Ammonium nitrate prices and trade flows have been heavily impacted by the Russia-Ukraine conflict. Our analysis, using the Rovsupply platform, shows that while some companies are taking advantage of recent supressed Russian ammonium nitrate prices, others are divesting their Russian supply and seeking alternatives, with some higher cost impacts balanced against improved perception by shareholders and customers.
Ammonium nitrate (AN) is a hugely important basic global commodity. Its dominant use is as nitrogen-based agricultural fertiliser. However it is also used extensively within the mining industry as an explosive product. Low density prilled ammonium nitrate is commonly mixed with fuel oil at the point of delivery into holes on mine blast benches to create ANFO explosive. The key precursor is ammonia, which is combined with nitric acid to produce ammonium nitrate.
Russia has traditionally been the largest global producer and exporter of ammonium nitrate (Figure 1). The Russian invasion of Ukraine in February 2022, and Russia’s temporary export ban on ammonium nitrate (running from February to May 2022) has caused major upheaval to global trade flows and supply chains. This article showcases how our Rovsupply platform can be used to analyse impacts on ammonium nitrate supply to the mining industry, from cost changes down to individual company trade flows.
Ammonium nitrate in mining, contribution to unit costs
Ammonium nitrate is a commonly used material for drill & blast operations, used in ANFO and other bulk explosive products. A typical open pit mine using a powder factor of 0.4 kg/tonne (~1.0 kg/BCM) will therefore use 0.4 kg of explosives to blast a tonne of rock. With a stripping ratio (waste:ore) of 2:1, this means 1.2 kg of explosives used per tonne of ore extracted and delivered to the process plant. For an operation processing 10,000,000 tonnes of ore annually, that corresponds to 12,000 tonnes of explosives required. The typical price of ammonium nitrate, prior to the Russia-Ukraine conflict, has been around 250 $/kg. This gives an annual cost of $3million, or 0.3 $ per tonne of ore processed.
Drill and blast services costs, excluding explosive supply, typically cost between 0.5-1.5 $/tonne depending on several factors including the mine type and location (see e.g. this article on drill & blast service costs in Australia).
Ammonium nitrate prices
The Rovsupply platform is able to track ammonium nitrate (HS Code: 310230) trade flows and price trends. Commodity price data is available from shipment-level records, as well as macroeconomic data originating from national statistics agencies. Figure 2 shows how these prices closely correlate for ammonium nitrate over the previous four years. Significant commodity price inflation is seen, starting around in the second half of 2021 and continuing through to the end of 2022, before decreasing back towards historically normal levels. The global average price between 2019-2023 was 0.3 $/kg, and this increased by 230% to 0.7 $/kg by Q4 2022.
Comparing prices between three key producing nations, Russia, Georgia, and USA (figure 2 bottom), we see the rapid price increase of Russian ammonium nitrate shortly before they imposed an export ban in February 2022. After the ban, Russian prices have been supressed compared to other nations, partly from extra supply dampening prices, but also as demand by certain regions for Russian commodities is weakened by the ongoing conflict. The US export price steadily increased since mid-2022 and are now returning towards historically normal levels in mid-2023. The Georgian prices have remained elevated compared to US-supplied ammonium nitrate throughout 2022 and 2023.
The impact of these price rises on typical mining costs is significant. The increase of ~300% in ammonium nitrate costs through 2022, up to ~0.8 $/kg, meant explosives unit costs elevating to around ~1.0 $/tonne, similar to the D&B services costs.
The depressed Russian ammonium nitrate prices represent a potential buying opportunity for companies who are willing to handle the goods and can navigate any potential shareholder or customer concerns.
Ammonium nitrate trade flows
The Rovsupply platform can explore commodity trade flows at a national or individual supplier level of granularity. From Figure 1, Russia is known to be the largest global producer of ammonium nitrate annually and has been a major supplier to mining explosives services companies. Figure 3 shows how Russian-origin ammonium nitrate exports, filtered specifically to mining explosives companies, have been shifting over the last three years. Noticeable changes include: a) Peruvian and Chilean companies are steadily reducing their imports of Russian ammonium nitrate, b) Indian companies have dramatically increased their imports of Russian ammonium nitrate in 2023, already exceeding the 90,000 tonnes in 2020, c) Panama has ceased sourcing ammonium nitrate from Russia since the middle of 2022, and d) Mexican companies continue to use Russian ammonium nitrate as a source of supply.
Focussing on two countries as a comparison, Figure 4 shows that Peruvian companies (left) have hugely reduced their reliance on Russian ammonium nitrate, with imports from Georgia becoming the dominant source in 2022 and 2023. Georgia has in fact become the leading supplier nation to Latin America in the mining industry. By comparison, Indian companies (right) have increased their supply of Russian ammonium nitrate since the invasion of Ukraine, with the 2023 trade volume already exceeding the total for 2020. Georgian ammonium nitrate was heavily sourced as an alternative to Russia in 2022, presumably during the Russian ammonium nitrate export ban. Other insights include that USA-based suppliers have also diversified their customer base in Latin America since the invasion.
Rovsupply can help you seek opportunities by identifying market trends early, benchmarking different buying opportunities, or avoiding a supply squeeze.
The Rovsupply platform is able to analyse multi-tier supply chains and benchmark individual suppliers. Figure 5 shows ammonium nitrate import volumes by source country for Orica Mining Services Peru (including its subsidiary Esxa S.A) at the top, and for Famesa Explosivos S.A.C at the bottom. Orica Peru can be seen reducing its purchases of ammonium nitrate from Russian sources, and seeking alternate supply from Georgia between 2022 and 2023. By comparison, Famesa has been increasing its import volumes of Russian-sourced ammonium nitrate, with 2023 already showing the largest import volume.
Other companies have also reduced their reliance on Russian ammonium nitrate. Austin Powder Panama, the Panamanian subsidiary of US company Austin Powder, has completely ceased importing ammonium nitrate from Russian sources since the invasion (and preceding export ban) in February 2022.
Rovsupply can help you understand your multi-tier supply chain for key commodities like ammonium nitrate, from spotting potential price pressures or delays to suppliers before they impact your operation, to balancing the social aspects of using suppliers linked to specific nations or regions.
Ammonium nitrate is produced from ammonia and nitric acid. Ammonia prices therefore represent a leading indicator of the ammonium nitrate price, and these have been consistently falling through the second half of 2023 (Figure 6).
We therefore expect the reductions in ammonium nitrate prices to continue to a levelling off slightly above the pre-2021 prices, around 0.4 $/kg. For explosives companies that purchase ammonia and produce their own ammonium nitrate, price reductions should begin to filter through to the contracts with mining operators. Those who import ammonium nitrate from producers have to navigate the shifting prices and supply capacities from different source countries, and determine their preferred balance between price and source location reputation/image.
The Rovsupply platform can help you uncover price insights, benchmark supplier options, and monitor and mitigate risks to your upstream supply chain, covering thousands of commodities, from ammonium nitrate, to tyres, to grinding media and reagents. If you are interested to see how Rovsupply can help you gain crucial intelligence to navigate the complex, ever-changing world, and secure resilient supply chains for your operation, please do get in touch.