The price increase of liquid ammonia is coming swiftly

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The price of liquid ammonia is rising sharply. Author/Source: China Fertilizer Network. Date: 11-07-2016. Clicks: 4. The liquid ammonia market was volatile in October; after experiencing a decline in prices recently, it has seen a rapid rebound and increase in prices since mid-October. For example, the reference price for liquid ammonia at the production site in Shijiazhuang, Hebei Province, rose from 1,850 yuan per ton to 2,000 yuan per ton, indicating a significant increase； The increase in the East China market can also reach around 100–130 yuan per ton ； In the Central China market, the price increase was around 90–120 yuan per ton, while other regions also saw price rises to varying degrees. 　　The reason for this is, on the one hand, the sharp rise in the price of raw coal ； On the other hand, strict environmental inspections in local markets have led to a decrease in the operating rate of liquid ammonia enterprises ； Furthermore, the prices of urea and methanol are favorable, supporting the liquid ammonia market. 　　In most parts of the country, coal is the raw material used by enterprises that produce liquid ammonia. The sharp and rapid increase in coal prices has caught manufacturers of liquid ammonia and other fertilizers that rely on coal by surprise. Since October, coal prices have risen by 100–200 yuan per ton in most areas, with some regions seeing increases of up to 300 yuan per ton. Moreover, some liquid ammonia manufacturers believe that coal prices will continue to rise, which means that their costs will keep increasing and their selling prices will also go up accordingly. In addition to the pressure from rising upstream costs, the sharp increase in urea prices is also one of the main factors driving up the price of liquid ammonia. As for the reasons behind this rise in urea prices, they include higher costs of raw materials such as coal, increased shipping fees, or difficulties in transporting supplies from low-cost sources in Xinjiang. Moreover, urea manufacturers operate at lower capacity levels, leading to a tight supply of goods in the market and thus rising prices ； For example, the mainstream ex-factory price of small-grained urea in Shandong region continues to rise, reaching around 1380 yuan per ton, with transaction prices being slightly lower. In Jiangsu region, the mainstream ex-factory price of small-grained urea has reached 1430–1450 yuan per ton, and prices can be negotiated. Driven by the ongoing upward trend in urea prices, some manufacturers are focusing their production efforts on the urea market. Furthermore, in regions such as Hubei, environmental regulations are strict; ammonia production facilities have been forced to reduce or cease operations. As a result, the amount of ammonia released by most large-scale manufacturers has decreased significantly. Meanwhile, the price of methanol has been rising steadily, with factory prices in parts of East China reaching around 2350–2390 yuan per ton. Therefore, some manufacturers that produce methanol alongside other chemicals have also shifted their focus to other areas of production. Overall, these factors have all led to a reduction in the overall operational rate of the liquid ammonia industry, with tight supply and rising prices becoming the norm in the market. 　　However, among the many positive factors, there are also significant negative ones, namely demand from downstream sectors. On one hand, companies in the chemical industry and power plants have a relatively stable demand for liquid ammonia, so this does not have a great impact on its price trends for now ； On the other hand, looking at the flow of liquid ammonia into fertilizer production, the operation rate of small ammonium chloride fertilizer manufacturers is relatively high, while that of phosphate fertilizer manufacturers is slightly lower; the demand for these two types of fertilizers is not very large. As for the largest recipient of this liquid ammonia, namely compound fertilizer manufacturers, their operation rate is low – according to rough estimates from Zhongfei Net, it’s around 37%. There is no significant increase in overall fertilizer shipments. If the operation rate of compound fertilizer manufacturers is to improve, we can only wait for adjustments after the meeting on phosphate and compound fertilizers. 　　The key factor affecting the price trend of liquid ammonia is the supply-demand balance. As indicated by the analysis above, the supply of liquid ammonia is currently tight. Additionally, due to the cold weather in northern regions, it may be difficult to maintain continuous production there; as a result, the overall operational rate of the liquid ammonia industry is likely to continue declining, which will expand the market opportunities for liquid ammonia in surrounding areas. Overall, the factors supporting the improvement and upward trend in the liquid ammonia market are quite strong; it is expected that the market will continue to show positive development, with prices rising gradually in small steps ； However, it should also be reminded to liquid ammonia manufacturers that they need to keep an eye on the price trends of upstream raw materials as well as changes in the production conditions of downstream enterprises, and adjust their own production levels accordingly; this can help reduce the impact caused by unexpected price fluctuations. (Tan Junying)