AMMONIUM NITRATE – TRENDS IN

2023 AND FACTORS AFFECTING

PRICES AND SUPPLY

Jorge Luis JAMES CALLAU

Industrial Engineer and MBA – Consultant in Mining and Explosives

MAIPEX SRL

E-mail: james@maipex.net
A LITTLE HISTORY…
 WHAT EVENTS HAVE HAPPENED IN THE LAST
YEARS THAT AFFECT THE SUPPLY AND PRICES
OF AMMONIUM NITRATE
•2020  COVID PANDEMIC  STOPPAGE OF ECOMOMIC ACTIVITES: Low demand and Price reduction

•2021  VACCINATION AGAINST COVID  RAPID RECOVERY OF THE DEMAND: Strong increase in prices

 STRONG RECOVERY OF COMMODITIES DEMAND (METALS, OIL, GAS, ETC.)

 STRONG GAS PRICE RISE IN EUROPE, AND THEREFORE OF AMMONIA AND AMMONIUM NITRATE
 EUROPA HAD DECREASED ENERGY PRODUCTION FROM COAL AND NUCLEAR SOURCES, TO DEPEND
MAINLY PROM GAS POWERED THERMAL GENERATION (AND THE NATURAL GAS WAS MAINLY FROM
RUSSIAN ORIGIN)

 SEVERAL EUROPEAN FERTILIZER PLANTS STARTED REDUCING ITS PRODUCTION DUE TO NOT BEING
PROFITABLES

 OCTOBER 2021: Russia anounces Fertilizer export controls from November 2021 through May 2022, and the
establishment of Export quotas
 WHAT EVENTS HAVE HAPPENED IN THE LAST YEARS
THAT AFFECT THE SUPPLY AND PRICES OF
AMMONIUM NITRATE
•2022  FEBRUARY 24TH: STARTS RUSSI-UKRAINE WAR

 WESTERN COUNTRIES IMPOSE SANCTIONS TO RUSSIA

 SHIPPING LINES DO NOT WANT TO CALL RUSSINA PORTS
 IMPOSITION OF RESTRICTIONS ON BANKING TRANSACTIONS WITH RUSSIA
 MINING AND EXPLOSIVES COMPANIES PROHIBIT/AVOID USING RUSSIAN AMMONIUM NITRATE
 APPEARING OF ALTERNATIVES SUPPLIERS (LITHUANIA, GEORGIA, ETC.)
 AUGUST 2022: RECORD NATURAL GAS PRICE IN EUROPE
 FERTILIZER PLANTS STOPPAGE IN WESTERN EUROPE
 EUROPE MAKES MASSIVE PURCHASES OF LNG (LQUIFIED NATURAL GAS), TO REPLACE RUSSIAN NATURAL
GAS

•2023  SMOOTH WINTER IN EUROPE  BIGGER STOCKS OF GAS: Prices start going down

 RUSSIA-UKRAINE WAS IS BEING ASSUMED AS A NORMAL SITUATION

 SE VUELVE A COMERCIALIZAR CON FUERZA EL NITRATO DE AMONIO RUSO
 WHY IS RUSSIA IMPORTANT?

• RUSSIA SUPPLIES 45% OF AMMONIUM NITRATE GLOBAL MARKET

(4.3 MM MT, data of 2021)

• Is the second producer of natural gast, just behind USA, in 2021

figures, it generated 762 thousand million m3 of natural gas, and
exported 210 thousand million m3 of natural gas by pipelines
(mainly to Europe)

• Ref: https://www.tomatonews.com/en/european-market-for-
fertilizers-is-overly-dependent-on-russia_2_1709.html

Berezniki AN plant, Rusia (Uralchem)

EFECTS OF THE RUSSIA-UKRAINE WAR IN THE
EUROPEAN NATURAL GAS TRADE
EFECTS OF THE RUSSIA-UKRAINE WAR IN THE
EUROPEAN NATURAL GAS TRADE
NATURAL GAS PRICE EVOLUTION IN THE
UNITED STATES

Agosto 2022: 9.85 US$/MMBTU

 News during 2022
https://www.lainformacion.com/economia-negocios-y-finanzas/produccion-europea-
fertilizantes-cae-70-precio-gas/2872808/

La producción europea de fertilizantes cae un 70% por el precio récord del gas
• No pueden competir con EEUU
• La producción europea de fertilizantes cae un 70% por el precio récord del gas
• En un comunicado, Fertilizantes Europeos alertan de que "la crisis actual exige una acción rápida y
decisiva de los responsables políticos nacionales y de la UE para el mercado de la energía y los
fertilizantes".

https://www.elconfidencial.com/empresas/2022-08-25/mayor-productor-fertilizantes-
mundo-recorta-produccion-precios-gas_3480422/

El mayor productor mundial de fertilizantes recorta producción por el precio récord del gas
(YARA)
• Más problemas para el sector de la agricultura. La compañía noruega Yara, el mayor productor
mundial de fertilizantes, ha anunciado nuevas medidas de ajuste que reducirán su capacidad total de
utilización de amoníaco en el Viejo Continente a alrededor del 35% "como resultado de los precios
récord del gas en Europa".
Natural gas and Amonia Price
Evolution in USA
 Ammonia Price Evolution

Source: Fertecon
 Ammonium Nitrate Price Evolution

Source: Fertecon

Note: In April 2022 there was no exoport data (it coincided with the start of Russia-Ukraine war), since in March were probably
shipped cargo previously already alocated.
FACTORS AFFECTING PRICE VOLATILITY
OF AMMONIUM NITRATE
 SOME DATA ON AMMONIUM NITRATE
TWO TYPES OF AMMONIUM NITRATE:

HIGH DENSITY (HDAN): Considered a commodity

 Density around 1.0 g/cc
 Low Porosity
 Low or nil oil absortion and Retention
 Use:
1.Fertilizer
2.Explosives, for making emulsions or watergels

LOW DENSITY (LDAN): (also known as Porous Prill AN [PPAN]), considered a

specialty product
 Density below 0.83 g/cc
 High Porosity
 High Oil Absortion and Retention
 Use: Explosives, for making ANFO
 SOME DATA ON AMMONIUM NITRATE

SOME DATA ON AMMONIUM NITRATE

Source: Andy Brunning/Compound Interest 2020 – www.compoundchem.com

 AMMONIUM NITRATE MANUFACTURING PROCESS

 Most common process for manufacturing AMMONIA: Haber-Bosch, from natural gas

Process for manufacturing Ammonium Nitrate

HOW IS FORMED THE AMMONIA
COST IN THE FACTORY
 From Haber-Bosch process)

No incluida la depreciación de la planta de amoníaco.

HOW IS FORMED THE AMMONIA
COST IN THE FACTORY

NATURAL GAS PRICE IS BY FAR THE MAIN DRIVER OF

AMMONIUM NITRATE COST

1 MT of Ammonia needs 36 MM BTU of Natural Gas

 How is Formed the Ammonium
Nitrate cost
As mentioned, AN is formed reacting Ammonia with Nitric Acid
The Nitric Acid needed is also formed from the Oxidation of
Ammonia in the presence of some Catalists.
1 MT of Ammonia is needed to produce 2.2 MT of Ammonium
Nitrate (here is included the ammonia needed form making nitric
acid)
There are other cash costs like:
Catalists/chemicals
Utilities
Direct fixed costs
Allocated fixed costs
And the Non cash costs
Depreciation of AN plant (it includes Nitric Acid plant)
Depreciation of Ammonia plant (in case of integrated factories with
 How is formed the Amonium Nitrate
cost in the Factory

 AMMONIA PRICE IS BY FAR THE MAIN COST DRIVER FOR PRODUCING

AMMONIUM NITRATE

1 MT of Ammonia => 2.2 MT of Ammonium Nitrate

 From other point of view

0.45 TM of Ammonia => 1 MT of Ammonium Nitrate

45% of the Ammonia Price goes directly to the Ammonium

Nitrate cost
 How is formed the Amonium Nitrate
price from the Factory
CFR/CPT = FOB/FCA + Flete

FREIGHT => Basically, it depends on two factors:

 Oil Price (bunker in the case of maritime freight; Diesel, in the case of land freight)
 Price level of freight market (in the maritime case it follows the BDI Index, Baltic Dry
Index).
 How is formed the Amonium Nitrate
price for any user
CFR/CPT = FOB/FCA + Flete
FOB/FCA => Basically, it depends from the production cost plus the manufacturers’s margin
WHAT TO EXPECT IN THE REST OF 2023?
 TRENDS
 AMMONIA PRICE HAS BEEN GOING DOWN ALL 2023, AND
WILL PROBABLY BOTTOM OUT BETWEEN JULY AND
AUGUST 2023; IS THE SAME CASE FOR THE AMMONIUM
NITRATE, THEN PRICES WILL GO UP AGAIN.

 RUSSIA IS COMING BACK TO THE MARKETS, WITH

STRENGTH AND WITH COMPETITIVES PRICES

 THERE IS LESS REJECTION IN BUYING RUSSIAN

AMMONIUM NITRATE (FROM MINING AND EXPLOSIVE
COMPANIES) SINCE THEY HAVE THE BETTER COST
STRUCTURE
 RISKS
 THE RUSSIA-UKRAINE WAR IS STILL GOING ON AND THERE IS A GREAT
UNCERTAINTY ABOUT TE OUTCOMES. DEPENDING ON WHAT HAPPENS
IT COULD BE MORE AND STRONGER SANCTIONS TO RUSSIA THAT WILL
AFFECT INTERNATIONAL TRADE AND BANK PAYMENTS.

 THERE IS THE FORECAST OF A MEGA EL NIÑO PHENOMENON FOR THIS

YEAR (BIG RAINS IN CERTAIN PLACES AND BIG DROUGHTS IN OTHERS)

 VERY COLD WINTER IN EUROPE THAT CAN MAKE RISE GAS PRICES
(AND THEREFORE, THOSE OF AMMONIA AND AMMONIUM NITRATE)

 BIG DROUGHT IN PANAMÁ IS ALREADY AFFECTING THE FLOW OF

SHIPS THROUGH THE CHANNEL, AND COULD BE WORST DUE TO THE EL
NIÑO PHENOMENON: IT WILL MAINLY AFFECT LATIN AMERICAN WEST
COAST COUNTRIES
 RISKS
NEWS RELATED TO PANAMA’S DROUGHT AND EL NIÑO PHENOMENON
 El Canal de Panamá, al borde del colapso: la sequía pone en jaque el comercio mundial
y los precios del gas y el crudo
https://www.elespanol.com/invertia/empresas/energia/20230604/canal-panama-
colapso-sequia-comercio-mundial-precios/768423530_0.html

 La sequía obliga al Canal de Panamá a restringir el paso de los buques

https://www.elespanol.com/invertia/empresas/energia/20230604/canal-panama-
colapso-sequia-comercio-mundial-precios/768423530_0.html

 Alerta Panamá ante fenómeno El Niño

https://www.prensa-latina.cu/2023/05/02/alerta-panama-ante-fenomeno-el-nino

 Panamá declara la emergencia ambiental por la prolongada sequía y la amenaza de El

Niño
https://www.infobae.com/america/agencias/2023/05/31/panama-declara-la-
emergencia-ambiental-por-la-prolongada-sequia-y-la-amenaza-de-el-nino/
 RISKS
NEWS RELATED TO PANAMA’S DROUGHT AND EL NIÑO PHENOMENON

AN ‘UNPRECEDENTED DROUGHT’ IS AFFECTING THE

PANAMA CANAL. EL NIÑO COULD MAKE IT WORSE
(Published by CNN on 13/06/2023)

- https://edition.cnn.com/2023/06/13/americas/panama-canal-water-levels-climate-intl-
latam/index.html
An “unprecedented drought” is affecting the Panama Canal’s water supply and leading authorities to impose
surcharges and weight limits on ships traversing the key global trade route, according to the Panama Canal Authority.
Ships move through the Panama Canal through a lock system, which uses water from several freshwater reservoirs to
float the massive cargo vessels overland.
But Panama is currently gripped by drought, and water levels at least one of those reservoirs – Gatun Lake – are
dropping.
Lake levels are forecasted to hit historic lows in July, prompting authorities to implement water saving measures as
well imposing strict draft restrictions, which is the distance between the waterline and the lowest point of the hull, in
the last few months.
The lake’s dwindling water also supplies the nearby region, including Panama City.
“The climatic emergency decreed by the Panamanian National Government reinforces what the Panama Canal has
been stating regarding the reality of a shortage of fresh water,” the statement read.
 WHO IS AFFECTED BY THE
PANAMA CHANNEL DROUGHT?

Main imports that came through Panama Channel towards

Latin America west coast, in 2022

 Perú imported:
- Ammonium Nitrate (all types) from Europe, a quantity of 406, 953 MT from a total of
506,680.5 MT (the difference: 99,762 MT, came from Chile and Australia without passing
through Panama Channel).

 Chile imported:
- Ammonia: From the Caribbean and the Gulf of Mexico, for a total of 348,911 MT.
passing through the Panama Channel.
- Ammonium Nitrate: Imported from Argentina 17,242.7 MT .
HOW TO MITIGATE THE RISKS?
 NOT DEPENDING FROM RUSSIAN AMMONIUM NITRATE, DUE TO
THE BETTER PRICES. KEEP DIVERSIFIED SOURCES OF AMMONIUM
NITRATE.

 STRENGTHEN THE RELATIONSHIP WITH LOCAL SUPPLIERS (IN

SOUTH AMERICA CASE: ENAEX IN Chile & Perú, AUSTIN POWDER In
Argentina, and YARA in Brazil)

 KEEP AN EYE IN OTHER EXPLOSIVE OPTIONS NON DEPENDING

FROM AMMONIUM NITRATE (THERE ARE NEW EMERGING
TECHNOLOGIES FROM HYDROGEN PEROXIDE)
 FIN / END

MUCHA GRACIAS
Thank You!