Global Ammonia Prices Faces a Seasonal Low, Feedstock Could Not Help

The global Ammonia market witnessed a pessimistic trend throughout the second half of December 2023. This current decline in prices is mainly attributed to muted demand from the downstream fertilizer industry and uncertainties in trade. Additionally, the decreasing prices of essential raw materials, Natural Gas, coupled with lower production rates, exerted downward cost pressure on Ammonia prices on a global scale. As the year approached its conclusion, marked by minimal signs of activity and persistently weak spot demand, the challenges in the market further intensified.

The European Ammonia market continued to experience a declining trend, similar to the first part of December 2023. This dip is primarily linked to subdued demand from the major downstream fertilizer sector. As the year approached its conclusion, characterized by minimal activity and consistently subdued spot demand, adverse weather conditions in the UK, France, and Germany further exacerbated the situation. The impact of adverse weather poses a potential threat to the demand for Ammonia in fertilizers in 2024. Despite the conclusion of the winter planting season, the inventory of Ammonia has not been depleted to the anticipated extent due to continuous wet weather conditions.

On the other hand, the Ammonia market in the United States maintained price stagnancy in the second half of December 2023, following a decline over the past few weeks. This price stability is primarily attributed to the surplus availability of material within the market coupled with lacklustre demand in both international and domestic fertilizer markets, worsened by significant stockpiles within the nation. Prolonged challenges at the Panama Canal, a critical global trade route originating in the USA, have contributed to this scenario. Additionally, some major shipping companies have opted for alternative trade routes instead of the Suez Canal due to concerns about potential rebel attacks. The limitations at the Panama Canal have compelled certain shippers to reroute exports, including Ammonia, through the Suez Canal to access Asian markets. Should the limitations at the Suez Canal continue to exist, it could increasingly complicate the exportation of Ammonia from the United States. This could potentially result in an excess supply within the domestic market, which might subsequently trigger a decrease in prices. The accumulation of Ammonia inventories within the country has been exacerbated by delayed shipments to the international market. Furthermore, the demand for Ammonia remained subdued in the United States, aligning with the conclusion of the peak fertilizer season.

Globally, there has been a decrease in market activity as producers prioritize contracted volumes over potential spot availability in January. Specifically, the Ammonia market in Brazil, a significant importer of Ammonia from the United States, has been subdued. Even though the country is in the midst of the planting season for Rice, Sorghum, and Soybeans, the demand for Ammonia from the vital downstream fertilizer industry continues to be minimal due to adverse weather conditions. The northern part of the country experienced exceptionally hot and dry weather in December 2023, worsening crop conditions. Simultaneously, the first half of the month saw lower temperatures in the southern part, which was then followed by a minor rise later on. The fluctuation in weather conditions, with wetter situations in southern Brazil and drier ones further north, is mainly driven by El Niño. This weather phenomenon is forecasted to continue into the early part of 2024. This has weakened the buying enthusiasm of fertilizer consumers due to potential threats to crops.

As anticipated by ChemAnalyst, a decrease in Ammonia prices is anticipated in the global market in the coming months. This decline is primarily attributed to a reduction in demand from the crucial downstream fertilizer sector.