FOB Middle East ammonia at rare premium to CFR Far East market

FOB Middle East ammonia prices, supported by European supply constraints, have risen above the CFR Far East market, according to trade sources March 22.

The European ammonia market has been hit by a disruption in supply out of Black Sea ports since Russia's invasion of Ukraine. High natural gas feedstock prices in Europe have also forced some production to be curtailed as the costs could not be passed on.

That has led to increased interest out of Europe for spot cargoes from other regions such as the Middle East.

Meanwhile, tepid Asian demand for spot cargoes has kept delivered prices capped, with most buyers' ammonia needs met by contractual volumes, market sources said.

S&P Global Commodity Insights assessed ammonia on an FOB Middle East basis at a record high $1,245/mt on March 22, up 28% since the start of the month. At the same time, the CFR Far East market has risen 22% to $1,215/mt, also a record high.

Typically, the CFR Far East market is at a premium to the Middle East, with the latter one of the major suppliers to the former.

However, the situation changed March 18 when S&P Global assessed FOB Middle East at $1,200/mt to be $15/mt above CFR Far East.

A source said that prices in Southeast Asia being far below levels in the Middle East had led to the weaker CFR Far East market.

A buyer in India said that although Southeast Asia was offering competitively compared with the Middle East, there was not much available at those levels and buyers in India would have to rely on the Middle East.

Although prices for contractual volumes of ammonia were considered high, most buyers in Asia were still keen on receiving them as they were lower than spot market prices, sources said.

That said, some demand destruction was seen taking place in the Far East. For example, a petrochemicals producer and end-user of ammonia said it had decided to bring forward maintenance at some petrochemicals facilities to mid-April, as the company was not able to pass rising ammonia feedstock costs on to its downstream products.