Global Ammonia Market Sees Ongoing Price Surge Amid Supply Constraints

During the second half of October 2023, the Ammonia market experienced a significant surge in price in the European and North American markets. The tight supply of the material in the global market and elevated feedstock Natural Gas prices were the key factors contributing to the current price surge in the global market.

The Imported Anhydrous Ammonia market in Germany witnessed a substantial price surge due to several factors. This increase was primarily instigated by the rising prices of essential feedstock, such as Natural Gas, in exporting European countries, coupled with limited material availability. The European gas hubs experienced a bullish trend, leading to restricted Ammonia production in the region. Producers were cautious about increasing production in response to the escalating feedstock costs. Additionally, BASF, a prominent chemical producer in Europe, announced a reduction in production rates and the closure of several energy-intensive facilities, including two Ammonia plants and related fertilizer facilities. This move resulted in a shortage of materials in the German market, prompting German manufacturers to import from the USA market. Compared to the USD, the weakened Euro also contributed to higher costs of Ammonia imports in the German market. Furthermore, increased demand for Ammonia and its downstream derivative, Urea, exerted upward pressure on Ammonia prices in Germany.

Moreover, the ongoing crisis in Ukraine, particularly the conflict with Russia, has significantly impacted Ammonia production and supply. Market participants in the Ammonia industry are facing challenges as the Russian invasion of Ukraine has led to an immediate halt in loadings at the key export hub of Yuzhny.

Likewise, in the North American region, the availability of Ammonia has remained limited in most areas, resulting in an inability to meet the growing demand in certain regions. Furthermore, the primary exporting country of Ammonia, Trinidad, has been grappling with issues related to natural gas supply for several weeks, leading to restricted Ammonia production in the region. Producers have been cautious about expanding their production capacities, given the escalating costs of feedstock. Additionally, as reported by various market participants, transportation infrastructure in the U.S. has been facing constraints this week due to low water levels in the Mississippi River, along with shortages of railcars and limited truck availability. These combined factors have contributed to the U.S. market's scarcity of Ammonia supplies.

According to ChemAnalyst, it is anticipated that Ammonia prices will experience a global increase in the coming months. This price surge can be attributed to the tight supply situation in the global market and the elevated prices of the essential feedstock, natural gas.