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Nitrogen+Syngas 385 Sept-Oct 2023

30 September 2023

Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

  • Ammonia prices have now dropped by about 50% from their highs a year ago. Gas prices have fallen, particularly in Europe, and peak fertilizer application season is over in Europe and North America, leading to slackening demand., leading to slackening demand.
  • High gas storage levels and supply diversification have reduced the risk of renewed stress in European gas markets in spite of some jitters over strikes in the Australian LNG industry. There is ample supply available from the US, though Trinidad continues to struggle with gas shortages.
  • While there is some short-term firming to market sentiment, some of it caused by the end of the Black Sea grain export deal, and a general consensus that prices may have bottomed out, the global ammonia market still remains in a very cautious state, with neither buyers nor sellers wanting to instigate a spike in pricing which may cause further demand destruction.

UREA

  • Urea markets reached a low point in June and have been on something of a bull run since then, driven by supply cutbacks in Southeast Asia, Nigeria and Russia, as well as China’s absence from international trade.
  • These trends now appear to be reversing, with China selling a record volume to India and a return towards normal supply from Nigeria and Southeast Asia. As a result, the urea market is heading back towards a surplus of urea and prices have peaked. Chinese export controls have been eased slightly.
  • There has been some support from buying in Brazil, but looking forward, demand looks unexceptional and sentiment among both traders and importers appears to be generally bearish.

METHANOL

  • Methanol bunkering operations have taken place in both Egypt and Singapore, though shippers have warned that it could take years for green methanol supply to meet demand. OCI Global, which is supplying green methanol for Maersk, has had a difficult quarter due to lower methanol prices.
  • China has provided a floor for methanol prices over recent weeks and months, with coal-based methanol production the marginal producer. Chinese demand has been lacklustre as the Chinese economy remains sluggish. At the same time, new capacity coming on-stream within China is contributing to oversupply, and in the absence of global demand may impact upon global pricing.
  • There is also new capacity coming onstream in Iran and the Geismar 3 Methanex plant in North America.
  • In the longer term demand is still increasing faster than methanol supply, but in the second half of 2022 low gas prices and ample supply may see prices lower.

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Tariff uncertainties cloud the picture

Nitrogen+Syngas went to press just a few days before Donald Trump’s swearing-in as the next president of the United States. While it is sometimes difficult to sort the truth from the hyperbole in his public pronouncements, nevertheless, if taken at face value, they would seem to indicate that we may be in for a turbulent four years in commodity markets in particular. While he is an avowed military non-interventionist, on the economic policy side he has emerged as a firm believer in the power of tariffs to alter markets in the favour of the US, and has promised 20% tariffs on all goods entering the US, potentially rising to 25% for Canada and Mexico, and 60% for his particular bugbear, China, sparking a scramble for wholesalers to stock up in the last few weeks of the Biden presidency. Trump previously raised tariffs on Chinese goods entering the US to 20% during his first term, and the Biden administration made no attempt to reverse this, and even added some additional ones, for example 20% on Russian and Moroccan phosphate imports.