What to expect from the ammonia market in 2022?

The ammonia shipping market has seen severe disruption this year on the back of the military and geopolitical action in eastern Europe and high natural gas prices in Europe.

The current merchant ammonia trade is around 20 mil. tones/year, of which the spot market only makes up around 20%, with the remaining on a contract basis. The fertilizer industry makes up 80% of global ammonia demand today, with the other 20% for industrial processes. Over the coming years, if ammonia bunkering technologies are developed, we can expect to see global ammonia demand significantly increase.

Exports from major ammonia hubs in the Black and Baltic Sea remain closed, which has taken some 200,000 tones per month off the market. As a result, we have seen a large increase in global trade tone-mile, with European importers seeking cargoes from regions further afield such as Trinidad and Algeria. European import demand has also increased considerably on the back of high natural gas prices which have caused some European producers to come offline due to reduced margins, and users are looking to imports instead.

The current ammonia shipping fleet has increased to around 80 vessels, but the fleet is becoming stretched due to longer voyages, leading to missed laycans and tighter turnarounds. If import demand continues to rise, and Europe remains shut-off to Russian supply, we expect more vessels to make the transition to ammonia. This would likely include older units towards the end of their trading life, or new units purpose built for long term ammonia trade.

Near-term market sentiment is expected to remain tight; It will continue to be driven by gas prices in Europe but will also be driven by seasonal demand from the fertilizer industry and industrial downstream processes, as well as the outcome of ongoing negotiations engaged by the United Nations and other parties to enable Russia to pipe ammonia through Ukraine to Black Sea ports. If gas prices in Europe drop, and supply from Russia is allowed to resume, then we could start to see ammonia pricing drop from the current highs.