The liquid ammonia market remains volatile

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The market for liquid ammonia remains volatile. Author/Source: China Fertilizer Network. Date: November 23, 2016. Clicks: 15. The market for liquid ammonia is continuing to heat up; supply is tight, and the selling prices for most manufacturers are rising steadily, with significant increases. For example, since the weekend, prices in Hebei Province have risen by 100 yuan per ton. In Shijiazhuang, the reference price for delivery upon acceptance is around 2330–2340 yuan per ton, while in Qinhuangdao the reference price has reached around 2700 yuan per ton； The reference ex-factory price for spot transactions in the northern Shandong region has risen to around 2400–2560 yuan, with increases of varying degrees observed in other areas as well. This has helped manufacturers reverse their previous losses to some extent. However, many industry insiders are puzzled: aside from the sharp rise in the price of raw material coal, what other factors are responsible for the rapid and significant increase in liquid ammonia prices, which continues to rise? 　　On the one hand, the operating rate of liquid ammonia enterprises is low. Since November, an increasing number of liquid ammonia production facilities have ceased operations, especially some large-scale plants. The duration of these shutdowns ranges from 10 to 20 days, with some even lasting up to 30 days. For example, certain large plants in the southwest region have stopped operating, while most manufacturers in the east and central regions are also operating at reduced capacity. In the northeast region, most liquid ammonia production facilities have ceased operations or are using the liquid ammonia produced for their own needs, resulting in an extremely tight supply in the market ； In addition, as raw material costs rise, manufacturers increase prices accordingly; for example, the current spot price of liquid ammonia in the Northeast region is around 2500–2600 yuan per unit ； In addition, since the onset of winter, due to heating systems, foggy weather has been severe in certain areas, particularly in North China and the Northeast, to the point where it has affected daily travel. North China has launched a new round of environmental inspections, forcing liquid ammonia manufacturers to reduce their production capacity. As a result, the supply of liquid ammonia has decreased significantly, with prices rising by up to 100 yuan; yet demand for it remains high and supply continues to flow smoothly. 　　On the other hand, the price of urea remains strong at high levels. The trend in urea prices influences the fluctuations in liquid ammonia prices to a certain extent. As the production costs for both increase, the selling prices of urea rise as well. Although there has been a slight drop in urea prices at a few manufacturers since the weekend, this may indicate a risk of downward trends in the future. However, based on the current situation, the degree of decline is not significant. For example, in Shandong Province, the mainstream ex-factory price of urea has dropped by 30 yuan, reaching around 1,500 yuan; in Hebei Province, it has dropped by 10–20 yuan, coming to around 1,510 yuan. Yet most manufacturers continue to maintain high prices. Additionally, heavy snowfall in regions such as Shanxi and Henan could increase the costs of coal transportation, so it is unlikely that urea prices will decline significantly in the short term. Consequently, the impact on the liquid ammonia market will not be substantial for now ； In addition, some urea manufacturers say that they are currently operating in a profitable manner, and since urea is easier to store compared to liquid ammonia, manufacturers prefer to shift their production focus slightly toward urea; as a result, the supply of liquid ammonia is likely to decrease rather than increase. 　　Looking ahead, the operating rate of compound fertilizer plants, which are the end-users of ammonia, is slowly increasing; according to statistics from Zhongfei Net, it is around 43%. The volume of liquid ammonia sold is also set to increase gradually ； Liquid ammonia manufacturers in most areas that have suspended production or reduced output are not expected to resume operations in the short term, and there will be no significant increase in their operational rates ； The strong demand for urea provides support for the liquid ammonia market ； Stable demand in the chemical industry market. However, another factor that requires more attention is the trend in raw material prices. The sharp rise in coal prices has benefited coal companies and those in downstream industries. To stabilize the coal market, **relevant authorities have taken measures to regulate coal prices; although there has not been a significant drop yet, the trend of rapid price increases has been curbed. Overall, the current liquid ammonia market has strong support, and prices are likely to see some further increases in the short term; however, the potential for growth is limited. In the long run, downstream users may develop resistance due to excessive price rises, so it is necessary to be cautious about the risk of a price decline. (Tan Junying)