Price trend

Domestic liquid ammonia prices declined in August, failing to maintain the previous month's upward trend. The decline significantly exceeded the previous month's increase. According to the SunSirs Commodity Market Analysis System, Shandong Province's liquid ammonia prices fell by 12.74% in August. By the end of the month, the mainstream price of liquid ammonia in Shandong Province was between 2,200 and 2,350 RMB/ton.

Analysis review

Restart of plants and high inventory brought pressure

On the supply side, the supply-demand structure remained in surplus. In August, operating rates continued to rise as previously maintenance-related enterprises gradually resumed operations, coupled with increased ammonia conversion. This put companies under high inventory pressure, and to alleviate this pressure, factories continued to lower prices. Furthermore, imports had continued to increase, impacting the domestic market with low-priced foreign goods. Supply was temporarily in a surplus. Throughout the month, major Shandong manufacturers repeatedly lowered their ex-factory prices for liquid ammonia, ranging from 300 to 350 RMB/ton. On the demand side, during the traditional off-season, downstream industries such as urea and compound fertilizers were facing insufficient support, and industrial demand remained rigid, with minimal fluctuations. This downstream weakness had further exacerbated the supply-demand imbalance.

The industrial chain was cooling down, with upstream and downstream sectors showing weakness

Looking at the liquid ammonia industry chain, the upstream and downstream markets were weak. Upstream natural gas continued to weaken, with a monthly decline of 5.09%. Downstream sectors in particular remained generally sluggish, with more declines than increases, significant declines, and small gains. Urea, in particular, remained tepid. According to monitoring, urea prices fell as much as 5.79% in August. This was primarily due to weak downstream demand and the agricultural off-season. The current increase in compound fertilizer production was falling short of market expectations. Terminal production in the industrial sector was also showing a downward trend. The market was generally dominated by rigid demand, and this demand side was hindering the ammonia market from recovering from the downturn.

Future outlook:

Analysts of SunSirs believe that from the supply side, market supply and demand pressures will remain strong next month, with some plants operating and others shutting down, and the impact will likely be mitigated. Companies may maintain their price support, potentially limiting the potential for further price declines. Furthermore, the potential for ammonia production to increase with the subsequent shift to ammonia production suggests a potential upward trend in ammonia production. Supply and demand pressures in September remain significant.

On the demand side, demand remains stable in the short term, but expectations are for a weaker outlook in the future. For one thing, the peak agricultural season has not yet begun, resulting in light trading. Furthermore, industrial demand remains primarily driven by rigid demand. Overall, the downstream sector of liquid ammonia may continue to drag down its price recovery in the future.

Taking all factors into consideration, liquid ammonia prices will likely remain low in the near term. Later, under the pressure of supply and demand, the ammonia market may enter a volatile range, with price fluctuations further narrowing. It will be important to monitor news on plant start-ups at manufacturers.

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