Treasure Island: With downstream fertilizer tariffs removed, what’s the reaction of synthetic ammonia?

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Treasure Island: Elimination of tariffs on downstream fertilizers – what’s the impact on synthetic ammonia? Author/Source: Date: 2016-12-27 Clicks: 41. The main downstream products of synthetic ammonia are nitrogen fertilizers, phosphorus fertilizers, and compound fertilizers. On December 23, the Tariff Commission of the State Council issued a notice regarding the tariff adjustments for 2017; this notice specified that export tariffs on nitrogen fertilizers, phosphorus fertilizers, and other such fertilizers would be eliminated, while export tariffs on triple-component compound fertilizers would be reduced accordingly. The removal of fertilizer tariffs will undoubtedly benefit fertilizer exports; so how will the market for synthetic ammonia, which serves as a raw material, react? 　　Currently, the operating capacity of facilities for producing nitrogen fertilizers, phosphorus fertilizers, and compound fertilizers is low. Demand in the ammonia synthesis industry is declining, and a reduction in urea production will increase the export volume of ammonia. As a result, the market will see an increase in supply while demand decreases. However, with the removal of tariffs, there is an expectation of an increase in fertilizer exports, which will inevitably lead to higher consumption of synthetic ammonia, providing some support for the market. It can be seen that the removal of fertilizer tariffs is good news for the synthetic ammonia market, but it will take time to verify this. 　　In the short term, the removal of fertilizer tariffs has boosted market confidence. Over the weekend of last Saturday and Sunday, the synthetic ammonia market in Shandong was the first to see price increases; as of today, the cumulative increase has been 50–90 yuan per ton. One reason for this rise is the end of environmental inspections, which has led to an increase in urea production and a decrease in the volume of synthetic ammonia sold outside the region ； On the other hand, affected by the removal of tariffs, urea was the first to see price increases following that removal, with its price rising by 70–80 yuan per ton over two days. Although there wasn’t much actual trading in the market, this still had a positive effect on market sentiment. 　　In the long term, after the elimination of fertilizer tariffs, export volumes will increase and market demand will rise. Along with an increase in urea production, exports of liquid ammonia will decrease, and exports are the main factor affecting market fluctuations. As a result, exports increase, the imbalance of supply exceeding demand in the market is alleviated, and prices are likely to rise as a consequence. 　　In summary, the removal of fertilizer tariffs will be good news for the synthetic ammonia market; as a result, the market has shifted from a downward trend to an upward one. The duration of this upward trend will be determined by the market’s own demand. For now, the synthetic ammonia market is set to gradually enter an upward trend. As the price of synthetic ammonia rises in Shandong, surrounding markets are gradually seeing increases in prices as well. The Hebei market, which is closely linked to the Shandong market, is experiencing improved sales conditions and is showing positive trends. With the rise in urea prices, the synthetic ammonia market is expected to see further increases. The main focus in the market at present is the changes in manufacturers’ export volumes.