Falling Demand and Production Costs Lead Ammonia Prices to Decline in December 2023

In the first half of December 2023, the Ammonia market in the European and North American regions experienced a bearish trend. This decline in Ammonia prices can be attributed to two main factors. Firstly, the reduction in the price of Natural Gas, a crucial feedstock material for Ammonia production, played a significant role in driving down overall costs. Secondly, the Ammonia market continued to be lacklustre heading towards the end of the year with little signs of activity and spot demand remaining weak. The interplay of these factors exerted downward cost pressure on Anhydrous Ammonia prices.

In Europe, the Ammonia market witnessed pessimistic sentiments during the second half of December 2023. A noticeable decline in Natural gas prices, a crucial raw material for Ammonia production, added to the downward pressure on Ammonia prices. This period was characterized by subdued demand from end-user fertilizer markets, as the peak planting season concluded, causing consumers to delay Ammonia stockpiling until Spring 2024. The demand for Ammonia in European nations faced obstacles due to unfavourable weather conditions, including the aftermath of Storm Ciaran and heavy rainfall in northwestern European countries in November 2023, disrupting the planting of winter crops. As a result, there was a significant reduction in the expected demand for Ammonia intended for spring application in 2024. Although the current impact of the storm is not significant, adverse weather conditions within the country have made consumers hesitant to make bulk purchases. Importantly, domestic demand for Ammonia in Eastern Europe absorbed a substantial portion of Russian production. On the supply side, a continuous flow of shipments from the Russian market was facilitated by increased water levels in the Rhine River. The combination of these factors led to a narrowed market, contributing to the bearish trend in the European Ammonia market during that period.

Simultaneously, a downturn unfolded in the United States' Ammonia market. The diminishing price of essential upstream Natural Gas applied downward cost pressure on domestic Ammonia prices. Demand for Ammonia remained subdued within the United States, coinciding with the conclusion of the peak fertilizer season. Moreover, the international market remained quiet during this period, with producers currently focusing on contracted volumes before potential spot availability for January. Additionally, the market faced challenges with surplus material availability, worsened by persistent bottlenecks in the Panama Canal, a critical global trading route originating from the USA. Consequently, there were delayed shipments to the international market, leading to an accumulation of Ammonia inventories within the country. The confluence of reduced demand and surplus material availability contributed to a narrowing gap between demand and supply, thereby reinforcing the prevailing decline in Ammonia prices.

According to ChemAnalyst, there is an expectation of a sustained decrease in Ammonia prices in the coming months. This forecast is grounded in the ongoing decline in feedstock prices and the surplus availability of the material. The interplay between these factors is anticipated to lead to a continued downward trajectory in Ammonia prices, aligning with the broader dynamics and prevailing conditions in the market.