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June 16, 2020

Global ammonia industry shows signs of resilience despite the impact of Covid-19

By GlobalData Energy

The Covid-19 pandemic originated in China in December 2019 and had spread at an alarming rate across the globe, nearly reaching seven million cases worldwide and causing major impact on global economic growth. The US has surpassed all the countries worldwide and has been the most affected country, accounting for around 30% of the total Covid-19 cases worldwide. The epicentre of the pandemic was Europe earlier, which later shifted to BRIC countries, with a spike in Brazil, Russia and India. Governments across the globe are closely evaluating recent developments and contingency plans are being developed and implemented accordingly to contain the spread of virus.

The progress of upcoming ammonia projects is less likely to be affected. Potential impacts include increased uncertainty regarding phasing and completion timelines, but depend largely on the duration and severity of the outbreak. Projects that are under initial stages of development could face startup delays. In addition, new ammonia capacities under construction may experience labour and equipment issues that may delay project completion and commissioning. There have been minimal project delay announcements due to the pandemic. The pre-commissioning activities at Ramagundam Fertilizers and Chemicals plant got impacted due to Covid-19 led lockdown.

The current scenario has seen mixed reactions from major ammonia producers, with only few companies announcing capex cuts for the current year, as an immediate and proactive measure. Companies aim to dynamically optimise production and plan their investments in order to maintain long term competitiveness and growth. Yara International remains committed to investments, however has stated that optimisation due to Covid-19 may postpone some spending. Producers continue to evaluate their capital structure to identify further cost-effective investment opportunities.

The Covid-19 has negatively impacted the company’s supply chain and workforce, in addition to disruptions in end markets. The producers would continue to monitor the coronavirus situation closely, and remain focused to maintain business activities. Producers are optimising existing operations by suspending / shutting down plants in view of weakening demand and falling prices caused due to Covid-19 outbreak. Turnarounds, improvement and project activities are expected to be implemented to reduce risk, as sustaining operations through Covid-19 is a top priority in these challenging times. The disruption of global supply chains has created additional challenges in securing access to feedstock / raw materials and delivery of end products to customers.

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