U.S. Gulf/Tampa: The Tampa market rolled over in March to $310/mt CFR from February’s price. Sources had speculated that recent events, including increased Trinidad curtailments, U.S. exports, and Cornbelt movement, might all converge to stall out any further drop at Tampa.
There was nothing new to report at NOLA last week, but the above factors may also give that market some legs going forward.
March NYNEX natural gas closed on Feb. 25 at $1.711/mmBtu, down from Feb. 18’s $1.852/mmBtu.
Eastern Cornbelt: Sources reported a significant uptick in ammonia sales in late February, along with tightening inventories due to heavy demand in other regions. The low end of the range was reported at $435/st FOB East Dubuque, Ill., but other Illinois terminals had reportedly firmed to $450/st FOB by Feb. 25 for confirmed sales, with some speculating that spot prices will firm more in early March.
The ammonia market out of terminals in Indiana was pegged at $450-$455/st FOB, although suppliers were reportedly not taking new orders at Mt. Vernon, Ind., as the week progressed. “These farmers don’t have a clue what’s heading toward them,” said one regional contact, who noted that preplant ammonia movement should begin in Illinois and Indiana in just a few weeks, weather permitting.
Western Cornbelt: Plant outages and accelerated demand were reportedly fueling an increase in the ammonia market as the week progressed, with reports of heavy movement in central and western Missouri in late February.
Spot ammonia pricing had reportedly firmed to $410-$415/st FOB in Nebraska, $415-$430/st FOB out of Iowa terminals, and $445/st FOB Palmyra, Mo. Those levels reflect a $30-$50/st increase from last report, depending on location. The sudden increase had some sources warning of sticker shock when buyers return to the market. “Many farmers and dealers have no idea the market is moving,” said one regional contact.
Southern Plains: The Southern Plains anhydrous ammonia market appeared to be in an upward swing in late February, fueled by heavy movement on preplant corn ground, tight supply, and production allocations. Availability was the major issue in late February, with numerous locations reportedly not taking new orders or limiting truck loading.
Anhydrous ammonia pricing out of Kansas pipeline terminals had reportedly firmed from $370/st FOB early in the week to $410/st FOB by Feb. 25 for limited tons. Pricing out of regional production points had firmed dramatically as well; sources quoted a range of $375-$400/st FOB for any available tons as the week progressed, with the low at Enid, Okla.
“Some manufacturers are not offering any tons until April at this time,” said one contact. Others noted that one plant at Verdigris, Okla., was down for the next two months, and a mid-April turnaround is scheduled at Borger, Texas.
South Central: The anhydrous ammonia market was quoted at $400-$450/st FOB in the South Central region, up $20-$30/st from last report, with the low at Memphis, Tenn., and the upper end FOB Henderson, Ky., for new orders. Sources said the Henderson market had firmed from $440/st FOB earlier in the week.
Black Sea: Producers are arguing the ammonia price should be in the $270s/mt FOB, but sources say the real price is closer to $250-$255/mt FOB.
One trader noted that netback estimates from Morocco and Tampa argue for the $250-$255/mt FOB price. The only acknowledgement that a $270/mt FOB deal might have been done came as part of a deal involving top-off tons rather than a full cargo.
Industry observers said there is nothing in the marketplace that could argue for ammonia prices out of Yuzhnyy higher than $255/mt FOB. Demand is soft in Asia, and Trinidad is moving east into North Africa and northwestern Europe.
Sources said the new Mendeleevsk nitrogen project in the Tatarstan region of Russia will not impact global prices because the 480,000 mt/y ammonia output is slated for the domestic market. The facility comes online as the global ammonia market is dealing with overproduction issues and limited demand.
One trader noted that ammonia from Trinidad has begun to cut into the traditional Yuzhnyy markets of Morocco and northwestern Europe. These incursions are forcing Yuzhnyy suppliers to look east for new sales. Unfortunately for them, the soft global economy has led Asian buyers to take as few tons as possible.
Middle East: Arab producers continue to service their long-term contracts, but are facing buyers asking for the latest possible deliveries under those contracts.
Prices remain in the $270s/mt FOB even as producers claim $300/mt FOB is the going price. One trader said finding a home for $270/mt FOB ammonia is difficult, while placing $300/mt FOB material would be impossible.
Sources report that Iran is beginning to slowly move up the price of its exported ammonia to place it closer to the Arab-produced product.
Even though sanctions have been lifted from Iran, sources said finding a bank willing to deal with Iran and U.S. dollars is difficult. While many sanctions were lifted related to the Iranian nuclear program, the U.S. Congress had imposed additional sanctions on Iran for other reasons, including to punish the country for its support of terrorist organizations. Working through the maze of what is and isn’t allowed, according to one European trader, has left some U.S. banks extremely anxious over trying to deal with Iran.
Sources said euro-based deals, on the other hand, face fewer limitations. Even if European banks become willing to finance ammonia deals from Iran, sources said the amount available is limited because of domestic demand and steady business with India.
Freight costs have come down, allowing some suppliers to snap up better netbacks on fixed price sales. Sources said the long-term nature of securing vessels for ammonia means ship owners have not felt the same pain as shippers of dry commodities such as urea and phosphates. That could change by the end of this year, however, according to one trader.
New vessels are slated to come into operation during the fourth quarter of this year. Many of those ships already have long-term charters attached to them as soon as they leave the construction ports. The older vessels will most likely be turned over to spot market vendors. The end result could be even lower shipping costs by the end of the year.
Europe: Demand is steady, sources said. Buyers have begun to look at sources other than Russia in recent times. Reportedly PCS sent two cargoes from Trinidad to Antwerp, with more planned.
The aggressive entrance of Caribbean ammonia into Europe is bad news for Russia, which will now have to look to the east for its sales.
For the Europeans, sources said the benefit is mostly just having another source of material. Reportedly, the price has not shifted notably from what they pay from Yuzhnyy or the Baltic ports.
North Africa: OCP in Morocco has been aggressive in trying to force Yuzhnyy suppliers to lower their prices. The latest shot across the bow came when OCP took delivery of a cargo from Trinidad.
The Moroccans have been steady in their demand for lower prices, while the Yuzhnyy suppliers have turned a deaf ear.
Sources said shipments from the Caribbean will not be able to fully supply Morocco with the product it needs, but the shift in sourcing is expected to place more pressure on the Black Sea suppliers to lower their prices.