Since September, the domestic liquid ammonia market has ended the bottom consolidation of nearly two months, and a perfect rebound has emerged in the middle and early days. Shandong, Hebei, Lianghu and other major production areas saw an increase of 600-800 yuan/ton. According to the monitoring of the business community, as of September 20, the percentage increase of liquid ammonia in Shandong Province since September has reached 15.09%, and the current mainstream quotation range is 4200-4400 yuan/ton. The sharp increase in the market is mainly related to the tension between supply and demand, as well as the cost positive impact of the high upstream coal and natural gas prices.

Supply side: tightening supply in main production areas

On the supply side, since the end of August, the operating rate of main liquid ammonia production areas has continued to decline. Fujian, Henan, Shanxi, Hebei and Shandong all have large factories that have entered the maintenance period or temporarily stopped due to faults, and enterprises that have stopped in the early stage, such as Hebei Kaiyue, Shandong Luzhou and Hubei Heyuan, have been unable to resume production. During this period, the superposition of “early shutdown” and “new shutdown” devices has led to a sharp reduction in market supply. In addition, many downstream devices of co production enterprises have resumed operation, increasing self consumption and reducing the supply of goods that can be circulated to the market. The continued contraction of supply is the main reason for this upward trend.

Cost: High coal and natural gas prices and ammonia enterprises face upward pressure

The high cost is also the driving force for the rise of liquid ammonia. Since the end of August, the coal market has continued to rise. As of September 20, the steam coal has risen by nearly 15% since September, which has continuously brought profit pressure to downstream ammonia enterprises. At the same time, with the help of the tight supply and demand of liquid ammonia, the ammonia enterprises’ motivation and willingness to increase prices have been supported. However, with the national regulation of coal prices, the rise of coal has been restrained to some extent, and the profits of downstream methanol, liquid ammonia and other products are still within a reasonable range. The price of natural gas also rose sharply in September, which also played a cost driven role for ammonia enterprises in Southwest China. According to the monitoring of the business community, LNG rose as high as 15.89% this month.

Demand side: demand boosts market confidence

In the end, the downstream demand of liquid ammonia continues to rise. The price of urea continued to rise, and the urea rose by 7.0% in September. The number of new orders sold by many manufacturers increased, and the price of new orders kept rising. The demand for downstream compound fertilizer in autumn was followed up, and the industrial demand also improved. In addition, the export and light storage promoted the market. As of September 20, the urea market price had reached 2550-2650 yuan/ton. Relative to the supply tension, the recovery of downstream demand also forms a strong support for the market.

From the above figure, we can see that the trend of liquid ammonia and urea is basically the same. In September, the price difference between the two narrowed significantly, and the curve crossed at the near end. The strength of liquid ammonia compared with downstream urea also showed the tight situation at the supply side, as well as the continuous improvement of the profits of ammonia enterprises.

From the above figure and the liquid ammonia industry chain diagram, the current profits of the liquid ammonia industry chain are fair, and the price increase of natural gas upstream of the gas head is strong, which affects the profits of ammonia enterprises in the southwest gas head. However, the sharp rise of the liquid ammonia price has eased the pressure on the profits of ammonia enterprises. The pressure of downstream fertilizer enterprises is relatively high. The growth of urea, boric acid and other products was weaker than that of the upstream, while that of ammonium chloride (- 14.85%), ammonium nitrate (- 4.61%), diammonium phosphate (- 8.81%) and other products was weaker.

Future market forecast

The liquid ammonia analysts of the business community believe that since this week, the rising momentum of domestic ammonia enterprises has generally weakened, and the supply and demand side of the market has gradually moved towards easing. The expected resumption of production in the later period may bring some negative effects to the market, and the release of some new capacity has also increased the supply expectation. However, before the National Day holiday, the market procurement demand is still there, and the continuation of the downstream peak season effect will make ammonia enterprises continue to rise in price. Based on comprehensive consideration, it is estimated that liquid ammonia will still be subject to strong shock in the near future.