Midwest distributors replenishing terminal inventories ahead of spring applications are anticipated to drive US ammonia prices higher following widespread consumption this fall.
Wholesalers and retailers in early December finalized the first strong post-harvest application period in nearly three years, and with preliminary corn acreage estimates of at least 90mn acres for the spring, replacement demand during the next three months is anticipated to stimulate the market and support spot prices.
While bullishness is primed across the US, any significant price swings preceding spring applications should be regionally defined as a result of supply availability.
Gross ammonia supplies are up by 2pc from a year prior on increased domestic production and imports, fueled primarily from Canada as Trinidadian cargoes slip amid production cutbacks and curbed industrial demand in the US.
Increased Canadian imports should largely help satiate Midwestern demand in tandem with domestic production during the next three months and keep a lid on price appreciation throughout the Corn Belt.
Spring prepay offers from CF Industries, Koch and OCI Wever across the Midwest frame 11-30pc of price appreciation from mid-December spot values to March, depending on location. CF in early December rolled out prepay offers across its distribution system, with quotes ranging $410-415/st fot at Illinois and Indiana terminals, $395-410/st fot at Iowa locations, $395/st fot in Blair, Nebraska, and $390/st fot in Palmyra, Missouri.
But lagging offshore volumes from Trinidad to the US Gulf coast could result in sharper price swings at the US Gulf coast.
Cargoes from Trinidadian producers slipped in January-October by 8pc from a year earlier on Covid-19-related cutbacks in industrial ammonia consumption and curbed production on the island. US producers compounded with reduced imports from Trinidad and allocated increased ammonia output to agricultural consumers, squeezing spot industrial ammonia availability at the Gulf coast.
As industrial consumption recovers from an early-year dearth, prices are anticipated to reflect supply tightness offshore. The monthly Tampa supply contract — the key benchmark in the US — settled at a one-year high for December cargoes, propelling Nola values higher, and near-term increases are widely expected as gas curtailments dents export availability from Trinidad.
Argus' preliminary export estimates from Trinidad framed volumes at a maximum 250,000t in December, well below the average 332,687 t/m of exports in 2020, according to the island's Ministry of Energy and Energy Industries.
Nutrien in December was operating all three of its production units on the island, but at minimum rates because of cutbacks in feedstock natural gas supplies, hampering ammonia output. Meanwhile, only one of Yara's Tringen ammonia units was operating in December, halving the company's monthly production.
