Ammonia prices have been continuously growing in the global market for a long time now. The fertilizer prices have increased because of rising worldwide inflation. Furthermore, since the previous quarter, demand for Ammonia from the fertilizer and agrochemical industries has remained solid and robust. Due to the European supply restrictions, the FOB Middle East Ammonia market has moved above the CFR Far East market. Since Russia invaded Ukraine, the supply disruption has impacted the European Ammonia market out of the Black Sea ports.
In Europe, high Natural Gas feedstock prices have caused certain production cuts because the costs could not be passed on. Meanwhile, due to the rise in natural gas prices, Yara, one of the world's major fertilizer producers, is reducing its Ammonia and Urea output in Italy and France. The increase in Ammonia prices is primarily due to the development of the Russia-Ukraine dispute, which has resulted in a significant increase in the energy and natural gas prices, impacting the production costs negatively.
Meanwhile, market sources noted that lacklustre Asian demand for spot cargoes has kept delivered prices controlled, with most customers' Ammonia needs being fulfilled by contractual volumes. On March 22, Ammonia FOB Middle East hit a new high of USD 1,245/MT, up 28% from the beginning of the month. Simultaneously, the CFR Far East market has increased by 22% to USD 1,215/MT, a new high. Typically, the CFR Far East market is more expensive than the Middle East, despite the latter being one of the former's key suppliers.
Natural gas prices rose on Friday after a joint task group led by the United States and the European Union agreed to provide 15 billion cubic meters of LNG to Europe. The agreement intends to lessen the United States' dependency on Russian energy exports. During the next 6-10 days, the weather forecast predicts mixed weather on the West Coast and cooler-than-normal weather on the East Coast. In the most recent week, LNG exports were constant. For the week of March 16 to March 23, natural gas spot prices rose at many locations. The Henry Hub spot price increased to USD 5.26/MMBtu from USD 4.67/MMBtu.
As per ChemAnalyst, "Ammonia prices are likely to increase by a significant percentage in the upcoming weeks. Driven by strong seasonal demand for fertilizers, Ammonia prices are likely to rise globally. However, any revisions in the natural gas pricing are likely to drag Ammonia prices down."