According to China Chemical Industry News, the ammonia market this year has exhibited a divergent pattern—prices hitting five-year lows while exports reached historic highs—driven by a confluence of factors: continued capacity expansion, weak domestic demand support, and geopolitical conflicts opening a window for exports. As of July 31, the average domestic ammonia price had fallen to 2,055 yuan per ton, hovering near the cost line. Industry experts believe the sector is currently caught in a tug-of-war between a "new normal" of loose supply-demand and a temporary surge in exports; the market is expected to struggle at the bottom throughout the second half of the year, with little prospect of a significant rebound.
Falling Prices, Rising Exports
Data shows that the average domestic spot price for ammonia in the first half of the year was RMB2,247, down 6.53% year-on-year—a five-year low for the period. Price trends closely mirrored the seasonal rhythms of agriculture: the market continued its downward trend from the previous year in early 2024; a temporary boost occurred in March and April due to fertilizer stockpiling for spring planting, driving a short-term price recovery; however, agricultural demand quickly faded after the spring planting season, causing prices to retreat again during the May–June off-season.
In stark contrast to the sluggish domestic demand, the export sector performed exceptionally well. Customs data indicates that cumulative ammonia exports for the first half of the year reached 588,700 tons, an increase of 870.77% year-on-year—a record high for the period. Exports peaked in May at 185,000 tons, a month-on-month surge of 163%, with both volume and price rising sharply. Key export destinations included South Korea, India, Morocco, and Vietnam. These flows were driven by a dual logic: proximity advantages and the need to substitute for Middle Eastern supplies. On one hand, proximity to demand centers like South Korea and Vietnam offered transportation cost advantages. On the other, instability in the Middle East led to plant shutdowns and production cuts in major producing regions, creating supply shortages and prompting major consuming nations like India and Morocco to shift their procurement to China.
The sustained rise in ammonia export volumes is the result of a combination of these factors. First, against the backdrop of weak domestic supply and demand, opportunities for export arbitrage have continued to open up; current domestic costs for delivering ammonia to ports stand at approximately 2,400 yuan per tonne, while international transaction prices range from $550 to $650, driving strong export interest among enterprises. Second, port storage and logistics infrastructure is becoming increasingly robust; mature liquid ammonia storage and transport systems at ports in Jiangsu, Zhejiang, Fujian, Guangdong, and Guangxi provide the necessary hardware support for smooth exports. Third, geopolitical conflicts have created a global supply-demand gap; following conflicts in the Middle East in late February, supplies from the region tightened, necessitating the use of Chinese supplies to fill the international shortfall.
Capacity Expansion vs. Weak Demand
In contrast to the stellar performance of the export sector, the domestic market exhibits a pattern of strong supply and weak demand. Statistics from the China Nitrogen Fertilizer Industry Association indicate a continuous expansion of ammonia production capacity in recent years; national ammonia output in 2025 reached 77.687 million tonnes, a year-on-year increase of 6.1%. Longzhong Information forecasts an additional 5.38 million tonnes of capacity in 2026—with 4.02 million tonnes coming online in the second half of the year—representing a supply growth rate of approximately 4.9%, which outpaces the 3.9% growth in demand. In Shandong, a major province for fertilizer production, ammonia output rose by 4.23% year-on-year in the first half of the year, further confirming the trend of capacity expansion.
On the demand side, the market remains relatively sluggish. Agricultural demand receded rapidly following the conclusion of spring planting, while the industrial sector showed even greater weakness, with industries such as caprolactam, acrylonitrile, and nitric acid facing persistent losses. Data shows that as of mid-July, production margins for caprolactam ranged from RMB -2,270 to -2,265, and margins for acrylonitrile stood at RMB-1,011, resulting in low enthusiasm for production. According to the China Nitrogen Fertilizer Industry Association, total profits in the nitrogen fertilizer manufacturing sector fell by 75% year-on-year in 2025, with 47.1% of enterprises operating at a loss, highlighting significant industry pressure.
Exports Provide a Floor, Though Uncertainties Remain
In July, the global ammonia market was characterized by ample supply, weak demand typical of the off-season, and a downward trend in prices marked by volatility. On one hand, the Northern Hemisphere is in the agricultural off-season; top-dressing for corn in Europe and the US is concluding, rice planting in Southeast Asia has entered a lull, and global end-user purchasing has entered a traditional slack period. On the other hand, following the easing of shipping disruptions in the Strait of Hormuz, large volumes of low-priced supplies have flowed into Southeast Asian and Indian markets, further suppressing global spot prices.
Looking ahead to August, downstream demand is expected to gradually recover as preparations for autumn fertilizers in India and the autumn-winter agricultural season in North America get underway. Domestic production and sales for autumn fertilizer stocking are likely to pick up, while localized supply constraints are anticipated due to summer maintenance shutdowns and operational fluctuations at production facilities. The combination of recovering demand and tight supply will likely drive a slight upward shift in commodity ammonia prices, with the mainstream average price for liquid ammonia in August projected to hover around RMB2,220.
Exports remain a key variable influencing market trends in the second half of the year. Currently, arbitrage margins for Chinese exports remain substantial; amidst global geopolitical instability, Chinese supplies play a crucial role in filling global supply gaps. However, close attention must be paid to the situation in the Middle East; once low-cost production capacity—leveraging local oil and gas resources—resumes supply, it will directly impact Chinese exports, significantly squeezing the potential for volume growth in markets such as India and Morocco.
As tensions in Iran ease, Middle Eastern ammonia supplies will return to the market. A narrowing price gap between domestic and international markets will further diminish domestic export arbitrage opportunities, potentially leading to a gradual decline in export volumes; restricted export channels could further exacerbate the domestic supply-demand imbalance.
It is also worth noting the continued intensification of energy conservation and carbon reduction policies. In May, the National Development and Reform Commission and other departments issued a notice launching a three-year campaign to accelerate energy conservation and carbon reduction upgrades in key industries; ammonia production was designated as one of these key sectors, with a requirement for the comprehensive implementation of such upgrades over a three-year period. "While policies are driving the phase-out of outdated production capacity, the short-term impact on the supply side remains limited, and the current state of loose supply-demand balance in the domestic ammonia market is unlikely to reverse soon," says Liu Yuge, Chief Marketing Specialist at Hualu Hengsheng. He believes that against the backdrop of continued capacity expansion and sluggish recovery in downstream demand, the industry will continue to struggle through a market bottoming-out phase. A fundamental market turning point may only emerge once the situation in the Middle East becomes clearer, the elimination of outdated domestic capacity accelerates, and profit margins in the downstream chemical industry recover.
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