Could ammonium prices fall?

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Could ammonium prices fall? Author/Source: China Fertilizer Network Date: 2019-08-05 Clicks: 14 From mid-August to the beginning of the month, the fertilizer market remained sluggish. Although urea was mainly supplied for export, its price showed no sign of improvement; domestic demand was weak. As of the first week of August, the purchase price of urea in Linyi, Shandong, was around 1840–1860 yuan per ton. There was also no significant improvement in demand for other fertilizers, including monoammonium fertilizers. Initially, industry experts believed that there was a chance of price increases for monoammonium phosphate. However, as time goes by, confidence in its prices within the industry is declining, with concerns about potential price drops. Currently, prices remain relatively stable. In Hubei province, the standard export price for 55% powdered monoammonium phosphate is around 2050 yuan. Large manufacturers there actually offer it at around 2000–2030 yuan per unit, while some lower-tier manufacturers charge 1960–1970 yuan. In Sichuan, large manufacturers sell 55% powdered monoammonium phosphate at 1900–1950 yuan per unit. Companies in Henan have stated that they are unable to accept new orders for 55% powdered monoammonium phosphate at 2000 yuan per unit at the moment. The factors affecting the market for monoammonium are mainly reflected in the following aspects: First, downstream demand. Recently, it was reported that several large compound fertilizer manufacturers have introduced winter storage policies in the Northeast. Since this is happening earlier than in previous years, the payment situation at the grassroots level is likely to be poor. But why do these compound fertilizer companies still adopt such measures? In recent years, compound fertilizer companies have indeed faced numerous difficulties. Ongoing environmental and safety inspections have resulted in low overall production levels. Additionally, the low prices of agricultural products such as grains at the retail level have led farmers to be less inclined to purchase fertilizers, especially traditional ones. This has caused many compound fertilizer companies to encounter various problems, including funding shortages; many of them are unable to collect sufficient revenue to buy raw materials. Moreover, the pace at which finished products are sold in some companies is slow, putting these companies in a vicious cycle. Recently, companies in the Northeast have started collecting funds in advance for winter storage; even if the results are not ideal, they can still obtain some funds to purchase raw materials, giving them a chance to turn things around. It can also be seen that the demand for compound fertilizers in autumn is not ideal. Many compound fertilizer manufacturers, especially the larger ones, still have ammonium sulfate in stock from previous purchases; some of this stock has not yet arrived at the factories. Although there is a demand of tens of thousands or thousands of tons in the coming period, for now these companies are not in a hurry to formulate new procurement plans and are choosing to wait and observe. Secondly, regarding corporate supply. For a long time, the overall operating rate of monoammonium nitrate production remained low. By the first week of August, this rate was 44.24%. Companies in Hubei that had ceased operations for an extended period still had not resumed production due to environmental inspections and financial issues. A large factory in Sichuan underwent 15 days of annual maintenance recently, while some 55% monoammonium nitrate production facilities in Henan switched to producing 58% monoammonium nitrate as sales were not satisfactory; particle-shaped monoammonium nitrate production facilities switched to manufacturing compound fertilizers. Even with low operating rates, there has been no shortage in the supply of ammonium sulfate. Some companies still have tens of thousands of tons of orders pending shipment, and these orders have not yet all been delivered due to shipping issues; as a result, the pressure on these companies is currently low and their inventory levels are not high. For those companies producing 58% and 60% purity ammonium sulfate, the pending orders can be fulfilled until around the end of August, while for those producing 55% purity ammonium sulfate, there are only a few orders left to process. Additionally, given the poor performance in securing new orders recently, the pressure is likely to increase gradually. Finally, the support from raw material costs is insufficient. In July, sulfur prices experienced a significant drop. Port traders lacked confidence, and inventory levels remained high. Currently, the price of granular sulfur at the Yangtze River Port and Fangchenggang Port has fallen to 785 yuan, a decrease of 155 yuan compared to the end of June. The price of sulfur at the Wanzhou Port in the Puguang area has dropped to 810 yuan, a decrease of 160 yuan compared to the end of June ； Although the price of liquid ammonia has risen slightly, it remains at a relatively low level; currently, the mainstream ex-factory price for liquid ammonia in Hubei is between 2980 and 3050 yuan. According to rough calculations by China Fertilizer Network, the total cost of high-quality 55% ammonium sulfate in Hubei is around 1,950–2,000 yuan. In summary, industry insiders are increasingly less optimistic about monoammonium nitrate recently. It is reported that the price at which 55% powdered ammonium nitrate purchased by large manufacturers in Shandong is accepted for storage is as low as 2100 yuan, which indicates that a decline in prices for monoammonium nitrate is already underway. However, the manufacturers themselves may maintain high prices for some time; deals will be negotiated on a case-by-case basis, and the discount margins might increase, which effectively amounts to a price reduction. However, whether Yian will have a chance in the future mainly depends on factors such as when the remaining rigid demand will arise. (Zhao Hongye)