With growing agronomic demand for ‘sulphur as a nutrient’, ammonium sulphate (AS) has a key place in this delivery, whether it is directly applied, blended or used as a feedstock in the production of more advanced N+S products or compound NPK+S.
Join Matt Lisley – Senior Analyst and Tim Cheyne - VP, Fertilizers, as they discuss AS production routes, future capacity additions coming on-stream & price mechanisms. We move on to the impact of Chinese caprolactam and compaction capacity on price premiums for different grades and quality of AS product; and finish with an intriguing look at the recent news surrounding the environmental impact of phosphogypsum, and how ammonium sulphate may play a part in the circular economy.
Related LinksMore information - Argus Strategy Report: Ammonium Sulphate
View Table of Contents (includes extracts and key benefits)
Tim: Welcome to episode five of the "Inside Fertilizer Analytics" podcast. I am Tim Cheyne from the fertilizer team here at Argus Media, and today we're going to be discussing ammonium sulfate. A product quite different to those we've covered so far in this series. I'm joined by Matt Lisley, senior analyst in our team, and our research lead on N+S fertilizers, which are fertilizers with nitrogen and accessible sulfur. And Matt has just published a report on ammonium sulfate, which gives us a great chance to quiz him on the key findings. So Matt, welcome to the podcast. To start us off today, what is ammonium sulfate, and what makes it relevant in a discussion about the fertilizer market? Or how does it fit in as a plant nutrient?
Matt: Thanks, Tim, lovely to be here. Ammonium sulfate, as you say, is an N plus S fertilizer, that's nitrogen and sulfur, and it contains 21 units of nitrogen and 24 nutrients of sulfur. But it plays a key role in the delivery of nutrient sulfur to crops. Essentially, it's the workhorse of getting sulfur onto the ground. The interesting thing is that as a product on its own, it's far from ideal as a fertilizer. The 1:1 NS ratio is far from ideal for most crops, and hence the development of NS fertilizers with more suitable ratios for direct application. But importantly, it's used as a sulfate source in other fertilizers, either a standard grade product, used a feedstock to produce derivative NS products or compound NPKs; or a granular product, used in NPK blends. So whilst the report that I've produced, along with my colleagues, focuses on ammonium sulfate, we do touch upon derivative products, such as ammonium sulfate nitrate, and the emerging NS fertilizers, where this will have an impact on ammonium sulfate (for example, being used as a feedstock). If any listeners are interested in exploring these other NS fertilizers more deeply, then we have a series of recent credentials of bespoke consulting projects in this area.
Tim: Thanks, Matt. So it's clear that ammonium sulfate has a particular role as a fertilizer product. It's also got some unusual characteristics that we haven't discussed yet. If you are to pick one thing that you find most interesting about ammonium sulfate, what would that be?
Matt: I think personally, the most interesting thing about ammonium sulfate is that it's simply produced from the reaction of ammonia and sulfuric acid, which are extremely common industrial chemicals. Consequently, the vast majority of the production that we see is not on purpose, but rather it's produced as a byproduct of a wide variety of industrial processes. And that is really interesting supply position from a sort of circular economy perspective. Caprolactam, a key chemical intermediary to make the chemical fiber-nylon-6 accounted for half of global ammonium sulfate capacity in 2020. And depending on the technology used, caprolactam plants can produce anywhere from no ammonium sulfate byproduct, to up to four and a half tonnes per tonne of caprolactam. Aside from caprolactam, we also look at production routes from acrylonitrile, MMA, coke ovens, flue-gas desulphurisation units, metals processing and many more.
Tim: Okay, so ammonium sulfate is produced intentionally, but also from a whole range of different other processes that have ammonium sulfate as a co-product or a byproduct. That must make tracking production and capacity and projects really different and difficult I guess. So as you've gone through your research, in terms of capacity, where are you seeing capacity additions coming onstream in the future?
Matt: Yeah, quite. It is a difficult process to go through, but any industrial chemical process, when there is a nitrogen or sulphur-based waste stream, there's the potential for ammonium sulfate to be produced.
In terms of capacity additions, this year we should see the restarting of some idled units. The Ambatovy nickel mine in Madagascar was shut down for exactly a year amid the Covid-19 pandemic and resumed operations in late March, which results in further byproduct ammonium sulfate production. There's also the restart of Petrobras' Fafen sites. With the leasing of these assets to Unigel, the Laranjeiras plant resumed urea production in early April, and it remains to be seen with regards to the restart of their discretionary on purpose ammonium sulfate unit on the same site. In terms of structural additions though, the majority of new capacity, as I mentioned earlier is based on caprolactam. And that will be based in China, which has dictated the supply story for the past few years, as they sought to build out importing substituting capacity around ten years ago.
Tim: That Chinese development sounds really important thinking about prices and influence on prices. So let's talk about prices. What actually drives ammonium sulfate prices? Is there a normal supply-demand balance or is it connected to something else? And in particular, can you talk us through what you think will be the impact on prices of these caprolactam capacity additions in China?
Matt: So standard grade ammonium sulfate prices are typically driven by the nitrogen content, so that's 21%, and the main international traded nitrogen product is urea. So the pricing tracks on a nutrient basis, but there's an additional value in the sulfur content for ammonium sulfate. So when we're looking at these Chinese capacity additions, rather than just the production per se, the form that these exports are taking is really having the major effect on the global markets. China is increasing both the quantity and the quality of compacted exports in an attempt to capture the premiums available for larger diameter product, which is suitable for mechanized application or blending.
Since Argus began assessing the price of large diameter ammonium sulfate delivered to Brazil, we've seen a huge decline in the premiums available. From a weekly spot high of $84/t in December 2014 to as low as just $15/t in early April. This has primarily been driven by the rise of compacted exports from China, which is largely responsible for the volumes of large diameters ammonium sulfate imported into Brazil increasing by 150% in just five years.
An interesting aspect of our analysis in this report was to look at what we think will happen to this premium, and how low it could go in the future. Here we were able to draw parallels from other fertilizer products which the team covers. The results of this analysis are of strategic importance for ammonium sulfate produces, be it discretionary, on purpose producers at one end of the supply spectrum, or standard grade byproduct AS at the other. With the introduction of a compacted fob China assessment this month from our colleagues in the editorial team, I really look forward to tracking development of this premium from an export perspective.
Tim: Thanks, Matt. So you've looked at the premium available for different grades and qualities of products. Is there a forecast of that premium in the report alongside an overall forecast of the product price?
Matt: Yes, so a key part of the analysis was to look the future of the premium for large diameter product, and then yes, we forecast the cfr Brazil and fob Northwest Europe prices.
Tim: Oh okay, so China is driving these capacity additions, but do you see any structural changes happening outside China that will also add to capacity?
Matt: So yeah, we've mentioned China driving the supply additions, but outside of China, the largest project floated is a JV between the Ural Mining Metallurgical Company, which has surplus smelter acid and logistics provider Ultramar, which currently is a merchant compactor of ammonium sulfate on the Baltic and has successfully exported product to the United States. The market in North America is hotting up however, because last year we also saw Nutrien’s conversion of their Redwater MAP unit to an additional granular synthetic ammonium sulfate unit, which has been increasing the competition there.
With this conversion I think an important point to note, a long-term trend or threat I've been looking at for a long time is the conversion of ammonium phosphate plants, to ammonium sulfate. Either as a result of restriction of access to phosphate rock, as in the case of Nutrien’s Redwater MAP plant, or because of environmental restrictions on the stacking of phosphogypsum in the case of PCI in Texas. As demonstrated in early April, the stacking of phosphogypsum is of significant environmental concern. Interestingly, and I think this nicely demonstrates how multifaceted ammonium sulfate is, phosphogypsum can in fact be processed into ammonium sulfate. However, currently this is only done in India and China, and usually only where it is economically viable in terms of there being a market for both ammonium sulfate and cement, which is part of the process to produce from phosphogypsum.
Tim: That does link in very nicely with the theme of circular economy and recycling. Do you see that production route growing in the future outside of India and China? Do you see us seeing ammonium sulfate coming from phosphogypsum source in the future?
Matt: I think where the trend lies in phosphogypsum would be actually that more ammonium phosphate plants, which are producing phosphoric acid on site, and have to dispose of this phosphogypsum could easily retrofit themselves into being ammonium sulfate plants. So an indirect supply source there.
Tim: Wow, interesting. We've managed to cover several areas that show how dynamic and interesting ammonium sulfate is as a market currently, so there is no surprise that there's interest from our subscribers in further research, but can you tell us what made you, or prompted you, to write the report right now? What was most interesting or a kind of trigger to get the report done?
Matt: Sure thing, yeah. Well, we've had ammonium sulfate capability for a number of years out of our bespoke consulting division. However, we're seeing across the entire industry, there really is a trend towards tackling sulfur deficiencies, and the rate at which clients have being requesting bespoke ammonium sulfate studies seems to have been accelerating recently. Personally I must have worked on 10 major studies over the past few years, and this report we're really bringing together our expertise and the data sets which we regularly use to provide a strategic insight for our clients. That and also with the pressure on the Brazil cfr premiums, I think it really is a timely report in that aspect of the market.
Tim: Very timely indeed. For our listeners that are interested in hearing more about the report, it is slightly different to the usual fertilizer analytics products we've covered in this podcast series which are quarterly in nature and have a certain delivery format. Can you tell us what the structure of this report is? What would subscribers to this report receive?
Matt: Sure thing. So the key difference is the form as well as the frequency. So our analytics products are typically slide-based and published quarterly, whereas this Strategy Report is a standalone written document. However just like with the analytics products, we draw on our large fertilizer model-based platform, and the data and price forecast are all available in Excel. So a subscriber would receive a written report, around 100 pages, as well as the underlying data in Excel.
Tim: And this report, is it available now? Has it been published or when do you expect it to be available, Matt?
Matt: The report should be available in late April to subscribers via Argus Direct.
Tim: We are out of time, and this interesting discussion has come to an end. But, Matt, I'd like to thank you for sharing your thoughts today, and I'm sure that some of our subscribers will get in touch with you directly to ask you more in-depth questions based on all the work you've done, because you really have delved into some of the details, and that'll give our customers great value, so I'm sure you'll have more discussions in the future. But if you are a listener and you're interested in accessing this new ammonium sulfate report, then please get in touch, either through your account manager who can help you with arranging a subscription or you could look for more information through the fertilizer section of the Argus Media website, or you could follow the links on the podcast description.
Thank you for your time today, we really enjoyed putting this podcast together and having you involved, Matt. And so to our listeners, until next time stay safe and see you soon.