In Q4 2023, the North American region experienced a bullish trend in the Ammonia prices, driven by several key factors. Firstly, a rise in the price of essential feedstock natural gas elevated the production costs of Ammonia. Secondly, there was strong demand for Ammonia and its derivatives in the domestic market, particularly in anticipation of the upcoming winter planting season, resulting in upward pressure on prices. Additionally, limited material availability within the regional market contributed to increased Ammonia prices domestically.
Moreover, as the Chinese government restricted fertilizer exports, international consumers, especially Indian players, actively engaged in the North American market. However, in December 2023, prices declined significantly due to a surplus of available material within the North American market.
Prolonged drought conditions and persistent bottlenecks at the Panama Canal, a crucial trading route in the USA, resulted in delayed exports and long queues, leading to a buildup of inventories at the port. Furthermore, demand from the South American region remained subdued during this period due to adverse drought conditions caused by the El-Nino effect. The combined effect of these factors narrowed the gap between demand and supply, thus supporting the current price decrease.
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During Q4 2023, the pricing dynamics of Ammonia in South America were influenced by various factors. Initially, the market exhibited bullish sentiments in the first two months of the quarter. However, as December approached, the Ammonia market in the Middle Eastern region took a downturn. In the beginning of the quarter, the Ammonia market in Brazil started on a notably bullish note, primarily driven by costly imports from the USA market and a shortage of imported Ammonia within the domestic market.
Major exporting nations, particularly the USA, experienced this surge, prompting producers to exercise caution in expanding Ammonia production. Additionally, a shortage of gas pipelines further constrained the availability of crucial raw materials. Concurrently, persistent bottlenecks at the Panama Canal added another layer of complexity, resulting in prolonged queues for ships. These disruptions not only affected shipping schedules but also led to a subsequent increase in transportation costs, directly impacting the smooth flow of Ammonia shipments into the Brazil market.
However, despite the onset of the planting season for crops like Rice, Soyabean, and Sorghum, demand for Ammonia and other fertilizers remained subdued in the Brazil market due to prolonged drought conditions caused by the El-Nino effect. Extremely hot weather conditions in the northern part of Brazil, coupled with dry conditions during the first half of December 2023, exacerbated the crop situation within the country. Meanwhile, temperatures were cooler in the southern part of the country during the first half of the month, though they rose later in the month.
The disparity in wet weather in southern Brazil and drier weather farther north is primarily driven by El Niño, which is expected to persist into the first part of 2024. This has dampened the purchasing enthusiasm of fertilizer consumers amid potential threats to crops.
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