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Nitrogen+Syngas 375 Jan-Feb 2022

31 January 2022

Market Outlook

Market Outlook

Historical price trends $/tonne

AMMONIA

  • The ammonia market has entered 2022 looking very different to last year, with early January Pivdenny prices $875/t higher on a mid-point basis than they were at the start of 2021, and the likelihood of further gains ahead.
  • Continuing strong appetite for imports in Europe, the US, Morocco, Latin America and India is keeping the market in deficit, with supply options still limited.
  • The sale of an Indonesian cargo earlier in January – understood to be for a European customer – highlighted just how tight the market is.
  • European gas prices have come down from their peak but remain at very high values. Political uncertainty with Russia and cold weather is likely to keep them high for the next few weeks, supporting the current run of high ammonia prices.
  • IHS Markit says that it looks likely that European gas prices will not fall significantly until the end of winter.

UREA

  • In the near term, prices are expected to continue adjusting downwards. India is now out of the market until March or April and buyers seem to be waiting for the market to find a floor.
  • Brazilian import buying has also slowed with high international prices and the restart of the PAU urea plant in Bolivia late last year.
  • The US market remains volatile. Off-season NOLA prices fell by $125/st in a week, and prices seem likely to fall further as sellers try to tempt buyers back into the market.
  • There are plenty of offers in Europe, but buyers are still attempting to wait for lower prices. However, high natural gas prices should remain supportive of higher urea prices while temperatures remain low in Europe.

METHANOL

  • Methanol prices have been falling since November. Methanex’s US non-discounted reference price (NDRP) dropped from $692/t in November to $642/t in December and $619 in January 2022. Spot prices were lower, at around $330/t in December compared to $530/t in October.
  • US methanol production has been running at high rates, with new production from Koch and a restart for Natgasoline. At the same time, demand is in a seasonal lull, though it is expected to pick up later in the year. Increasing renewable fuel requirements may boost consumption for biodiesel production.
  • In China, demand is also in the off-season. This has coupled with an easing in coal prices to take the edge of Chinese methanol prices, which fell to around $385/t by the end of December, down 12% on November, and the weakness is expected to persist in 1Q 2022. Prices in southeast Asia have fallen to just over $400/t c.fr.
  • Overall the methanol market seems to be well supplied and demand is covered in the short term.

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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.