Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

• Prices remain at low levels, in part because of oversupply due to new plant start-ups. However, there has also been a contraction in demand, especially for technical ammonia – industrial markets for ammonia in China and East Asia have been badly affected.
• Natural gas prices and freight rates remained at historical lows. This means that producer margins remain reasonable and so many plants are still producing. Lockdowns have also affected plant maintenance and many turnarounds have been postponed. There are some market related shutdowns, such as Nutrien in Trinidad, but they have not affected the market significantly.
• Major DAP producers continue to buy ammonia and US agricultural demand remains brisk, with some localised shortages reported during May.

UREA

• Urea prices staged a rally in mid-May, driven by new tenders from India, which led to offers in the $240s/t c.fr, met mainly from the Middle East and FSU. Nevertheless, urea prices are down roughly $50-60/t on the same time last year.
• There was an absence of Chinese offers – Chinese exports have slowed down considerably from mid-March as producers fulfilled domestic demand – which has also helped to reduce oversupply in the market. Chinese exports for May and June looked to be less than 300,000 tonnes.
• Higher demand from Latin America, especially Brazil, Argentina and Mexico have also improved sentiment, and there has been additional demand from Egypt and other parts of Africa.

l However, with the Chinese buying season ending, more urea may be offered onto the international market, with a concomitant effect on urea prices.

METHANOL

• Methanol prices have been falling rapidly in all major markets, with significant oversupply in the market and storage tight. Demand for methanol into fuel blending and ether production is down significantly as major consuming nations travel less due to Covid lockdowns.
• Chinese coastal storage reached 780,000 tonnes at the end of May, and with tanks being turned over to crude oil storage there were fears there might be nowhere for methanol to go. Only MTO production remained a bright spot, with low methanol prices encouraging olefins producers to operate polypropylene capacity. New plants with a capacity of 1.8 million t/a of methanol equivalent are due to start up in 2020.
• European spot prices hit an 11-year low in May, falling below e140/tonne, although this triggered a moderate price rally as traders sought to capitalise on bargains.
• Forecasts for 3Q 2020 are continued weakness in the market. ICIS predicts that global demand will be down 5% in 2020, with recovery taking up to two years. Around 2 million t/a of capacity has so far been idled this year, particularly in Trinidad, as well as Chile, and some start-ups have been postponed, but more is likely to follow.