Limping Ammonium Sulfate Market Still Resists Recovery

By Qiu Yuntong, China National Chemical Information Center

Rapid growth of production
in 2013

Ammonium sulfate in China is, by and large, a byproduct of any of a variety of major products such as coke, caprolactam, cyanuric acid, acrylonitrile, methyl methacrylate and zinc oxide, or it is a byproduct of the process of sulfuric acid tail gas desulfurization or power plant desulfurization. Its capacity and output are determined by investment and operation for these other products/processes. Production processes for ammonium sulfate used today mainly include recovery from coke oven gas, co-production in the production of other chemicals or co-production in other sectors.
Table 1 shows the capacity, output and operating rate of ammonium sulfate in China during 2011-2013. It can be seen that both the capacity and the output of ammonium sulfate have increased in recent years. In 2013, in particular, the rapid development of the caprolactam sector in China boosted the total capacity and the total output of ammonium sulfate. The total capacity for ammonium sulfate reached 6.50 million t/a that year, an increase of 41.3% over the previous year. Output was 6.05 million tons, an increase of 68.1% over the previous year. This was mainly because most of the caprolactam projects constructed in 2012 started production in the second half of the year and their  output began to boom in 2013. The development trend of ammonium sulfate was also sound in 2012, new capacity developed fast and lots of new units went on stream in 2013.
Table 2 shows the major ammonium sulfate producers in China in 2013. It can be seen that the top ammonium sulfate producers were all caprolactam producers. China Datang Power Corporation had an ammonium sulfate capacity of 480 kt/a and became the biggest ammonium sulfate producer in China. Baling Petrochemical Co., Ltd., Shandong Haili Chemical Industry Co., Ltd. and DSM Nanjing Chemical Corporation were also expanding their ammonium sulfate capacities and became large ammonium sulfate producers in China.

Oversupply in the market

Ammonium sulfate is an excellent nitrogen fertilizer that is good for replacing other nitrogen sources in compound fertilizers. When the supply of ammonium sulfate is abundant, compound fertilizer enterprises prefer to use ammonium sulfate as nitrogen source so as to reduce the use of other low-concentration nitrogen fertilizers such as ammonium chloride and ammonium carbonate. When the supply of ammonium sulfate in China increased so drastically in 2013, the growth of consumption was comparatively slow. The consumption of ammonium sulfate that year was only around 5 million tons, and there was a surplus of around 1 million tons. As a result, the ammonium sulfate market suffered from serious oversupply.
From a long-term point of view, however, with the increase of output and the acceleration of market expansion, the ammonium sulfate market in China is promising. The overall trend of the chemical fertilizer sector in China is to increase the proportion of compound fertilizers and the utilization rate. In agriculture, ammonium sulfate will have a bright prospect no matter whether it is used as raw material for compound or blended fertilizers or used directly. In industry, the development of related sectors will help maintain a moderate growth of the ammonium sulfate demand. In import and export, owing to the output growth of ammonium sulfate and the favorable policy of zero tariff, the export of ammonium sulfate from China will also increase steadily. Stimulated by the rapid supply increase, the compound fertilizer sector will remain the sector with the most rapid growth of ammonium sulfate demand in the next 5 years. As the consumption of ammonium sulfate in the compound fertilizer sector will increase considerably and the export market will likely be sound, it is expected that the surplus of ammonium sulfate in China will be around 300 kt in 2018.

High export volume but low export price

As the output of nitrogen fertilizers in China is getting higher and higher, the export volume of ammonium sulfate is on the increase. Since 2000, the export volume of ammonium sulfate has always been higher than the import volume. The export volume has increased drastically since 2006. Starting from the second half of 2008, however, the price of ammonium sulfate in the international market slid steeply, and the Chinese Government also started to levy an export tariff. The export volume of ammonium sulfate therefore shrank drastically. The current zero tariff was initially implemented in 2009, and the export volume returned to 879 kt that year. The zero tariff continued during 2010-2013, and the export volume saw a sustained increase. The export volume reached 2.919 million tons in 2013, an increase of 35.8% over the previous year and an all-time high.
Obviously, the export volume of ammonium sulfate is closely related to the export tariff policy. A temporary zero tariff was implemented at the beginning of 2008. China increased the tariff on April 20, 2008: 100% export tariff was applied from April to August, and 150% export tariff was applied from September to December. After these increases of the tariff, the export of ammonium sulfate was basically stagnant. China once again reduced the tariff to 0% in December 2008, and it remained in at that level during 2009-2013. Southeast Asia is the biggest ammonium sulfate consuming region the world, accounting for around 25% of the world total. Southeast Asia is unable to become self sufficient with regard to ammonium sulfate, and around 25% of the apparent consumption has to be supplied by import. The import volume to the region is expected to increase steadily in next few years. The region will remain the major destination for the export of ammonium sulfate from China due to Chinese producers’ geographical advantage and long-accumulated brand advantages. Another important reason for the drastic increase in the export volume of ammonium sulfate in 2013 was the oversupplied domestic market. Nitrogen fertilizers in China are in oversupply in general, and ammonium sulfate can replace quite a few nitrogen fertilizers. When the demand for chemical fertilizers in the international market is brisk and the prices increase rapidly, ammonium sulfate producers in China use export to release the domestic pressure. The price of ammonium sulfate in the international market in 2013 was lower than in the previous year, but the situation was much better than in the domestic market. At a time when the supply of nitrogen fertilizers was much higher than demand, ammonium sulfate producers had no way out but turn to export.
While the export volume of ammonium sulfate in 2013 was much higher than in previous years, low prices of chemical fertilizers in the international market forced China’s export prices down drastically. The average export price of ammonium sulfate in China was only around US$158/t (FOB) in 2013, a drop of 26.5% from the previous year.

Drastic slide of price in 2013

After a price drop in the second half of 2008, the price of ammonium sulfate in China stayed relatively low, at RMB620-780/t, during 2009-2010, and ammonium sulfate trade was not prosperous. Starting from 2011, as the price of coal went up, the production cost of ammonium sulfate stayed high. The very active export of N-P fertilizers greatly promoted the demand for ammonium sulfate, so its price went up, with the average ex-factory price reaching RMB1 117/t that year. Pushed by export sales, the price stayed high in 2012, but as discussed earlier, in 2013, it plummeted from around RMB1 100/t at the beginning of the year to RMB500/t, due to oversupply and the general macro-environment of China’s chemical fertilizer market. Oversupply exploded in the chemical fertilizer sector in 2013. The drastic price reduction of chemical fertilizers, including urea, had a big impact on the ammonium sulfate market.
The future price trend of ammonium sulfate in China will be influenced mainly by factors such as production cost, chemical fertilizer market trends, domestic demand and international ammonium sulfate prices. With the increase of energy costs, the production cost in the coking sector, the caprolactam sector and other related chemical sectors will go up and the cost of co-produced ammonium sulfate will also be higher. As ammonium sulfate is not the major profit growth point, however, enterprises will not shift the increased energy cost proportionally to ammonium sulfate. Compared with the impact on other chemical products, the impact of the cost increase on the price of ammonium sulfate will be relatively small.

Table 1  Capacity and output of ammonium sulfate in China, 2011-2013 (kt/a, kt, %)

Year    Capacity    Output    Operating rate
2011    3 600    3 330    92.5
2012    4 600    3 600    93.9
2013    6 500    6 050    93.1

Table 2   Major ammonium sulfate producers in China in 2013 (kt/a)

Producer    Location    Capacity
Sinopec Baling Petrochemical Co., Ltd.     Sichuan    400
Sinopec Shijiazhuang Refining & Chemical Co., Ltd.     Hebei    300
Baling Hengyi Caprolactam Co., Ltd.    Sichuan    300
Shandong Haili Chemical Industry Co., Ltd.    Shandong    500
DSM Nanjing Chemical Corporation    Jiangsu    460
Shandong Fangming Chemical Co., Ltd.     Shandong    160
Shandong Heze Wolan Chemical Co., Ltd.     Shandong    120
Guangxi Tiandong Power Plant    Guangxi    100
Zhejiang Juhua Group Co., Ltd.    Zhejiang    100
China Datang Power Corporation    Inner Mongolia     480
Hubei Sanning Chemical Co., Ltd.    Hubei    200
Ansteel Group Co., Ltd.     Liaoning    40
Shanxi Lanhua Group Co., Ltd.     Shanxi    200
Shanghai Baosteel Group Corporation    Shanghai     32


Difficult recovery of market
in 2014

The ammonium sulfate market in China in the first half of 2014 retained the slackness of 2013 and had no evident backing from favorable factors. In terms of downstream market, despite improved sales of compound fertilizers, operating rates of compound fertilizer producers are not high on the whole, and the good sales hardly contribute the ammonium sulfate market. With regard to rare earths, due to policies for environmental protection the output of rare earths is strictly controlled and the related demand for ammonium sulfate is quite low. In terms of export, even though ammonium sulfate prices in the international market are still low, the oversupply of ammonium sulfate in the domestic market is still serious and producers have to resort to export as a way out. Price warfare is therefore still fierce, and even if the export volume increases the export price can hardly rise.
Nevertheless, with the current slowdown in the fall of ammonium sulfate prices in the international market and the drastic rise of urea prices in the domestic market, traders will have greater enthusiasm for buying ammonium sulfate. A considerable backing will therefore be provided to the ammonium sulfate market in the second half of 2014. As the market price of ammonium sulfate has been on the low side for a long time, there will be high hopes for the ammonium sulfate market to maintain a stable trend in the second half of 2014, although the possibility for recovery is not big.