In August, domestic liquid ammonia did not continue the upward trend of the previous month, but turned into a decline, and the decline was significantly greater than the previous month’s increase. According to the commodity market analysis system of Shengyi Society, the decline of liquid ammonia in Shandong region in August was 12.74%. As of the end of the month, the mainstream price of liquid ammonia in Shandong region is between 2200-2350 yuan/ton.
Equipment resumption and high inventory bring pressure
From a supply side perspective, the supply-demand structure continues to be in an oversupply situation. As we enter August, the operating rate continues to increase. 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, the import volume continues to increase, and low-priced foreign sources 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 300-350 yuan/ton. From the demand side perspective, in 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 is mainly due to the weakness of the upstream and downstream
From the perspective of the liquid ammonia industry chain chart, the performance of the upstream and downstream environment of liquid ammonia is weak, and the upstream natural gas continues to be weak, with a monthly decline of 5.09%. Especially in the downstream sector, there is still a general cooling trend, with more declines and less gains, heavier declines and smaller gains. Especially urea is still lukewarm, according to monitoring, the decline in urea in August was as high as 5.79%. This is mainly reflected in weak downstream demand, low season in agriculture, and the current increase in compound fertilizer production not meeting 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.
Market forecast:
Business analysts believe that from a supply side perspective, the market supply and demand pressure will not decrease next month, and the impact will tend to weaken as the equipment will be on and off. The mentality of enterprises to raise prices may be reflected, and the downward space in the later stage may be compressed. In addition, there may be an increase in ammonia conversion enterprises in the later stage, and there is a trend of increasing ammonia production. The supply and demand pressure in September should not be underestimated.
From the demand side, in the short term, demand remains stable, and expectations for the later period may be weak. On the one hand, the agricultural peak season has not yet begun, and trading is light. In addition, industrial demand remains dominated by rigid demand, and overall, downstream liquid ammonia may continue to drag down its price recovery in the later stage.
Taking all factors into consideration, the price of liquid ammonia is expected to hover at a low level in the short term, and in the later stage of supply and demand competition, the ammonia market may enter a volatile range, further narrowing the range of price fluctuations. We need to pay attention to the manufacturer’s equipment start-up news in the later stage.
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