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SunSirs: Higher Cost, Shortage of Supply, Upstream and Downstream Linkage Rise of Liquid Ammonia

May 28 2021 10:00:03     SunSirs (HU)

Recently, the domestic liquid ammonia market continues to push up. According to the monitoring of the SunSirs, the price increase mode of liquid ammonia started last week. Since the beginning of last week and the end of the 26th, the domestic liquid ammonia price has increased by more than 5%. At present, the market price has broken through the 4000 marks, reaching a three-year high. The soaring price of liquid ammonia is the result of the dual effects of higher cost and tight supply and demand.

After the May Day holiday, with the increase of inflation expectations, domestic commodities ushered in a new round of rising cycles, especially the upstream products of liquid ammonia, such as coal and methanol, rose sharply. At first, the price of liquid ammonia did not rise obviously. Even in the first week after the festival, the inventory of liquid ammonia was still higher due to the high operation rate of domestic plants and the increase of output, and there was a short wave of a downward trend. However, in the week of May 11, the price of urea continued to rise sharply. After a week, the price of liquid ammonia also soared.

On the cost side, the domestic coal market is booming after the festival, according to the monitoring of SunSirs, as of May 18, the price of steam coal has increased by 14.07%. Since the beginning of March, the price has increased by more than 70%, which is more than 100% higher than that of the same period last year; Coking coal also rose as high as 11.8%. Although affected by "ensuring supply and stabilizing price", the coal price has fallen in stages, but it is still relatively high, and the cost pressure is gradually transmitted to the downstream.

Methanol also feels the pressure from upstream, the supply and demand of raw coal are tight, which promotes the cost of coal to methanol. According to the monitoring of SunSirs, as of May 18, the average price of domestic methanol production enterprises in Shandong was 2730 RMB/ton, with a month-on-month increase of 14.23% and a year-on-year increase of 64.71%. Methanol peaked and fell in the recent week, but the price is still relatively high in history.

From the supply side, ammonia enterprise failure and routine maintenance are also good for the price of liquid ammonia. Recently, the urea market soared, and most low-level ammonia enterprises concentrated on producing urea, which aggravated the shortage of liquid ammonia. Jiangsu Hengsheng all produced urea, and the actual unit was overhauled, which made it difficult to ease the market supply tension.

From the downstream perspective, the futures and spot prices of urea have been linked. In the past three weeks, the price of urea has been rising continuously. According to the monitoring of the SunSirs, from May 10 to 26, the price of urea has increased by more than 8%. The main reason is that local agricultural demand has been followed up; The operation rate of downstream compound fertilizer and rubber plate plants increased, which led to the recovery of the urea market. At the supply end, some enterprises in Shandong, Xinjiang, Shaanxi, and other places have to repair their devices, so the supply is tight. In addition, India's RCF issued a new round of urea import bidding on May 18 and opened the bid on May 25, raising bullish expectations.

In the aspect of compound fertilizer, the demand of agriculture is getting warmer, the price of agricultural products is rising, the planting area is increasing, which is good for the fertilizer market, but the main factor is the tight supply side, according to the monitoring of SunSirs, ammonium phosphate rose more than a week, and rose continuously from 20 to 26 days, up 3.29%.

In the future, the problem of tight domestic supply is difficult to ease quickly shortly. Coupled with the high price of upstream raw materials, the price of liquid ammonia may remain high, and the possibility of continuing to rise is not ruled out.

 

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