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Nitrogen+Syngas 365 May-Jun 2020

31 May 2020

Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

  • The impact of coronavirus on both supply and demand continues to provide considerable uncertainty to the market. Industrial demand seems to have been worst affected, and fertilizer related demand has largely kept up, although shutdowns in India’s ammonium phosphate sector have also affected demand. Spring is traditionally the strongest time for fertilizer demand, and this has helped support prices at least in the short term.
  • However, the market was oversupplied before the Covid-19 pandemic, and falling demand has only exacerbated the situation. Fortunately feedstock, especially natural gas prices have been falling in tandem with ammonia, which eases some of the burden on producers.
  • At the moment prices are holding steady at their new lower levels, and what happens next depends very much upon how and when the lockdown eases in major producing and consuming countries.

UREA

  • Market uncertainty and peak demand for the spring application season led to a run-up in urea prices during February and March, boosted by a 750,000 tonne tender from India. However, with this past and demand from India more subdued than expected, urea prices have been falling from mid-March into April and remain relatively soft. Black Sea and Baltic rates dropped to $200/t f.o.b., with Arab Gulf prices about $220/t f.o.b.
  • More demand is expected from India, with MMTC due to close a tender in May, and there are expectations Brazil will come back to the market by June, but there is still plenty of supply available.
  • In spite of some shutdowns, availability continues to increase from new facilities. Egyptian Chemical Industries (KIMA) has announced that its new fertiliser facility in Aswan is now fully operational, with a capacity of 1,200 t/d of urea and 300 t/d of AN. Dangote Fertilizer’s 3 million t/a urea complex at Lekki, near Lagos in Nigeria, is close to being commissioned with its various sections being test run, according to the company.
  • On the other hand, many producers are expected to take plant turnarounds if prices remain low, which could see slightly tighter availability towards the end of the second quarter.

METHANOL

  • Methanol prices peaked in mid-March, and then saw a precipitate fall. European methanol prices crashed at the end of March, falling as low as e150-158/ tonne for spot cargoes f.o.b. Rotterdam before rebounding slightly, as lockdowns across the continent affected shipments and industrial production.
  • Fuel uses, direct blending and DME and MTBE have all also been curtailed, and no pickup in demand is likely in the short to medium term.
  • Falling methanol prices did mean that methanol to olefin demand remained relatively strong in China, however, which has helped absorb some of the methanol flowing out of Iran which is no longer able to find Indian buyers.

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Running the gamut

This issue of Sulphur magazine contains a preview of CRU’s Sulphur + Sulphuric Acid conference in Woodlands, Texas, which is being held from November 3rd to 5th this year, giving delegates the opportunity to meet and discuss some of the trends which are continuing to change the sulphur and sulphuric acid industries. Some of this is echoed in our editorial coverage this issue; the rise of electric vehicles and the continuing electrification of society is changing demand for metals and impacting upon both sulphur and sulphuric acid markets alike. As CRU’s principal analyst Peter Harrison discusses on pages 36-37, battery demand for nickel is leading to a surge in new nickel leaching capacity in Indonesia which is drawing in greatly increased volumes of sulphur, while rising demand for copper is leading to additional volumes of smelter acid from China, India and Indonesia which are impacting the merchant market for acid, as detailed by CRU’s Viviana Alvorado on pages 38-40. In the United States, new lithium mines will require additional sulphur (see pages 22-23). Rare earths and battery metal recovery will form a major topic on the first day of the Sulphur + Sulphuric Acid conference, with speakers from Lithium Americas, one of the pioneers of the new US lithium industry.

Is the world ready for CBAM?

At the end of this year, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will move from its transitional phase into its ‘definitive’ phase, whereby the carbon costs of goods entering the EU will need to be priced in. CBAM requires suppliers to calculate the carbon emissions of their fertilizer (and other, e.g. steel) products, including indirect emissions, for example from electricity consumed in the process, and emissions of precursor or raw materials. They will then need to purchase CBAM certificates to cover embedded emissions above the established free allowance benchmark rates determined by the European Commission: 1.57 tonnes CO2e/tonne ammonia and 0.23 tCO2e/t nitric acid.