Ammonia Costs Are Rising Due to a Supply Shortage In the United States
- 14-Jul-2022 3:51 PM
- Journalist: Bob Duffler
The price of Ammonia, the principal source of nitrogen fertilizer, in the United States has increased by a significant percentage in the last two years, with the majority of these increases occurring since March 2021. Since Ammonia is predominantly manufactured from natural gas, Ammonia prices typically track natural gas prices. Because imports account for around 14% of the nation's total Ammonia usage, U.S. Ammonia prices closely track those of other countries. Typically, the cost of feedstock and the cost of commodity chemicals such as Ammonia is tightly related to the prices of natural gas.
The price of Ammonia in the United States closely tracks international Ammonia pricing rather than just U.S. natural gas prices because of how intertwined the world's Ammonia markets are. Over the past 12 months, international natural gas costs have grown quickly, pushing Ammonia prices higher than domestic natural gas prices, which have stayed comparatively stable.
Ammonia prices in the United States market have revived after falling for a month in the domestic market. The fall was observed primarily due to the falling natural gas prices. Prices for Anhydrous and Aqueous Ammonia have risen in the domestic U.S. market due to the difficulty in transporting considerable amounts of liquefied natural gas from Europe to North America amidst the war.
Nitrogen fertilizer supply delays during spring and increased demand from downstream industries have also influenced the local market. As a result, the increasing trend has persisted. Given the increasing demand and reduced stocks, some businesses are also experiencing rising pressures due to poor production rates. On July 8th, anhydrous ammonia CFR Tampa was evaluated at USD 1530/M.T., while FOB New Orleans was at USD 1560/M.T.
According to ChemAnalyst, "Due to a shortage of supplies and the high downstream demand, natural gas prices are anticipated to stay above average. Since rising production costs and limited product availability on the domestic U.S. market will impact the trading climate, these issues will continue to affect Ammonia prices in the domestic market."