In December, domestic liquid ammonia reversed the previous month’s upward trend and prices turned downward. According to the Commodity Market Analysis System of Shengyi Society, the decline of liquid ammonia in Shandong region in December was 7.88%. As of the end of the month, the mainstream price of liquid ammonia in Shandong region is between 2450-2600 yuan/ton.

Equipment resumption increases supply and increases supply volume

From a supply side perspective, there has been a shift in the supply and demand structure. As we enter December, the operating rate has increased. Previously, maintenance companies have resumed work one after another, coupled with an increase in ammonia conversion capacity. The inventory pressure of enterprises is high, and in order to alleviate the pressure, factory prices continue to be lowered. Furthermore, with a large import volume, low-priced foreign goods are impacting the domestic market. Supply is in an oversupply situation. During the month, major factories in Shandong have repeatedly lowered the ex factory price of liquid ammonia, with a range of 200 yuan/ton. From the demand side, as we enter winter and the traditional off-season, downstream industries such as urea and compound fertilizers lack support, and industrial demand remains rigid with little fluctuation. Downstream weakness has further exacerbated the supply-demand imbalance.

The cooling of the industrial chain and the lukewarm upstream and downstream markets

From the diagram of the liquid ammonia industry chain, it can be seen that there has been little improvement in the upstream and downstream environment of liquid ammonia. After a long-term decline in the upstream natural gas industry, there has been a slight rebound with limited growth and little support. As of the end of the month, the monthly increase was 2.85%. Especially in the downstream sector, it is still generally cold, with more declines and less gains, especially in urea, where the decline is significant. This is mainly reflected in weak downstream demand and the off-season in agriculture. Currently, the increase in compound fertilizer production is lower than market expectations. The terminal production in the industrial demand field is also showing a downward trend. The market is generally dominated by rigid demand, and the demand side is restricting the ammonia market from getting out of the slump.

From the perspective of downstream urea, the urea market has shown a sluggish performance, with a monthly decline of up to 8.56% in December according to Shengyi Society. On the one hand, the supply performance is sufficient, but domestic urea manufacturers have insufficient ammonia conversion and high inventory. Combined with weak exports. On the other hand, there was no significant increase in downstream procurement volume, and the market performance remained calm.

Market forecast:

Business analysts believe that from the supply side, there is not much pressure on the market supply, and the impact tends to weaken as the equipment is on and off. The mentality of enterprises to raise prices is gradually strengthening, and there may be an increase in ammonia conversion enterprises in the later stage, with a trend of increasing ammonia production. However, overall, it is difficult for a large-scale market oversupply to occur in the short term.

On the demand side, in the short term, demand remains stable, and expectations for the later period may be weak. On the one hand, as the holiday approaches, trading is light. In addition, during the off-season of agricultural demand, industrial demand remains mainly driven by rigid demand. Overall, downstream demand for liquid ammonia may continue to drag down its price recovery in the later stage.

Taking all factors into consideration, the price of liquid ammonia will be difficult to emerge from the haze in the near future due to supply and demand pressures. In the later stage of the supply-demand game, there may still be downward space for the ammonia market. We need to pay attention to the manufacturer’s equipment start-up news in the later stage.