Does China ammonium sulfate price will continue to decline?

Latest news: In a recent tender in Indonesia for the purchase of 40,000 tons of ammonium sulfate, a byproduct of caprolactam, the lowest bid price received was $119 per ton (CIF). Assuming the supply is from China, the offshore price in China would be slightly lower than $100, which is significantly lower than the prices at ports such as Yantai in our country.

At first glance, it is unlikely that the price of ammonium sulfate in China will continue to decline.

Firstly, one characteristic of this Indonesian procurement tender is that the shipping period is long, from July to September, which may not represent the current market. As of May 26, the landed guidance price for caprolactam byproduct ammonium sulfate in Southeast Asia is still around $145 per ton. Although the guidance price is expected to decrease to some extent this Friday, it is unlikely to decline continuously.

From this perspective, the top six destinations for China’s ammonium sulfate exports are Brazil, Myanmar, Turkey, Malaysia, Vietnam, and Indonesia. The decision of whether Brazil will make purchases and to what extent its prices will fall will also have a significant impact on the price of ammonium sulfate in China. As of May 26, the guidance price for caprolactam byproduct ammonium sulfate in Brazil is similar to that in Southeast Asia. Moreover, there has been a relaxed purchasing pace from Brazil recently, so extremely low prices are not expected for now.

One can only say that market participants are not optimistic about the prices of major importing countries such as Southeast Asia and Brazil in the long term, which will consequently affect the price of ammonium sulfate in China.

Secondly, although the ex-factory price of caprolactam byproduct ammonium sulfate is currently below 800 RMB per ton and has significant downward potential in the long term, in the short term, some manufacturers have sold out their goods before mid-May, so the export guidance price for caprolactam byproduct ammonium sulfate is not likely to decline rapidly.

Furthermore, the price of ammonium sulfate from coking byproduct is not particularly low. In recent years, the price of granular ammonium sulfate has been consistently higher than that of caprolactam byproduct ammonium sulfate. For example, as of May 26, the offshore guidance price for granular ammonium sulfate in China is about $22 per ton higher than that for caprolactam byproduct ammonium sulfate (approximately 154 RMB per ton). With the recent further depreciation of the Chinese yuan, the price of granular ammonium sulfate converted back to coking byproduct ammonium sulfate is even higher than that of caprolactam byproduct ammonium sulfate.

Although the ex-factory prices of coking byproduct ammonium sulfate in Shandong, Hebei, and Henan provinces have recently fallen below 700 RMB per ton, which is a new low since mid-March when it fell below 1,000 RMB per ton, they have not reached the low prices seen in the Indonesian tender. It can be seen that the drop of more than 300 RMB per ton took nearly three months.

Lastly, if there is a significant decline, we should pay attention to how international urea affects the international price of ammonium sulfate. Why is international urea being watched? On the one hand, China’s ammonium sulfate exports account for approximately 70-80% of the total production, so the international price of ammonium sulfate has a significant impact domestically. On the other hand, since October 15, 2021, while exports of urea and other fertilizers require inspection and approval by the Chinese authorities, exports of ammonium sulfate continue to be exempt from inspection. As a result, the export volume of ammonium sulfate has been increasing significantly, leading to a higher dependence on the quantity and price by major importing countries internationally. In 2022, the annual export volume of ammonium sulfate reached 12.45 million tons, breaking the previous record. Furthermore, the cumulative export volume from January to April this year has increased by as much as 15% compared to the same period last year.

The international urea market is currently experiencing a downward trend, with prices in many regions lower than the levels observed on March 3. The latest news suggests that India may announce a new tender for urea procurement tonight, with the bidding set to open on June 12. Typically, international urea prices tend to rise moderately before the bidding in India, and sometimes even continue to rise for a few days after the bidding. Although the situation this time is not very optimistic, it is still possible that the international urea prices may experience a temporary abnormal increase this Friday. If this happens, it could provide some relief to the declining international ammonium sulfate market.

However, if international urea continues to decline, the guidance price for international ammonium sulfate, as described in the previous paragraph, is unlikely to fall too rapidly in the absence of substantial spot transactions.

In short, the short-term price of ammonium sulfate is not too bad, considering that it would be considered poor if coking ammonium sulfate returns to 400-500 yuan/ton. The rare earth occasionally shows slight improvement in sales, but the long-term outlook is indeed bearish. It is necessary to continue monitoring the international market conditions (volatile decline), the impact of by-product ammonium sulfate from lithium iron phosphate on prices, and so on.