US Gulf coast-based ammonia producers will likely maintain higher-than-normal exports in 2023 as elevated natural gas prices curtail ammonia production in many parts of the globe.
Heightened demand from European importers has bolstered ammonia exports from the US Gulf coast this year during times of low upriver interest from the Midwest and Corn Belt. US Gulf coast-based producers exported more than 621,000t of ammonia in the second half of 2022, the highest July-December total in more than 10 years, according to Argus estimates.
Widening margins to both domestic and international destinations have improved options for suppliers with export capabilities as US feedstock costs remain low relative to importers. Even though natural gas costs in 2022 reached levels not seen since 2008, producers' cost to produce one short tonne (st) of ammonia averaged $272/st during the second half of the year, according to Argus cost of production estimates.
The low cost of production indicated about a $686/st margin against US Gulf coast spot fob pricing and $731/st for Nola barges as of 8 December. Thin demand during the US offseason should also enable elevated exports from the region in early 2023, before domestic deliveries of pre-bought tonnage begin in the second quarter.
In the US Midwest and Corn Belt, elevated volumes of pre-purchased ammonia prevented suppliers from stepping into the spot market until late in the season, causing stocks to build at terminals as inclement weather also hampered application opportunities in the Corn Belt. Industry participants say that elevated inventories could persistas fill pricing remains unattractive to many farmers, despite significant discounts to prepay across the Corn Belt, as spring price uncertainty lingers in the market.
But Mosaic's diminishing dependence on imports from Trinidad has pressured the former benchmark monthlyTampa ammonia settlement, with Mosaic's operating rates expected to remain consistent with 2022 levels that ranged from 66-70pc during the first three quarters of 2022, according to performance data from the company.
Ammonia buyers in the Corn Belt have faced competition from European importers for tonnage from the US Gulf coastsince Dutch TTF prices jumped in the third quarter of 2021. That growing competition with international buyers for pipeline and river tons should persist as natural gas costs remain elevated, particularly for European fertilizer producers.
Although TTF natural gas prices have fallen to $20/mnBtu to start this month, European producers' feedstock costs are exceeding $1,270/t, still well above the Argus-assessed cfr price for northwest Europe. Consistent output also remains in question with many ammonia producers still off line or operating at reduced rates.
