Constraints in Ammonium Nitrate Supply

On January 18th 2022

Ammonium nitrate indexes are currently at levels over five times higher than they were just 18 months ago and ammonia prices have risen even more than that over the same period.

Supply constraints for ammonium nitrate and bulk explosives are emerging in many locations around the world and strong premiums are being commanded by some companies who still have access to what seems like increasingly scarce quantities of AN that have not already been committed elsewhere.

Whilst recognizing that nitrate markets are, and always have been cyclical, it’s hard to imagine that this most recent change in market dynamics is something that will quickly resolve itself in the short term.

In the immediate term, those most impacted need to understand the constraints they really face, the immediately available options and, in case those options aren’t viable, the slightly more innovative solutions that could be employed to ensure safe blasting can continue.

In the medium to long term, fully understanding security of supply (or maybe put another way, how fragile your existing explosives supply chain is) becomes imperative, as does ensuring supply contracts provide the expected level of protection. This is equally applicable to those currently experiencing supply constraints or rising prices as to those who may not yet have been directly impacted.

For obvious reasons, risking mining operations due to an inability to access the required quantities of explosives must be avoided. Yet, it is a very real prospect at the moment and some future scenarios anticipate recurring AN shortages in 2023, 2024 and beyond.

If the current export limitations in Russia and China continue longer than anticipated (or are repeated in the future), or the drivers of the current high nitrogen prices remain (for fertilizers as well as explosives) then the options available to users of commercial explosives to manage their costs whilst also guaranteeing security of supply may be quite limited. Those options are likely to become even more constrained the longer they are left unresolved as others move to secure the available supply.

So, in the short to medium term, we see some significant challenges associated with the supply of bulk explosives in terms of supply continuity, risk mitigation and cost management. This potential supply issue compounds with the work being done by many miners to capture additional value in the comminution process through the incorporation of new digital technologies and later generation product lines. Whilst the supply issues are getting resolved, progress made generating value in other areas must continue and the distraction should not be allowed to become an excuse for underperformance.

Where alternatives sources need to be introduced (and more so where future supply plans are being developed), the increasing Environmental, Social and Governance (ESG) requirements should be kept in mind, as well as maintaining the well-established focus on continuously improving the safety of operations.

At Moncourt Group, we provide our clients with independent subject matter expertise in relation to the supply of ammonium nitrate and bulk explosives. At a global, regional and local level, we identify viable supply options and then develop, implement, and manage contracts that are in the best interests of our customers. We deliver the necessary commercial, technical and operational outcomes whilst appropriately managing the underlying risks.

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