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SunSirs: Supply Increased and Demand Was in the Off-season, Liquid Ammonia Fell Back from a High Level in October
November 02 2022 13:41:44SunSirs(John)

Price trend

In October, the domestic liquid ammonia market declined by 5.95% in shock. Shandong, Hebei, Shanxi, Hubei and Hunan provinces and other regions saw a significant drop of 300-500 yuan. The market supply increased significantly. However, downstream demand was relatively weak, and the peak agricultural demand season had ended. Downstream depressed prices, and terminal prices were also falling one after another. According to the monitoring of SunSirs, as of October 31, the quotation range of liquid ammonia on mainstream market in Shandong was 3,800-4,000 RMB/ton.

Analysis review

Supply side

On the supply side, at the beginning of this month, the price of liquid ammonia was high, and there were too many local maintenance devices, especially the shutdown of Wanhua and Shenyuan devices. In some areas, such as Fujian, the supply of goods was scarce, and the amount of external procurement increased, but the downstream acceptance was close to the critical value. With the early maintenance devices being started, but the downstream demand had not followed up, the market supply was excessive. Repeated epidemic situations and poor transportation had led to a cold trading atmosphere, and the manufacturer's shipping capacity was greatly reduced. It was inevitable to reduce prices and clear the warehouse.

Cost side

The upstream coal market price was still high, with an increase rate of 12.43% in October. Affected by the epidemic situation and the safety reduction in production, the coal mines were mainly responsible for long-term orders, and the market supply was still tight. The supply was reduced, the market trading atmosphere was fair, and the coal price was strongly supported. In terms of downstream ports, the price was mostly strong. During the overhaul of Daqin Line, the amount of coal entering each port had decreased. The traders' quotation was relatively firm and their willingness to ship was relatively strong. The rise of coal price had brought heavy pressure on downstream ammonia enterprises, especially when the price of liquid ammonia declined, the profits of enterprises were significantly compressed. However, the situation of gas head ammonia enterprises was on the contrary. The price of natural gas fell sharply this month, with a monthly drop of more than 20%, greatly easing the cost pressure of gas head ammonia enterprises in Southwest China.

Demand side

In the end, domestic demand entered the traditional slack season, and the downstream urea market was cold. According to the monitoring of SunSirs, urea fell 1.92% in October, and the supply and demand fundamentals of urea were unbalanced. On the one hand, in terms of agricultural demand, a small amount of goods were prepared, the operating rate of compound fertilizer plants declined, the demand for urea weakened, and it was difficult to support the high price operation. On the other hand, industrial demand increased slightly. The rubber sheet factory enterprises started at a low level, mainly rigid demand procurement, and the melamine price was consolidated at a high level, so they had a good enthusiasm for urea procurement. In general, the downstream was still rigid, with less increment and limited support.

According to the data from SunSirs, the trend of liquid ammonia and urea was basically the same. Since October, the price difference between the two had narrowed, urea was stronger than liquid ammonia, and downstream profit margins increased.

From the liquid ammonia industry chain chart, the performance of the liquid ammonia industry chain in October was weak, most products fell, and the cost performance was different. The rise of coal and the fall of natural gas coexisted, and the situation of coal head ammonia enterprises and gas head ammonia enterprises was completely opposite. In the downstream, due to the weakening of seasonal demand, liquid ammonia and downstream products such as formic acid (- 27.62%), DMF (- 19.49%) and DAP (- 8.64%) declined strongly.

Market outlook

SunSirs believes that, on the cost side, affected by the supply guarantee policy and the northern heating season in winter, the coal may still be able to move forward in the later period, while ammonia enterprises still face greater cost pressure in the later period, the price may be supported. In terms of supply and demand, there are still maintenance devices facing resumption of production in the later period. It is estimated that the supply of liquid ammonia may continue to increase in November. The demand for agricultural fertilizer in the downstream is in the low season, and the operating rate of downstream factories is generally low, which may suppress the ammonia price. In terms of exports, there may still be some interesting points. India's urea bidding supports, and China's export substitution to some countries increases. On the whole, liquid ammonia may maintain a balanced pattern in the later stage, with resistance and support in price. The domestic regions are subject to short-term differentiation due to epidemic situation and transportation.

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com.

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