Spring plowing begins – will ammonium chloride prices rise further?

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Spring plowing begins – will ammonium chloride prices rise further? Author/Source: China Fertilizer Network Date: 2020-03-09 Clicks: 7 Since the end of February, the price of ammonium chloride has been subject to continuous changes; prices in various regions have varied by around 30–50 yuan per ton, with higher prices reaching 70 yuan per ton. At the same time, some companies have sufficient orders, which has led them to limit or stop accepting new orders ； According to some large manufacturers, they will also raise the price of ammonium chloride moderately within this month. The supply of ammonium chloride in the market became tight for a while; manufacturing companies had a large number of orders to fulfill, and they remained optimistic thanks to the support provided by urea. At present, the operating rate of ammonium chloride manufacturers has increased, and road transportation in many areas has seen some improvement; according to statistics from China Fertilizer Network, this rate is around 70%. The orders that companies had planned to ship before the Spring Festival have not yet been fulfilled entirely, and there has also been some reduction in inventory since the Spring Festival. Currently, the prevailing delivery price for wet ammonium in the Central China region is around 480 yuan per ton, while the price for dry ammonium is around 580 yuan per ton. The pandemic has caused difficulties in transportation in Hubei province, especially when it comes to shipments to other areas; supplies are mainly used within the province or transported by water. A factory in the Northeast region continues to be shut down, with a restart date yet to be determined. The price of some dry ammonium supplies from outside the province that are sent to the Northeast market is around 700–750 yuan per ton. Some ammonium chloride manufacturers in East China say that their target prices have not yet been reached. For detailed price information, please join the member area of China Fertilizer Network. 　Firstly, soda ash manufacturers have sufficient pending orders for ammonium chloride, and inventory consumption is looking positive. Looking back at the situation in the ammonium chloride market before the Spring Festival, when there was supply but no demand, traders and some compound fertilizer manufacturers purchased the material as needed, obviously in order to avoid the risk of price drops. This led to a shortage of ammonium chloride as raw material in the downstream markets after the Spring Festival, resulting in a significant demand gap during the spring season ； At the same time, due to disruptions in transportation across various regions caused by the pandemic, the policy of free highway tolls allowed downstream businesses to benefit from reduced transportation costs on top of their purchasing expenses, which helped to accelerate the recovery of market conditions to some extent ； Additionally, ammonium chloride granulation enterprises and compound fertilizer manufacturers in certain regions are preparing to resume operations one after another; meanwhile, the prices of compound fertilizers continue to rise, which boosts companies’ enthusiasm for production, leading to an increasing demand for the raw material ammonium chloride. Secondly, the current market for soda ash is weak, with prices remaining low. Although some soda ash manufacturers have attempted to raise prices tentatively, actual sales face pressure, and inventory levels are high; as a result, prices may either decline slightly or remain stable at low levels. In addition, soda ash prices continue to fall in many regions. As for ammonium chloride, which is a by-product, given the production costs associated with producing two tons of this product, a weak soda ash market increases the chances of an improvement in ammonium chloride prices. Therefore, the current situation in the soda ash market provides certain support for ammonium chloride prices. 　Additionally, the urea market is performing well, with prices rising frequently and demand continuing to increase in many regions. According to China Fertilizer Network, although urea producers handle daily volumes of over 150,000 tons, this does not prevent prices from rising. For example, compound fertilizer manufacturers in Linyi, Shandong, are purchasing urea at around 1,850 yuan per ton, while the price of anhydrous ammonium in Shandong ranges from 630 to 700 yuan per ton; actual transaction prices may be lower, especially since supplies at low prices were available at around 560–570 yuan per ton. Compared to urea, ammonium chloride still has a significant price advantage. 　Once again, although there are many positive factors supporting ammonium chloride, and the market continues to heat up, it is necessary to be cautious about the potential increase in the operating rates of caustic soda manufacturers in the future. Currently, the production capacity of ammonium chloride manufacturers across the country has increased significantly compared to earlier periods; of course, this does not include a few enterprises in the Northeast, the Two Lakes region, as well as Gansu and Guangxi, which have been shut down for extended periods ； Recently, a large factory in Jiangsu Province stated that its originally planned maintenance work for March has been canceled. With the recent short-term shutdowns now over, the facilities have returned to normal operation. The vast majority of other companies are operating at full capacity, and no company has indicated any plans to shut down in the near future. This means that the industry’s production rate for ammonium chloride will remain high during this period. It is also important to keep an eye on the trends in urea prices. Currently, the agricultural demand for urea is slowing down, and industrial demand alone is not sufficient to support its price; if urea prices fall in the future, it will certainly have an impact on ammonium chloride. 　In conclusion, given the strong demand for spring plowing, it is not difficult for ammonium chloride prices to rise. In the short term, with high demand and sufficient production capacity on the part of companies, prices are likely to continue rising. However, it is necessary to be cautious to avoid excessive increases; attention should also be paid to transportation issues and companies’ production levels. Therefore, it is expected that companies will approach price increases cautiously. (Tan Junying)