Tight Supply and Demand Balance & The End of Spring Ploughing Season, Liquid Ammonia Continued to Push Up in April

In April, the domestic liquid ammonia market maintained a high level, with a steady rise. According to monitoring, liquid ammonia increased by 2.63% in April. At the end of the month, the mainstream transaction price of liquid ammonia in Shandong was 4900-5050 CNY/ton. Mainly due to the decrease in supply in the region and the failure of some devices; as well as the continued rise in the downstream urea and fertilizer market, the demand has maintained a moderate growth; in addition, there are still some enterprises switching to urea, which makes the supply of the ammonia market more tense. The superposition is at the end of the spring ploughing season, and the downstream stocking has also pushed up the ammonia price.

Supply Side

On the supply side, the supply this month was the same as in March. Compared with January and February, March and April showed an overall tightening trend. The overall ammonia release in many places in China has dropped significantly, and the supply of manufacturers is mainly reduced. In addition, due to the impact of the epidemic, market transportation is still restricted, and local transportation is not smooth, which has pushed up the freight rate and also made the ammonia price continue to rise. Although the price is high, it affects some transactions. The market is still showing a trend of differentiation. Especially in the southern region, there are too many equipment maintenance, and the supply reduction has caused the price of liquid ammonia to remain above the 5,000 yuan mark in the second half of the month. Some large factories in northern regions, such as Hebei, underwent equipment maintenance in the mid-to-late period, affecting output, and the overall market supply remained in a tight balance. Shandong region also broke through the 5,000 mark by the end of the month.

Cost Side

On the cost side, coal continued to be stable in April. Affected by the national policy control, the increase in coal prices was generally suppressed. However, the current price is still high, and downstream purchases are mainly on-demand, the overall supply remains stable, and coal prices are adjusted steadily; In terms of downstream power plants, the port market is now dominated by long-term cooperation and guaranteed supply of coal. Now the daily consumption of power plants is in the off-season, the purchase intention is general, and the market transactions are limited, and there is resistance to high coal prices. Coal prices stabilized, easing the cost pressure in downstream coal chemical industries such as methanol and liquid ammonia.

Demand Side

From the demand side, the price of urea continued the rise in March this month. According to the monitoring of the business agency, the monthly increase of urea was 2.8%. The agricultural demand in the south has started, and the industrial demand in the north has increased. From the perspective of supply: in May, some manufacturers began to overhaul, and the supply was reduced. There is a small volume of exports. India issued a new round of indefinite urea tenders. Various factors continue to push up the price of urea. The policy of ensuring supply and price stability remains unchanged. The moderate growth in downstream demand is the main reason for the continued rise in the price of liquid ammonia.

It can be seen from the price comparison chart of urea and liquid ammonia that the trends of liquid ammonia and urea are basically the same. In the middle and late April, the two curves briefly crossed. The main reason is that liquid ammonia was weaker than urea in the early stage, and urea rose better in the latter half of the year. Domestic demand and export were both. There is a boost, urea is slightly stronger than liquid ammonia. At present, the price difference between the two is still relatively reasonable.

From the picture above, the liquid ammonia industry chain diagram shows that the profit of the liquid ammonia industry chain continues to improve, the natural gas upstream of the gas head is sluggish, the coal price is affected by the policy, and the price remains stable. Profits have increased significantly compared to the previous period. The downstream areas also improved significantly, with formic acid, ammonium nitrate, ammonium chloride, and urea all rising to varying degrees.

Market outlook forecast: The business club believes that at present, the supply and demand of liquid ammonia maintain a basic balance. Due to the impact of the epidemic in the later period, the trend of supply and demand differentiation may continue to exist, but the pattern of "strong south and weak north" is gradually reversed. In terms of demand, the spring ploughing season is coming to an end, and the market demand tends to weaken in the later period. Moreover, the epidemic has not yet ended. The limited transportation has led to rising costs and slow turnover, which will further accumulate risks. Considering that the current price of liquid ammonia has reached a historical high, the possibility of price loosening cannot be ruled out in the later stage.