OUTLOOK FOR AMMONIA SUPPLY AND DEMAND by Peter SCHMID Agrium Inc.

CANADA

INTRODUCTION In the international nitrogen fertilizer trade ammonia is the second most commonly traded product, after urea, with 14.6 million MT exported in 1999. Ammonia is different from the other major traded fertilizers because it is a gas and, therefore, transported and stored differently, either in pressurized vessels or, more commonly, refrigerated at minus 33 degrees C. This requires special refrigerated tankers and shore side storage, and the resulting logistical constraints play a very important part in the international ammonia trade.

1999 WORLD AMMONIA

Total Production 132 Million MT
13%
Urea Ammonia Trade

45% 27%

Direct Application Other Fertilizers Industrial (non-fertilizer)

4%

11%

Source: IFA

Figure 1 About 85% of the ammonia is used as fertilizer ; or 90% if we include ammonium sulphate from caprolactam production (Figure 1). Urea alone consumes 45% of the total world ammonia production and about 11% is traded internationally. Of the sea borne trade ammonia, nearly half is used for MAP and DAP, primarily in the USA, India and North Africa. A small percentage is for direct application and the remainder is for other fertilizers and industrial use. In many cases it is impossible to determine the exact end use of the traded product since there can be many applications for ammonia discharged into a receiving tank or pipeline.

HISTORICAL DEVELOPMENTS THROUGH 1999

18 16 14 12 10 8 6 4 2 0

M illion MT

WORLD AMMONIA TRADE 1970 - 1999

Source: Fertecon/IFA

Figure 2 To better understand the future of the ammonia trade we have to look into the past and learn from historical developments. Total world trade during the last 30 years has grown from 2.8 to 14.6 million MTY (Figure 2). Even more significant is the fact that the ammonia trade has grown from about 4% of total production in 1970 to 11% today. We, therefore, can say that ammonia has become an increasingly global commodity, essentially connecting low cost hydrogen feedstock with the market place. Between 1970 and 1980 trade grew 150%, between 1980 and 1990 77%, and in the decade since about 26%, definitely a slowing growth trend in percentages, but quite steady in terms of tons as you can see from the chart.

TRADE SOURCES

MAJOR AMMONIA TRADE SOURCES

3% 10% 35%

1970
Trade: 2.8 Million MT

14%

32% Europe Canada USA Trinidad 12% M iddle East

6% FSU 12% 7% 5% Others

1999
Trade: 14.6 Million MT
33% 20% 11%

Source: Fertecon/IFA

Figure 3

2000 Est.

1970

1975

1980

1985

1990

1995

In 1970 Western Europe and the USA were not only the principal sources for globally traded ammonia, but also the principal import markets. The ammonia trade in fact was a trade between and within these two regions. The current principal suppliers to the global market place are the FSU and Trinidad, with the Middle East a distant third. Alaska, Indonesia and North Africa are other significant suppliers (Figures 4 and 5).

MAJOR AMMONIA TRADE SOURCES

(Million MT) FSU Trinidad Europe Middle East Canada USA Others TOTAL 1970 0.1 0.4 1.0 0 0.1 0.9 0.3 2.8 1980 2.4 0.5 1.4 0.4 0.4 0.8 1.1 7.0 1990 4.1 1.6 2.2 1.2 1.1 0.6 1.6 12.4 1999 4.8 2.9 1.7 1.3 1.1 0.7 2.1 14.6
Source: Fertecon/IFA

AMMONIA TRADE SOURCES OTHER 1999

Million MT Africa (Algeria, Egypt, Libya) .9 Asia (Indonesia, Bangladesh) .7 Central Europe .3 Latin America (Brazil, Venezuela) .2 TOTAL 2.1
Source: IFA

Figure 4

Figure 5

Europe and the USA supplied about two thirds of global trade ammonia in 1970 but only 16% today, even less if we omit the intra European trade. Part of this trade within the European Union is overland, and over open borders, say from Holland to neighboring countries. A similar overland trade exists between Canada and the United States. Figure 6 shows the global distribution of supply and the current concentration of a few sources, particularly the FSU and Trinidad. US exports have been quite steady over the years and are now limited to exports from Alaska.

MAJOR AMMONIA TRADE SOURCES 1999

Million MT FSU Trinidad Europe Middle East Canada USA Indonesia/ Malaysia

4.8 2.9 1.7 1.3 1.1 0.7 0.5

Source: IFA

Figure 6

TRADE DEMAND

MAJOR AMMONIA TRADE DESTINATIONS

17%

1970
Trade: 2.8 Million MT

4%

15%

64%

Europe

India

USA

Far East

O thers

20%

1999
Trade: 14.6 Million MT
10%

30%

9% 31%
Source: Fertecon/IFA

Figure 7 In 1970 Europe dominated not only the supply but also the demand (Figure 7). The ammonia trade then constituted primarily intra European trade and imports from other regions, such as the USA. Since then, Europes share has shrunk, although still significant at 30% of total trade, only slightly less than the USA which has become the worlds largest market for ammonia, primarily on the strength of its phosphate industry in Florida. Meanwhile, Europes share of the global market has been shrinking as the fertilizer industry there has gone through major restructuring and downsizing phases. Figure 8
MAJOR AMMONIA TRADE DESTINATIONS
(Million MT) 1970 0.4 1.8 0.1 0.0 0.5 2.8 1980 2.2 3.7 0 0.2 0.9 7.0 1990 3.5 5.6 1.0 0.6 1.7 12.4 1999 4.5 4.4 1.5 1.3 2.9 14.6

Figure 9
AMMONIA TRADE DESTINATION OTHER 1999
Middle East (Israel/Jordan/Turkey) Africa Latin America Central Europe/FSU Australia TOTAL Million MT 1.0 .8 .5 .4 .2 2.9
Source: IFA

USA Europe Far East India Others TOTAL

Source: Fertecon/IFA

We now look at the developments in other parts of the world, such as Asia, North Africa and the Middle East, where we have witnessed a significant growth of imports, and we will have to pay special attention to the future potential of these regions (Figures 8, 9 and 10).

During the last decade Far East imports have increased 50%, and in the same time span Indias imports have nearly tripled, largely as a result of government support for a domestic DAP industry.

MAJOR AMMONIA TRADE DESTINATIONS 1999

Million MT United States Europe India Korea Other Asia Turkey

4.5 4.4 1.3 0.8 0.7 0.6

Source: IFA

Figure 10

CURRENT SITUATION The historical developments over the past thirty years have shown us the changes in principal sources and markets for trade ammonia. We have also seen a trend to an ammonia niche trade, where source and market are closely linked, with specific shipping practices, such as the employment of smaller vessels dedicated to a specific trade. Figure 11 shows some of these trade links, but there are others. Two of the more interesting recent contracts are between Togliatti Azot and Oswal in India, and between Odessa Port Plant and Fertiberia in Spain.

MAJOR TRADE ROUTES 1999

(Million MT)

Trinidad to USA FSU to Europe Canada to USA FSU to USA Middle East to India Alaska to Korea FSU to N. Africa

2.4 1.7 1.0 0.9 0.7 0.6 0.5

Source: IFA

Figure 11

LOGISTICS SHIPS : When the FSU became a major player in the ammonia trade about two decades ago their huge 75,000 cubic meter ammonia carriers dominated the long distance trade from Yuzhnyy to the USA. Today even 52-56,000 cubic meter vessels, the largest currently employed in the ammonia trade, have limited use mostly for Black Sea to USA and Alaska to Korea routes. The larger new-buildings today mid-size, or around 35,000 cubic meters carrying 20-25,000 MT ammonia, and the trend is to these smaller carriers, in the mid-size range, as several of the larger carriers are reaching the 30 year mandatory retirement age without being replaced (Figure 12). There are several newer large vessels, but these are usually chartered at a premium to oil companies for the LPG trade, rather than for ammonia. As a result of depressed charter rates in recent years, the scrapped ammonia vessels have not been adequately replaced, not even the mid-size carriers, and a tighter vessel market is already in evidence today. For various reasons it will take nearly three years from the initial approval for a new building until the vessel actually enters service. With the continuing trade expansion it is, therefore, time for owners to begin the process for ordering new vessels.

LPG/AMMONIA CARRIERS
12 10 8 6 4 2 0
1971 - 1975 1976 - 1980 1981 - 1985 Large-Size 1986 - 1990 Mid-Size 1991 - 1995 1996 - 2000

Ships Built Since 1971

Large-Size Vessels (54,000 CBM) carry about 36,000 MT Ammonia Mid-Size Vessels (35,000 CBM) carry about 23,000 MT Ammonia
Source: Exmar

Figure 12 LOGISTICS-TERMINALS : Major components in the international ammonia trade are the terminals for shipping and receiving ammonia. Attached are summary lists for export (Figure 13) and import (Figure 14) terminals, with a focus on the existing facilities in the Asia Pacific region.
MAJOR IMPORT TERMINALS
Port Port ASIA PACIFIC USA Indonesia Saudi Arabia Malaysia Qatar Bahrain Bangladesh Kuwait UAE OTHER Ukraine Trinidad Latvia Yuzhnyy Point Lisas Ventspils 120 300 60 3,800 3,500 1,000
Source: IFA/Unocal

MAJOR EXPORT TERMINALS

Storage Capacity (Thousand MT) 73 100 105 50 67 40 20 80 40 Annual Throughput (Thousand MT) 700 660 500 450 425 190 170 130 120

Storage Capacity (Thousand MT) 35 20 40 50 55

Annual Throughput (Thousand MT)

Kenai Bontang Jubail Kerteh Masaieed Sitra Chittagong Shuaiba Ruwais

ASIA PACIFIC India - West Coast Kandla Sikka Other - East Coast Paradeep Other Korea Ulsan Kwangyang Kaohsiung Mailio West Coast Gulf Tampa

TOTAL 50 56 TOTAL Taiwan OTHER USA 190 550 125 TOTAL 30 40 TOTAL

1,660 700

630

4,500
Source: IFA/Unocal

Figure 13

Figure 14

OUTLOOK FOR THE FUTURE SUPPLY FSU After rising rapidly in the 80s, export volumes from this principal source to the world market have been relatively stable during the last five years. (Figures 4 and 15). There is still underutilized export capacity, particularly at Togliatti, Russia, but the constraints of the current export terminals at Yuzhnyy, Ukraine and Ventspils, Latvia, as well as the 2,000 Kilometer pipeline through Russia and Ukraine have reached their limit. Although there has been sporadic talk about additional Russian terminals in the Baltic and at Novorissisk, on the Black Sea, these are somewhat doubtful because of the development costs and additional transportation expenses involved. Although Russia has the worlds largest natural gas reserves there are no known plans for adding new ammonia capacities. The production of natural gas is actually shrinking due to lack of funds for exploration and development of new fields.

Million MT

FSU EXPORTS 1995 - 2000 Est.

4.5

3.5 1995 1996 1997 1998 1999 2000 Est.

Source: IFA/Unocal

Figure 15 CARIBBEAN - A new ammonia plant, with a capacity of 650,000 MTY, is currently under construction in Trinidad and an ammonia/urea complex with an ammonia surplus of about 350,000 MTY will commence production later this year at Jose, Venezuela (Figure 16).

CARIBBEAN EXPORTS
Million MT

(Trinidad, Mexico, Venezuela)

4 3

1995 - 2000 Est.

3.5 2.5 2 1.5 1 0.5 0 1995 1996 1997 1998 1999 2000 Est.
Source: IFA/Unocal

Figure 16

The combined ammonia supply of million MTY is targeted for the US market. With the new plant, Trinidads exports will surpass the FSU exports from the Black Sea for the first time, and Trinidad will then only be one more plant away from exceeding the entire FSU ammonia export volume. The supply shift from the Black Sea to the Caribbean sources will influence future trade. There have been serious discussions about doubling the new units in Trinidad and Jose, since the infrastructure is already in place and the natural gas is available for less than $1 per million BTU. However, it may be prudent to take into consideration developments in the long term North American natural gas scenario rather than making major investments entirely based on the current situation. MIDDLE EAST - Although there are several possible new projects in Egypt, Saudi Arabia and other countries in the region, none of these are definite at this time, and ammonia export supplies will be rather stable for the next three years (Figure 17). However, one must assume that in the future the ammonia export capacity will be expanded in this gas rich region to supply the needs of the growing Asian demand. The question is whether India will participate in any joint venture projects, such as Oman, to provide for Indias future ammonia needs. Indian imports have increased significantly and most of the additional ammonia requirements now come from new South Asian sources and the FSU.
MIDDLE EAST EXPORTS (includes Iran) 1995 - 2000 Est.

Million MT

2 1.5 1 0.5 0 1995

1996

1997

1998

1999

2000 Est.
Source: IFA/Unocal

Figure 17 SOUTH ASIA There are two ammonia complexes under construction in this region. One is at Kerteh, on the east coast of peninsular Malaysia and the other at Bontang, Indonesia, which together will add about 900,000 MTY new capacity by the end of next year and this tonnage will be targeted at the growing Asian markets. The rapid expansion of export capacity by about 1.5 million MT, including the recent start up of a large export oriented ammonia plant at Bontang, Indonesia, may exceed Asian trade demand and create a slight oversupply for the region by 2002. However, this does not take into consideration potentially increasing exports to Australia (Queensland), Thailand and Japan.

The new production may also displace some FSU tonnage form Asian markets in the future (Figure 18).

NEW SUPPLY AND DEMAND for SOUTH ASIA

(THOUSAND MTY) 2000 SUPPLY INDONESIA MALAYSIA DEMAND TAIWAN INDIA KOREA NET SUPPLY 650 450 2001 2002 450

300 360 (10)

100 240 150 110 300

Figure 18 The above projects in south Asia and the Caribbean will add about 1.9 million MT new trade supply during the next two years. This is more than double the usual increase in trade volume of 3-400,000 MTY, and may result in a global oversupply. However, it does not take into consideration the special situation in the US. DEMAND USA : This is the most difficult ammonia market to predict but imports are definitely increasing (Figure 19).
USA IMPORTS 1995 - 2000 Est.

Million MT

4.5 4 3.5 3 1995 1996 1997 1998 1999 2000 Est.

Source: IFA/Unocal

Figure 19 The US is the worlds largest trade destination, with three very distinct patterns : 1) From Canada, 750,000 MTY by rail and 250,000 MT by ship ; 2) US Gulf, about 1 million MT, for fertilizer and industrial use, competing with local production from plants built when gas was plentiful and cheap ; 3) Tampa/Savannah, about 2.8 million MTY, for DAP/MAP production.

Any major change in import volume most likely would happen in the US Gulf region where cheaper imports are forcing a shut down of some domestic capacity. Tampa/Savannah imports for phosphate production have been relatively stable. Imports from Canada also have varied little, but are expected to be down this year because of the combination of high production cost, distance to US markets and the production curtailment of the Kitimat methanol/ammonia plant. Until the end of 1999 Alaska could ship ammonia to the US West Coast. However, product between US ports has to be carried in a US flag vessel and the only such ship was scrapped earlier this year. Therefore, Alaskan ammonia can no longer be shipped to other US destinations and US West Coast imports will have to increase. The US Gulf has an excellent system for importing ammonia into various Gulf Coast markets, including deep water receiving terminals with a total storage capacity of nearly 700,000 MT. In many cases the shut down ammonia plants have their own receiving facilities for importing product and, therefore, can import from a cheaper source, such as Trinidad and, very soon, Venezuela. Four major American ammonia producers also have production facilities in the Caribbean and can easily switch from domestic production to imports from their low gas cost Caribbean plants. To move product inland there is the currently underutilized Koch pipeline which can transport about 2 million MTY and move product from the deep water receiving terminal at Taft to the markets in the Mid West (Figure 20).
U.S AMMONIA PIPELINE OVERVIEW
6 5.5
S # # S S # # S # S # S # S # S # S S # # S # S # # S

NORTH AMERICAN (HENRY HUB) GAS PRICES 1990 - March 2001 (including NYM Futures)

5 4.5 4 3.5 3 2.5 2

S #

S #S # S S# # S # # S # S S # S # S # S # S #

S # S #

S # S # S #

1.5 1
S #

0.5 0
Jan-00 Feb-00 Mar-00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Sep-00 May-00 Oct-00 Jul-00 Nov-00 Mar-01 Dec-00 Jan-01 Aug-00 Feb-01 Apr-00 Jun-00

Mapco Pipeline Koch NH3 Pipeline

Source: Unocal

Figure 20

Figure 21

The total North American ammonia production is about 18 million MTY, and such tonnage simply cannot be replaced by off shore product since it exceeds the total international trade tonnage by a wide margin. For this reason some production at US Gulf facilities readily accessible to imports, may be forced to shut down and rely on offshore supplies in the future. However, energy efficient inland plants have a freight advantage to the market place and are better protected from imports. The graph of Henry Hub natural gas pricing shown in Figure 21 illustrates the current dilemma of the US ammonia industry. Natural gas prices, which in the past ten years experienced annual increase of 2-3%, or more or less in line with inflation, doubled since the spring, increasing cash ammonia production costs accordingly. The US gas price and related ammonia production costs in the US Gulf in effect have now become the bench mark for ammonia pricing not only for US imports but the global ammonia trade. Because of historical trends one must assume that the current gas situation will attract new drilling activities and gas pricing will eventually normalize again. The natural gas futures

market also points in that direction. However, the current situation may persist for some time before it improves. EUROPE : For many years European ammonia producers had the current American problem - relatively high feedstock costs. Today, with an opening gas market and competing supply sources from the UK, Norway, Russia, Algeria and the Netherlands, the problem may be more the aging capacity and declining ammonia demand from the shrinking fertilizer industry. As a result, European demand for trade ammonia has shrunk about 20% during the last decade. In the course of the next few years any change in trade probably will be more modest, with decreasing demand more or less offset by declining production. INDIA : During the last decade Indias ammonia imports have nearly tripled, largely as a result of a government policy encouraging domestic DAP production, based on imported raw materials, including ammonia. Within the last two years alone, Indian ammonia imports, therefore, have risen about 70%, from one million to about 1.7 million MTY this year (Figure 22). However, this increase in import demand was generated through ever increasing government subsidies for domestic DAP production. It is doubtful that the Indian taxpayer receives an acceptable return by subsidizing an inefficient industry which does not improve food security. The total domestic DAP subsidy budget has been rising steadily and visions of DJ VU arise the ever rising domestic urea production subsidy which now accounts for over 3.4 billion dollars per year. Also, the method of favorably subsidizing inefficient domestic production at the expense of imported product is not in compliance with WTO agreements, and it is doubtful that additional new DAP capacities can be justified in the future. Therefore future Indian ammonia imports should be rather stable. However, a major as yet unpredictable change in government policy for fertilizer subsidy, and/or natural gas policy, may significantly impact future ammonia imports. In line with new policy thinking Indian companies may build joint venture ammonia/urea capacity overseas, such as in Oman, and this may include ammonia to cover some of the very large domestic ammonia needs. India, with shrinking natural gas reserves, and an increasing demand for this clean burning fuel, is now considering various schemes for importing LNG at various points. India is definitely moving away from energy and fertilizer self-sufficiency at any cost and has created an excellent infrastructure for importing ammonia (Figure 23).
INDIA IMPORTS 1995 - 2000 Est.
Annual Requirements of Imported Ammonia for India
West Coast IFFCO GSFC MCFL Zuari Indo Gulf FACT East Coast PPL Oswal SPIC GFCL HLL Eid Parry CFL Port Kandla Sikka Manglore Manglore Dahej Cochin 2000 Requirements (Thousand MT) 300 168 60 24 53 36 2001 Additional Requirements (Thousand MT) Storage Capacity (Thousand MT) 33 21 10 10 10 10

Million MT

1.5 1 0.5 0 1995 1996 1997 1998 1999 2000 Est.

Source: IFA/Unocal

Paradeep Paradeep Tuticorin Kakinada Haldia Ennore Vizag

240 180 180 180 120 72 48

180 60

50 40 10 17 9 10 10

TOTAL

1,660

1,900
Source: Unocal/VNB

Figure 22

Figure 23

FAR EAST : KOREA : Korean ammonia imports have increased steadily during the last ten years, largely for industrial uses, such as acrylonitrile, caprolactam and nitric acid (Figure 24). We can expect additional such downstream capacity for caprolactam and acrylonitrile increasing ammonia import demand by perhaps 250,000 MTY to more than one million MTY during the next two years. Imports are received through two major terminals and one smaller one.

Million MT

KOREA IMPORTS 1995 - 2000 Est.

0.8 0.6 0.4 0.2 0 1995 1996 1997 1998 1999 2000 Est.
Source: IFA/Unocal

Figure 24 TAIWAN : Taiwan has more than doubled imports to about 550,000 MTY during the last year because of the shut down of the domestic ammonia production at Miaoli and the start up of new acrylonitrile and caprolactam capacities (Figure 25). At this time, there are no new projects requiring additional ammonia imports, but it seems that a new ammonia terminal is desperately needed to handle the increased imports. Taiwan Fertilizers 30,000 MT receiving tank at Kaohsiung is turned about once every three weeks and includes all the imports for CPDC, another chemical company. Formosa Plastics have built a new terminal at Mailiao with 40,000 MT storage capacity for their own imports of about 150,000 MTY, primarily for acrylonitrile production.

0.8 0.6 0.4 0.2 0

Million MT

TAIWAN IMPORTS 1995 - 2000 Est.

1995

1996

1997

1998

1999

2000 Est.
Source: IFA/Unocal

Figure 25

JAPAN : Current imports are quite small, perhaps 50,000 MTY. However, a fiber producer, is building a 15,000 MT tank at Nagoya, with the intention to import about 100,000 MTY ammonia as of 2002. Another company is also considering the import of ammonia and plans to build a receiving terminal.. The total ammonia production/consumption in Japan is about 1.7 million MTY, all at very high cost with current feedstock prices. Imports should increase gradually in the future, replacing some of the expensive domestic production. PHILIPPINES : Imports of about 200,000 MTY are mostly for phosphate/NPK production at Isabel, but some small tonnage used as a raw material for explosive grade ammonium nitrate. As long as the phosphate plant continues to operate at current levels there should be little change in ammonia imports. CHINA : China represents a very special situation the worlds largest producer of ammonia, yet one of only a very few countries in the Asia-Pacific region which do not engage in the ammonia trade, either as importer or exporter. However, it is very possible that this situation will change during the next few years. There are several reasons. The current reliance on coal for energy (70%) versus natural gas (2%) is slowly shifting toward the increased use of favor of natural gas (NG). China is now part of the global economy and energy self sufficiency based on coal is an outdated concept. Coal shipments have tied up the rail transportation, and the burning of coal has been a significant source of pollution for the entire country. China has already become a major importer of crude oil, with a sharply rising trend line, and is about to become a major importer of LNG, first in Guangdong Province and then other coastal regions. Within ten years the environmentally friendly natural gas will supply 6 percent of the countrys energy needs and, according to the National Petroleum Corporation, about 40% of that will be imported either via ships as LNG, or overland via pipelines from other countries, such as Russias Siberia. One of Chinas options for the future is to import ammonia from a source where the feedstock is cheap. It is not economical to import ammonia and ship it by rail far into the interior but it does make sense to import ammonia hen it is used near the coast. There are several large integrated petrochemical projects in the planning stage now with a completion target around 2005. BASF has a project in Shanghai, requiring about 70,000 MTY for TDI/MDI production. BP Amoco has a project, also in Shanghai, requiring about 130,000 MTY for acrylonitrile production. In addition, there are plans for production of caprolactam requiring 100-150,000 MTY ammonia per plant. The above projects are somewhat similar to the multi billion dollar complex just completed by Formosa Plastics at Mailiao, Taiwan, which will require ammonia for six different applications, including acrylonitrile. In the future similar projects undoubtedly will be built on the Chinese mainland, probably close to the coast, potentially increasing the demand for trade ammonia. Another end use for imported ammonia may be for the rapidly increasing phosphate industry. Apparently one such project now under serious study is a terminal in Zhanjiang, Guangdong Province. A suitable terminal of, say, 40,000 MT would represent less than ten percent of the cost of a world scale ammonia plant and is a cost effective way of securing ammonia raw materials from diverse sources with a competitive feedstock base.

South Korea, which has not built any new ammonia capacity since 1977, and Taiwan are both relying on imported ammonia for economical reasons. The economics for energy deficient China should be similar. Below is a graph that depicts the Korean import pricing, by quarter, during the last ten years (Figure 26). The average quarterly prices shown are a mix of cargoes as large as 36,000 MT, as well as mid-size cargoes and part cargoes as small as 5,000 MT. Similar to other long term supply arrangements, such as Tampa, Florida, there are delivery contracts in place, with indexed market related pricing. Deliveries to Korea during this period have been from diverse sources and include all the major global suppliers - the Caribbean, Black Sea, Arabian Gulf, Indonesia and Alaska, the principal source. It is very conceivable that in the future ammonia deliveries to China and Korea can be combined because of the proximity (only about 1.5 days of steaming from Korea to Shanghai, for instance). In any case, one could assume that delivered ammonia prices to China and Korea would be very similar.
KOREAN AMMONIA DELIVERED PRICE 1990 - 3rd Quarter 2000
(Average 169/MT)
$/MT
300.00 275.00 250.00 225.00 200.00 175.00 150.00 125.00 100.00 75.00
1990 Q 1 1990 Q 3 1991 Q 1 1991 Q 3 1992 Q 1 1992 Q 3 1993 Q 1 1993 Q 3 1994 Q 1 1994 Q 3 1995 Q 1 1995 Q 3 1996 Q 1 1996 Q 3 1997 Q 1 1997 Q 3 1998 Q 1 1998 Q 3 1999 Q 1 1999 Q 3 2000 Q 1 2000 Q 3

Source: Unocal

Figure 26

CONCLUSION The international ammonia trade is increasing steadily at 3-400,000 MTY. There may be an oversupply situation in the near term. The current capacity expansion is limited to the Caribbean and South Asia. There is a shift to long term buyer/seller relationships with index based pricing. The high natural gas prices in the US may lead to increased international trade. The ammonia tanker fleet is aging and needs to be replaced. The Asian region has experienced one of the fastest growth rates in the ammonia trade. There are sufficient gas reserves in south Asia for building new ammonia capacities. China may emerge as a significant importer of ammonia in the future. New export oriented Asian ammonia plants will be built as demand becomes apparent. The global ammonia supply and demand will remain more or less in balance.