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Weak Demand and Ample Supply Further Topple Ammonia Prices in the USA
Weak Demand and Ample Supply Further Topple Ammonia Prices in the USA

Weak Demand and Ample Supply Further Topple Ammonia Prices in the USA

  • 08-Feb-2023 3:57 PM
  • Journalist: Jacob Kutchner

Texas (USA): Ammonia prices in the US market continued to decline, as all the nitrogenous fertilizers that mainly rely on natural gas as an input plummeted in recent weeks. The Ammonia fertilizer supply continues to outpace the available demand in the domestic market amidst the subsided market activities and stable offtakes.

Last year, the fertilizer markets were in disarray for several reasons, including high natural gas costs that forced output cuts, Ukraine-Russia conflict and associated sanctions that hampered exports, and trade restrictions implemented by numerous nations. Although the recent week's lower Ammonia prices suggest that the situation has improved, many of these crucial determinants are still in play, and uncertainty persists. Given the comparatively low demand for heating in the Northern Hemisphere this winter, Natural gas prices declined in January 2023. Additionally, the worldwide economic slump has resulted in sharp drop demand as the manufacturing and industrial activities continues to face a stiff test amidst sluggish consumer sentiment. Thus, as of first week of February 2023, Anhydrous Ammonia FOB New Orleans prices were estimated at USD 1062/MT with a weekly decline of 1.5%.

Ammonia prices have decreased by more than 40% since reaching record highs in the spring of last year, largely as a result of recent drops in natural gas prices and the restarting of fertilizer factories in Europe, even if costs are still more than double what they were before covid pandemic. However, Ammonia prices have been on a consistent decline in January owing to easing production costs and ample material availability in the domestic as well as international market.

Furthermore, many Ammonia facilities in the European region reopened as a result of lower natural gas prices, which decreased the region's dependence on imports from the US market. Ammonia prices in the global market were pushed lower because former suppliers to Europe had to cut their prices and hunt elsewhere for demand. Additionally, bolstered inventories in Brazil reduced international demand for a significant agricultural producer, potentially further pressuring Ammonia prices downward.

Hence, as per ChemAnalyst, the U.S. domestic market is expected to witness another bearish rally for Ammonia in the upcoming weeks on the back of weakening production costs, stagnant demand from fertilizers and fuel-based industries and stable supply dynamics.

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