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If the rise in ammonium prices is divine will – Author/Source: China Fertilizer Network, Date: 12-30-2019, Clicks: 5. As 2019 comes to an end, looking back at the entire fourth quarter, the fertilizer market was quite sluggish; only the price of urea experienced fluctuations from time to time, with price increases driven by certain positive factors that in turn affected other fertilizers in the market. The prices of other fertilizers remained either stable or declined. The same is true for monoammonium phosphate; recently, the actual ex-factory price of 55% powdered monoammonium phosphate across the country has been around 1700–1800 yuan per ton. I’ve heard that some lower-quality grades are available at 1650 yuan or slightly higher. Orders with fixed prices valid until the end of December are now being settled, and it is said that large manufacturers in Sichuan offered an ex-factory price of around 1700 yuan for monoammonium phosphate with fixed prices valid until the end of November; it is expected that the settlement price in December will also not be high. The weak market conditions for monoammonium phosphate are expected to persist around the Spring Festival. However, recent changes in the upstream raw material market might bring some positive developments for monoammonium phosphate, though such support is not sufficient. So what factors would be necessary for monoammonium phosphate to see price increases? First and foremost, an improvement in demand is a top priority. Demand is the ultimate determinant; in recent months, demand for ammonium nitrate has remained moderate. Compound fertilizer manufacturers across the country have kept their production levels low, partly due to safety and environmental inspections, and partly because of poor cash flow and weak sales of their finished products. The production of compound fertilizers is operating at low levels, and sales are not satisfactory; as a result, the consumption rate of ammonium sulfate, the raw material used in their production, is relatively slow. Some companies still have large amounts of ammonium sulfate that they purchased in advance and have not yet used up. It is reported that large and medium-sized compound fertilizer manufacturers in areas such as Shandong’s Lianghe region still have inventory levels of over 10,000 tons of ammonium sulfate. In the Northeast region, companies’ intentions to make purchases are also weak. Many companies say that they plan to restock before the Spring Festival in order to maintain normal production, but the amount of stockpiling will be limited, and there will be no concentrated purchasing activity. Assuming that the price of ammonium nitrate rises, the sales performance of compound fertilizer manufacturers should improve, with production rates increasing and the consumption of ammonium nitrate accelerating. Recently, many companies have shown a greater willingness to purchase ammonium nitrate, engaging in concentrated and large-scale purchases. Traders’ confidence in monoammonium has recovered, with increased willingness to take action. Thus, it is evident that improving demand is a top priority. Secondly, there is a shortage in the supply of monoammonium. Since the beginning of this year, the overall operation rate of monoammonium has remained at a low level around 50%, and it has become even lower recently, at only about 40%. Many ammonium nitrate production facilities across the country are not operating at full capacity; large manufacturers mainly limit their production, while some smaller plants have been shut down for extended periods. Some companies have changed their strategy by suspending the production of 55% powdered ammonium nitrate and similar products, and have started to produce 72% or 73% crystalline ammonium nitrate instead. This change is driven by distributors in regions such as Xinjiang who have made advance purchases, as well as the decent profit margins associated with industrial-grade ammonium nitrate. Such production shifts help to alleviate the supply pressure related to ammonium nitrate to some extent. If the production limit on ammonium nitrate remains in place for some time, based on past market supply and demand patterns, demand for ammonium nitrate is expected to increase in the first quarter, leading to a shortage in supply. As the inventory of ammonium nitrate manufacturers gradually decreases, and when demand exceeds or far exceeds supply, an increase in prices for ammonium nitrate will be an inevitable outcome. Once again, the price of raw sulfur continues to rise. In previous years, sulfur prices would rise around the time of the phosphate fertilizer conferences in November, but this year is different: international market conditions are weak, and demand for ammonium phosphate from domestic end-users is low. The inventory levels of sulfur at ports reached a peak of around 2.7 million tons; in previous years, even during periods of high sulfur inventory, the figure was only 1.7 million tons. This year, however, the inventory levels soared, and they have remained above 2 million tons since the second half of the year. Recently, the price of sulfur has seen a recovery, mainly due to an improvement in international trends and a positive trend in electronic trading platforms. Large phosphorus-ammonium producers downstream have expressed interest in purchasing tens of thousands of tons, while traders in the port are inclined to hold up prices. As a result, sulfur prices have gradually risen, and inventory levels in the port have slightly decreased. If the price of ammonium sulfate is to rise, raw materials play a crucial role in this process. The previously low costs have seen some improvement recently; if sulfur prices continue to rise and inventory levels in ports keep decreasing, then there is a possibility that the price of ammonium sulfate will increase. In summary, if the price of ammonium nitrate rises, it is necessary to pay attention to factors such as supply and demand as well as raw material costs. It is hoped that demand for compound fertilizers will see some improvement before the Spring Festival; coupled with improvements in supply and raw material conditions, an increase in the price of ammonium nitrate is possible. However, in reality, the overall situation for fertilizers is unlikely to improve significantly before the Spring Festival. It is expected that prices of ammonium nitrate will remain stable in the short term, though there is still a risk of further declines. (Zhao Hongye)