Waypoint August Ammonia Update: 2

Understanding the Price Decline

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Market Analysis Overview

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The recent price decline in the synthetic ammonia market can be attributed to a confluence of factors. Primarily, there has been an increase in supply due to recovery post-maintenance and the introduction of new production capacities. This surge in supply has not been met with a corresponding increase in demand, leading to an imbalance. Additionally, weak overall demand has been compounded by local demand declines in key regions. The north-to-south flow of goods remains predominant, with commodity ammonia volumes rising from 20,000 tons to 23,000 tons in major production areas. New capacities in Henan and the recovery of ammonia companies in Shanxi have significantly contributed to this uptick in supply. These dynamics, coupled with fluctuations in co-production companies, especially those within the caprolactam industry, are crucial in understanding the current market landscape.

Current Price Trends

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The synthetic ammonia market has experienced a stark decline in prices recently. Average daily prices have dropped by approximately 100 yuan/ton, with mainstream prices seeing a more substantial decline of 400-500 yuan/ton. As of now, prices in Shandong range between 2250-2450 yuan/ton. However, further reductions are expected in regions like Shanxi and Shaanxi, where prices could potentially fall below 2,000 yuan/ton. In terms of new transaction prices, northern regions are seeing figures between 1900-2180 yuan/ton. Meanwhile, most current transactions are occurring at prices ranging from 2250-2550 yuan/ton. This price volatility has caused fixed-bed synthetic ammonia production enterprises to operate at a loss under current market conditions. These trends highlight the pressing need for strategic market interventions and adjustments to stabilise prices.

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Future Price Predictions

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Looking ahead, the synthetic ammonia market is poised for further price adjustments. With the current trend of oversupply and weak demand, prices are likely to continue their downward trajectory. Regions like Shanxi and Shaanxi might witness prices dipping below the 2,000 yuan/ton mark. However, potential production cuts could serve as a counterbalance to stabilise prices. Discussions around reducing production are ongoing, and any resultant actions could mitigate the steep price declines. Additionally, the expected increase in compound fertiliser industry production and slight uptick in industrial demand, particularly in the nitric acid and caprolactam sectors, might provide some support to prices. Coordinated market interventions and a strategic tightening of supply will be crucial in averting further significant declines and restoring some level of equilibrium to the market.