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Nitrogen+Syngas 377 May-Jun 2022

31 May 2022

Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

  • Yara and Mosaic shocked markets with a settlement of $1,625/t c.fr for April, up $490/t on March, and the highest ever price recorded at Tampa, as the removal of Russian and Ukrainian ammonia supply impacted global prices, and Baltic rates soared to $1,500/t. However, April saw some of the global dislocations caused by the Russian conflict begin to ease, while the high prices saw buyers in the US delay purchases, leading to the Tampa price falling back $200/t for May loadings.
  • There was also some clarification from the US government that agricultural commodities – including fertilizer – were allowed to be imported from Russia, though payment still remains problematic as Russia is unable to use the SWIFT system.
  • At the moment buyers are holding back, looking to see how far prices will fall again. A sale of ammonia from Kaltim was withdrawn after failing to achieve a price target of $1,125/t f.o.b. Bontang, with unconfirmed bids said to be up to $300/t lower. Nevertheless, with up to 20% of market supply via the Black Sea out of the market, there is still strong support for prices in the absence of large-scale demand destruction.

UREA

  • After a market flurry in March caused by the situation in Ukraine, urea markets quietened during April as prices began to fall again, and major buyers stayed away from the market, awaiting clarity on future pricing, leaving significant volumes uncommitted.
  • India, as ever, was expected to provide support, with state purchaser RCF indicating after a delay of a month in tendering that it was likely to tender for up to 1.5 million tonnes of urea for July delivery. While India appeared to be signalling that it would not be taking urea from Russia, availability from other sources appeared to be sufficient to make up for this.
  • It is expected that the RCF tender will set the tone for inquiries from other potential buyers in Brazil, Mexico and southeast Asia. However, while trade has been thin, demand is still believed to be strong and supply still uncertain in the absence of Black Sea tonnages.

METHANOL

  • There were signs in late April that methanol prices had peaked, at least for the short term, in all major markets; Europe, China and North America. Argus assessed its European monthly methanol contract price at e520/t for May, down e47.5/t from April on rising inventories in Rotterdam and stable demand.
  • Methanol prices tend to track oil, which also peaked in March. Longer term, however, Morgan Stanley has raised estimates for 3Q oil prices from $120/ bbl to $130/bbl in spite of project demand destruction, because of the removal of 2 million bbl/d of Russian supply from the market.
  • Methanol demand remains fairly strong in derivative markets in Europe and North America, in spite of rising costs and supply chain challenges. However, key market China is suffering from new covid-related lockdowns which could see methanol demand fall.

Latest in Outlook & Reviews

Market Outlook

l The market looks very tight through the end of the year, though some expect supply to improve in Q4. Prices are unlikely to ease in the coming weeks. l Woodside’s Beaumont New Ammonia Project is now 97% complete, and the producer expects production from the first train in late 2025. There is no information from Gulf Coast Ammonia on when to expect commercial production. l There was an absence of fresh confirmed business into northwest Europe. Still, producers with ammonia capacity in the region are expected to be maximising output given the favourable economics at current spot natural-gas prices at the Dutch TTF.

Price Trends

By the end of October the ammonia market was facing an acute shortage of spot tonnage, reflected in a $60/t jump in the Tampa price for November. The benchmark Tampa price increased for the sixth straight month to its highest since February 2023 as the global ammonia supply crunch deepened. The surge at Tampa was said to be driven by good demand in the US for direct application combined with a lack of supply. Contributing factors included Nutrien shutting down its nitrogen production in Trinidad, potentially removing around 85,000 tonnes/month from the market. So far, there is no suggestion that other producers in Trinidad will follow suit, and they may even benefit from a boost natural-gas supply given the Nutrien outage, although it is unclear whether the spare gas will be directed to ammonia as opposed to other demand sources.