Thread Content
Can liquid ammonia, urea, or nitric acid save the fertilizer market? Author/Source: Date: 2016-12-09 Clicks: 23 Overview: In recent years, due to the constraint of overcapacity, China’s fertilizer companies have gradually seen the emergence of a buyer’s market. Companies and distributors want to sell the products they have in hand as quickly as possible, but they don’t want to do so at a loss by setting prices below cost. Additionally, thanks to advancements in biopharmaceuticals and science and technology, there are more and more types of fertilizers available each year. Today, instead of discussing capacity issues, we will start from the source of fertilizers and analyze other factors that could affect their market conditions, beginning with the raw materials used. It should be noted that the main raw material for fertilizers is liquid ammonia, which is primarily used in the production of nitric acid, urea, and other chemical fertilizers; it can also be used as a raw material in the manufacture of pharmaceuticals and pesticides. We will not discuss other uses today; this article will focus only on nitric acid, urea, and liquid ammonia. Article 1: The intertwined relationship between nitric acid and urea Liquid ammonia is an important chemical fertilizer that holds a significant role in the chemical industry; it is also the main raw material for nitric acid and urea. As early as 2008, urea and nitric acid began to compete for liquid ammonia. Data shows that approximately 60%-70% of liquid ammonia in China is used in the production of fertilizers such as urea and ammonium bicarbonate, while about 30%-40% is used in the manufacture of chemical products like nitric acid and other related compounds. As the old saying goes, workers and farmers are inseparable, and this is indeed true for the chemical industry represented by nitric acid and the fertilizer industry represented by urea. The impact of liquid ammonia on the urea industry: Given that most of China’s ammonia synthesis industries use natural gas or coal as raw materials, and domestic ammonia and urea producers that rely on gas for production generally benefit from preferential gas prices, while those that use coal as a raw material operate in a more market-driven environment, changes in coal costs can essentially reflect fluctuations in the supply and demand in the liquid ammonia market. With unchanged demand, rising coal prices will inevitably drive up the price of synthetic ammonia, and an increase in the price of synthetic ammonia will in turn push up the price of urea ； The same is true in reverse. The impact of liquid ammonia on the nitric acid industry: Nitric acid production is different from that of urea. In China, with the exception of Lutianhua, which produces synthetic ammonia from natural gas to manufacture nitric acid, all nitric acid production facilities use coal as a raw material to produce synthetic ammonia, which is then processed into nitric acid. Therefore, the price of coal is a direct indicator of the price of nitric acid products. The difference is that, since nitric acid accounts for a relatively low proportion in the production of ammonia, the impact of coal prices on the price of nitric acid in the market is usually slower by 5-6 months compared to the impact of coal prices on the price of urea in the market. Talking about these two influences gives it a pretty impressive feel, doesn’t it! In fact, it means that due to the differences in market cycles, both urea and nitric acid have a positive correlation with liquid ammonia; the difference is that nitric acid shows its effect later. Article 2: Liquid ammonia is a puppet in the hands of the coal industry. As explained in the previous article, China currently relies mainly on coal as the raw material for ammonia production facilities that use coal-based processes. It is winter now, and with increased demand for coal, its price naturally rises. At the beginning of November, driven by soaring coal prices, the Shandong region continued to lead in terms of price increases, with weekly price rises of around 150-200. Prices in other regions also rose by roughly 100. In the Central China region, the rate of increase was slightly slower due to an increase in the amount of ammonia released by enterprises ； In mid-November, there was a significant shortage in the northeast region, which drove up prices in Hebei; in some cases, the weekly price increase reached around 250. In some enterprises in Henan, ammonia production came to an end, and prices in that region also began to rise in line with those in neighboring areas. In the Jiangsu region, companies are gradually carrying out maintenance work and reducing production, leading to a shortage of liquid ammonia and rising prices ； In late November, as the price of liquid ammonia continued to rise. As December arrived, the market situation changed! There has been a slight decline in prices in China’s liquid ammonia market; in the Shijiazhuang area of Hebei, prices have dropped by 30 yuan, while in the northern part of Jiangsu, prices have fallen by 50–60 yuan. Currently, the mainstream acceptance price in Shijiazhuang, Hebei is 2,320–2,330 yuan per ton, while the ex-plant acceptance price in Cangzhou is 2,550 yuan per ton ； In northern Anhui, the prevailing price for acceptance is 2,490–2,500 yuan per ton, while in southern Anhui the prevailing cash price is 2,600 yuan per ton ； The regional mainstream price in Henan is 2,400–2,450 yuan per ton ； The prevailing price for liquid ammonia in Hubei is 2,650–2,720 yuan per ton, with actual transaction prices ranging from 2,600–2,650 yuan per ton ； The mainstream price in Hunan is around 2,750 yuan per ton ； In Jiangsu province, the mainstream price for goods delivered upon acceptance in northern Jiangsu is 2,540–2,550 yuan per ton, while in southern Jiangsu it is 2,700–2,750 yuan per ton. Other experts say that there is a strong bearish sentiment in Hebei and Shandong provinces, and Jiangsu’s prospects are also not favorable after today’s decline. The overall supply volume in Anhui is on the rise; in the future, the direction of shipments may be adjusted flexibly based on the conditions in surrounding markets. For now, the Hubei market is helping to sustain prices in Anhui. The liquid ammonia market is likely to remain stable with only slight fluctuations in the near term. Article 3: Forecast for the domestic fertilizer market in 2017 As can be seen from the above, the rise in coal prices during winter has increased the cost of some raw materials used in fertilizer production, and this will inevitably affect the price of fertilizers themselves. But! ! ! This impact comes in two forms: positive and negative, and these two effects are roughly equal. Given the wide variety of fertilizer types and the different raw materials used, the actual beneficial effects of fertilizers are quite limited. After all, our country still faces the awkward situation of an overcapacity in fertilizer production, with the main focus being on dealing with existing inventory.