Viewpoint: Ammonia markets face rising supply

Sparse export availability from the Caribbean, Black Sea and Middle East is poised to support near-term global and US ammonia fundamentals, but supply is expected to rise later this year.

Recent strength in the global ammonia market has been driven by limited export availability for July shipment, stemming from prolonged maintenance in Trinidad and ongoing maintenance in Yuzhny, Ukraine.

Limited spot export volumes from these key production regions has driven up both global prices and the monthly Tampa settlement.

But new ammonia production in the US Gulf and Indonesia, coupled with the resumption of normal production levels in the Black Sea and Middle East, will likely counter current firmness and apply pressure to spot values by the fourth quarter.

Yara's joint venture ammonia facility in Freeport, Texas, is in the commissioning phase and is testing barge shipments prior to commercial production. The 750,000 t/yr ammonia unit has already made its first export shipment, and will play a role both in reducing the US' reliance on imports as well as bolstering US exports.

Additionally, the 660,000 t/yr PAU ammonia plant in Indonesia loaded its first cargo in early-July, indicating it is nearing targeted production rates and adding to the global supply balance after being delayed by nearly eight months from its previous deadline.

Although the global balance is expected to tip back to oversupplied by the fourth quarter, declining US imports, lower exports and reduced net ammonia availability could keep interior terminal prices higher than a year ago.

US exports have receded after reaching a record 744,489t in 2017, primarily to Morocco for phosphate production, according to customs data. Year-to-date exports fell by 65pc from last year to 68,150t on a lack of business to Morocco, South Korea and Belgium. Imports have also been retreating amid anticipated growth in domestic output, falling by 19pc year-over-year to 1.47mn t in January-May.

Fewer imports and exports indicates balanced domestic inventories, but with expanded urea and UAN production fully on line, net ammonia availability in the US is slightly lower from the prior year which provides support to interior terminal prices.

East Corn Belt and west Corn Belt truck prices carried $32.50/st and $47.50/st premium on a midpoint basis to values a year ago in early-July. Market participants indicated that more than half of post-harvest fall application volumes were secured under this season's summer fill program, suggesting buyers could pay higher values amid weak corn prices.

Fall application demand will be guided by corn prices, which have been on a steady decline since late-May. If US farmer purchasing power is weakened amid tumbling corn prices, ammonia fall demand could be lackluster or delayed until the spring.