Nitrogen+Syngas 381 Jan-Feb 2023
31 January 2023
Market Outlook
Market Outlook
AMMONIA
l The market is anticipated to correct lower throughout the rest of the first quarter. Once a clearer picture over seasonal fertilizer demand in Europe emerges, this could stabilise downward momentum.
l Lower gas prices in Europe, albeit still at the $20/MMBtu level, mean that European producers will be able to produce below current import prices of $925/t c.fr, and ammonia prices may fall. At present, around 50% of European ammonia production remains closed. However, gas prices remain high and volatile and a cold snap could see prices climbing again, especially if demand revives.
l Tampa prices have also trended lower, but concerns remain about navigation restrictions due to water levels on the Mississippi River following a very dry 2022. Difficulties getting fertilizer upriver to farms could lead to price rises again as demand picks up for the spring application season.
UREA
l Importers and traders seem united in sentiment that a floor in the urea price is still some distance from being found, and are trading accordingly, exacerbating market softness. Break even production costs are well below latest trades, so little support will be found there. Prices have fallen back to below the level in Q3 2021.
l Low demand is contributing to the bearish market. Farm demand will rise later in the first quarter across much of the northern hemisphere but it is far from certain that this will be enough to return prices to today’s levels. Stock levels remain high.
l Delayed tendering from India is another contributing factor, and Indian buyers may want to see how far prices will fall before re-entering the market.
METHANOL
l Methanol prices have been more stable than ammonia and urea over the past few months, neither rising as high nor falling as far. Downstream demand into chemical derivatives like formaldehyde and acetic acid has fallen in major markets, leading to methanol prices sinking. Nevertheless, there has been an uptick in pricing in January on tight demand and good fundamentals in downstream markets.
l MTO demand has been slack in China, as new ethylene capacity has put pressure on Chinese MTO margins, but producers have been able to buy at a discount from Iran to keep operational. At the same time, however, Chinese coal prices have been high for some time, constricting the domestic methanol supply.
l The Chinese Lunar New Year is traditionally a time when markets are quiet, but market players are looking towards the impact of the relaxation of China’s covid regulations on increasing demand in China, which represents more than half of all methanol demand. Higher yuan rates against the dollar have also supported higher Chinese c.fr prices.
l There was short supply elsewhere in Asia, exacerbated by a maintenance shutdown at PT Kaltim Methanol Industri in Indonesia and an unplanned outage at Ar Razi in Saudi Arabia. n
