800 yuan per unit. “There is a strong correlation between the liquid ammonia and urea markets; as long as urea prices remain stable, liquid ammonia prices will also not be too low. ”Xiao Wenxiang said. Third, coal prices provide strong support. Most ammonia production in our country relies on coal as a raw material, and it is highly affected by the coal market. As June arrives, the traditional peak period for summer electricity consumption is approaching, and the demand for thermal coal will increase further, all of which contribute to rising coal prices. According to statistics, the average price of bituminous coal delivered to nitrogen fertilizer manufacturers is currently 1,040 yuan, up 1.3% from the previous month; the average price of gasified bituminous coal delivered to these manufacturers is 771 yuan, up 2.8% from the previous month. Rising coal prices and increasing costs provide support for liquid ammonia prices.