Prices for mineral fertilizers resurge with prices of natural gas
Prices for urea and ammonium nitrate resurged in Q3 of 2020 after their gradual decline in Q1 of 2020, says Oleksiy Kostyak, the head of the Ukrainian subsidiary of the Swiss trader Centurion Group. According to him, prices for fertilizers rose due to increasing costs of production inputs, in particular, the natural gas.
According to preliminary estimates of the supplier, prices for urea in Q3 of 2020 compared to Q2 of 2020 grew by about 6%, up to 160$/t on-165 $/ton, and for ammonium nitrate it resurged by 12%, up- to 225 $/ton -235 $/ton.
Oleksiy Kostiak's group of companies supplies mineral fertilizers, diesel fuel, natural gas, liquefied gas and other oil products to agricultural, industrial, and individual consumers.
Prices for natural gas, the key production input for urea and ammonium nitrate, on European hubs since the beginning of the year plummeted 3-fold, to 2.9 €/MWh -4.4 €/MWh (end of May 2020), the lowest in 10 years. During June-July 2020 gas prices fluctuated in the range of 3.5 €/MWh -7.1 €/MWh. At the same time, starting from August 2020, natural gas in Europe surged to € 11.9-12.4 / MWh at the end of Q3 of 2020. Compared to the minimum values in May, prices rose by 3.5 times, leaving behind the ones of early January 2020.
The situation in the Ukrainian natural gas market was similar: in Q1 of 2020 prices for natural gas sagged to 2 100 UAH/tcm - 2 400 UAH/tcm (end of May 2020), twice lower than at the beginning of the year. During June-July 2020 prices for natural gas fluctuated in the range of UAH 2 500 UAH/tcm - 3 500 UAH/tcm per thousand cubic meters. At the beginning of August 2020 the market began to resurge to 5 500 UAH/tcm at the end of September 2020.
Consequently, prices for ammonium nitrate and urea completely mirrored the trends in the market for natural gas as a key production input for these fertilizers.
The decline in prices for natural gas in 2019 and H1 of 2020 contributed to the growth of natural gas consumption by chemical enterprises. Thus, according to ExPro obtained data, in 2019 the chemical industry of Ukraine increased gas consumption by 1.6 times, up to 2.4 bcm. The growth of national gas consumption was due to relatively low prices for natural gas and resumption of production on August 1, 2019, at the PJSC Odessa Port Plant, the largest chemical enterprise of Ukraine.
Over January-July 2020 the Ukrainian chemical industry increased its gas consumption by 1.75 times ,up to almost 2 bcm for the period. Thus, the Cherkasy-based PRJSC AZOT plant in 9 months of 2020 increased its production by more than 10% compared to the same period of the last year.
The PRJSC Rivneazot over January-September 2020 also increased its production by 4.6% more than over the same period of 2019, with the Rivneazot's ammonia used by 1.5 times more than in January-September 2019.