Supply Chain Disruptions and Increased Freight Costs Contribute to Price Surge in Global Ammonia Market

The Anhydrous Ammonia market witnessed an upswing in North American and European markets during the first half of September 2023. This price surge can be attributed to various factors, including shifts in international demand for fertilizers (Ammonia), supply chain disruptions, and heightened freight costs. Further, the increasing price of upstream crude oil in the country has also significantly affected the current price hike.

The Ammonia market has consistently experienced an upward price trend in the United States. This trend is primarily attributed to strong demand from international markets, especially Brazil. Brazil's emphasis on Corn and Soybean cultivation for the year led to increased demand for various fertilizers, with Ammonia being a significant component. Additionally, domestic demand for Ammonia surged as buyers proactively made purchases anticipating the hurricane season. The threat posed by Tropical Storm Idalia to the Gulf Coast and Florida heightened the need for precautionary measures. Hurricane Idalia significantly impacted the country's production activities, prompting Kinder Morgan to temporarily close its Port Manatee, Port Sutton, and Tampaplex terminals, all of which handle fertilizers, including Ammonia. This resulted in a pronounced supply shortage within the country. Furthermore, the rising price of upstream crude oil and concerns about the potential impact of storms in the US Gulf have also contributed to the price hike in the Ammonia market.

In the European region, Ammonia prices significantly increased during the first half of September 2023. In terms of demand, there was strong and consistent procurement from both domestic and international markets throughout this period. Consumers were actively building their inventories in preparation for the upcoming planting season for crops like Wheat, Rye, and Barley in the domestic region. Moreover, due to the increasing inflationary pressures in the region, manufacturing units were operating at reduced capacities, resulting in a scarcity of materials in the market. According to data from the Russian Fertilizers Production Association, Russia had already fulfilled 80% of its annual supply by the beginning of September. Moreover, the current situation in the Ammonia market is characterized by a shortage of available spots. This scarcity is primarily due to producers giving priority to meeting their existing supply contracts, which in turn worsens the overall supply condition.

As per ChemAnalyst, the Anhydrous Ammonia market is expected to soar further in the forthcoming months. This is mainly due to seasonal demand for fertilizers from both North American and European regions. Additionally, fluctuations in prices of vital feedstock Natural Gas and upstream crude oil are anticipated to fuel the upward trajectory of the product prices.