Ammonium nitrate prices set to rise as India cuts imports from Russia

After a rollercoaster ride marked by pandemic stockpiling and war disruptions, the price of ammonium nitrate is expected to make a comeback, said a report from brokerage firm InCred Equities. Also called as Technical Ammonium Nitrate (TAN) a key ingredient in fertilizers and explosives, the report said that TAN prices are forecast to rise in the coming months due to a significant drop in imports from Russia and a resurgence in demand from other major consumers.

The report authored by Research Analysts Satish Kumar, Abbas Punjani, and Vipraw Shrivastava said that Ammonium nitrate (TAN) prices have seen a dramatic fluctuation, primarily due to the Covid-19 pandemic, the human tendency to hoard in uncertain times, and the Russian invasion of Ukraine

There was a decline in TAN imports in 2022 and 2023, principally by Peru and Brazil, resulting in a surplus of Russian cargo being diverted to India. However, as predicted by the analysts, potential changes are on the horizon in CY24F/25F. In the first two months of CY24, India’s imports from Russia plummeted by 37% due to a surge in Peru and Brazil's market presence.

Covid-19 pandemic-induced supply chain worries sparked large-scale purchases by Peruvian company Orca Mining Services Peru SA. The Russian invasion of Ukraine led to a 60% decrease in their TAN exports during CY21, causing a shortage in the supply chain and subsequent price surge. As a consequence, surplus Russian production was rerouted to India, doubling India's TAN imports from Russia and causing a drop in prices, the analysts said in the report.

However, they anticipate a recovery in global TAN demand, led by a resurgence in Brazil and fueled by China's amplified manufacturing activity, especially in iron ore. This trend is expected in CY24F and CY25F, with Brazilian imports set to increase by 0.3mt compared to levels seen in CY23.

Contrarily, India's imports from Russia witnessed a significant reduction, indicating a change in market dynamics. Nevertheless, integrated TAN producers could eventually profit from these trends, leading to an earnings recovery.

Moreover, the recent dip in ammonium nitrate imports and the revival of domestic prices in India point towards a likely reversal in fortunes. Reduced production in Ukraine and the diversion of Russian exports due to fertilizer shortages combined with the rising oil prices are all contributing factors.

"Finally, Russia, the primary provider and exporter of ammonium nitrate, faces significant disruptions due to the war with Ukraine. However, Peru's mining industry inventory is expected to stabilize, especially with the anticipated rise in TAN imports from Brazil, driven by China's increased steel and metal production, said the report adding that this could potentially lead to a drop in India's imports and a recovery in TAN prices.