Market and product

LONDON (ICIS)--Middle East and Indian ammonia prices plummeted this week following latest spot business on the back of current weak demand and high stock levels, which in turn is putting pressure on Yuzhny price levels, market sources said on Friday.

Indian Farmers Fertilizer Cooperative (IFFCO) purchased a 15,000-tonne Saudi ammonia cargo this week at $377.50/tonne (€287/tonne) CFR (cost and freight) for mid-February delivery.

This price was around $90/tonne lower than business concluded in India last week at $460-465/tonne CFR.

Indian ammonia demand is currently weak because first-quarter phosphoric acid contracts have yet to be finalised, so ammonia consumption is very low, traders said. Ammonia and phosphoric acid are raw materials for phosphate fertilizer production.

At the same time, traders added that SABIC has high inventory levels at present, which is forcing the producer to sell at lower prices.

Freight on the cargo to India is estimated at around $42/tonne, which reflects a netback around $335/tonne FOB (free on board), down from last spot indications in the $400-425/tonne FOB range.

It is unclear what stock levels SABIC is holding, or when phosphoric acid contracts might be resolved and improve ammonia demand in India, but there are expectations that we will see further spot sales at these low levels.

Traders said there are indications that SABIC is working on a cargo for shipment to the US Gulf, a non-traditional market, as the current low prices make Saudi ammonia competitive.

Indeed, this is likely to put pressure on Yuzhny ammonia prices to adjust further downwards to keep Middle East ammonia away from its market sphere.

Yuzhny prices are currently indicated at $380-400/tonne FOB and there are expectations that prices are close to the floor, with US demand expected to pick up in the latter part of February.

However, traders expect that Yuzhny prices will now move lower.

($1 = €0.76)