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Nitrogen+Syngas 368 Nov-Dec 2020

30 November 2020

Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

Ammonia prices have been on a rising trend over the past few months as plant closures begin to make themselves felt. Yara’s Baltic ammonia price also rose sharply at the start of October, and Nutrien’s announcement of the closure of its PCS-03 plant on Trinidad helped lift prices, with Yara and Mosaic’s contract prices rising $16/t in October.

Trinidadian exports were reported to be down 17% on 2019’s figures by the end of August, at 2.67 million tonnes, and the closure of PCS-03 reduces the island’s notional ammonia capacity to 4.1 million t/a.

Middle Eastern producers have had no problem finding buyers for their ammonia, though many markets have been quiet and buying for the US fall application season is largely complete.

Now that rising prices are starting to lead to producers coming back on line, including export-oriented capacity in Indonesia, the market could find itself quite weak to the end of the year.

UREA

Indian buying has been the dominant factor in urea pricing over the past couple of months. Strong buying at the end of August kept prices buoyant, but when India took a step back from the market in September rates sagged again, before picking up in early October when India made some more large purchases. The RCF tender attracted a record 3.6 million tonnes of offers. Indian buying looks set to continue to determine the fate of a volatile market going forward.

The Chinese application season is largely over now, and Chinese producers are likely to have more urea available for the international market, leading to potential market softening.

Fourth-quarter demand from Europe and Brazil will be the key to prices for granular urea. Suppliers are comfortable for now, but prices will likely come under pressure in between Indian tenders.

The start-up of the first train at the Dangote site in Lekki, now expected to be in November, will also bring more supply to the market over the coming months.

METHANOL

Methanol prices have improved during 3Q 2020. Autumn is traditionally a stronger season for methanol demand anyway, and demand has picked up strongly again following Covid-related shutdowns in key demand sectors earlier in the year.

Methanex reported Q3 revenues down 24% for the quarter compared to the same period in 2019, mainly because of much lower prices this year.

A number of shutdowns or turnarounds of major methanol plants around the world, especially in China, where prices had fallen below marginal costs of production, have also contributed to the recovery in prices, as well as unplanned outages in Southeast Asia and the Middle East.

The spectre of a ‘second wave’ of Covid lockdowns across Europe and North America continues to darken the outlook, however, and the pace of global economic recovery and methanol demand remains uncertain.

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