Ammonia market turbulence shows no sign of easing as supply/demand headwinds trigger fresh price falls
The Mexican Secretariat of Economy formally announced this week that import tariffs on ammonium sulphate, regardless of origin, will be completely suspended for six months. This includes on amsul imports from China and the USA. Amsul from both major producers has effectively been blocked since 2015.
The tariffs being suspended are $0.0759 per kg for HoneyWell Resins and Chemicals (AdvanSix); $0.1619 per kg for all other US suppliers. For shipments from China, the import tariffs were $0.0929 per kg for Wuzhoufeng amsul and $0.1703 per kg for all other Chinese suppliers. Of note, the latest move suspends additional tariffs but does not appear to remove basic import taxes. Yet, these are low, below 1%.
Import tariffs were first introduced in October 2015 for a five-year period and were subsequently renewed until 2025. The latest short term move follows several weeks of government announcements and local media reports that import tariffs were to be removed. However, the media reports did not indicate a timeline.
To date, no traders are understood to have committed product from China or the USA to Mexico due to the lack of official confirmation of the media reports. The latest announcement opens the doors to both origins.
Impact on trade flows: Mexican premium over Brazil to be tested
Since 2015, European and South Korean amsul has been duty free into Mexico. As such, in 2021, of the 329,000t of amsul imported, 166,000t arrived from Belgium and 115,000t from South Korea. With other origins effectively blocked out due to the import tariffs, Mexican cfr levels traded well above Brazilian cfr prices. In mid-April, Mexican buyers’ price ideas were $470-480pt cfr east coast for capro amsul. At the same time, Brazilian cfr values were under $400pt cfr.
The abundance of supply in China of both capro and compacted amsul will almost certainly end these premiums, especially on the west coast where there is a freight advantage. Indeed, a freight inquiry is already circulating for a combination cargo including 33,000t of amsul from China to west coast Mexico for FH June shipment.
With feedstock ammonia and other input prices high, the impact on domestic producers from the latest move is not yet clear. However, since late Q3 and Q4, production in Mexico has been impacted due to high input costs. Any cut in domestic output will be met with greater import demand.
In 2021, the USA exported 514,000t of amsul (primarily capro amsul) excluding Canada. The main markets were Peru with 150,000t and Brazil with 142,000t. The main US producers will have a freight advantage into east coast Mexico over European and Chinese suppliers as well as a freight saving on shipping to Brazil/South America. As such, US suppliers are likely to view the Mexican market with great interest.
By Michael Samueli, Head of Nitrates and Sulphates
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