The ITC, an independent, nonpartisan, factfinding federal agency, prepared the report at the request of the U.S. Senate's Committee on Finance. As requested, the ITC provided a comparative analysis of the ammonium nitrate (AN) industries in the United States, the European Union (EU), and Russia. The analysis includes profiles of the industries, addressing factors such as production, trade, and consumption; ownership and investment patterns; government programs; the ammonium nitrate production process with information regarding major feedstocks; and trends in domestic and export prices of ammonium nitrate. Following are highlights of the report.

• In the United States, prices for solid, fertilizer-grade AN generally trended upward during the time period July-December 1993 through mid-1996 before declining moderately in 1997 and more significantly in January-June 1998, generally to levels near those of 1993-94. Reported reasons for the decline include the impact of new capacity for AN and for nitrogen solutions of urea and ammonium nitrate (potential substitutes for each other) in the United States; the effect of imports on the spot market; growing U.S. inventories of wheat and corn, primarily attributable to decreased exports to certain Asian countries, which, in turn, have dampened U.S. consumption of AN; and the impact of the Chinese ban on imports of certain nitrogenous fertilizers.

• Russian input suppliers' reluctance to take firm action against late and nonpaying customers may enable some less-efficient firms to remain in business that would not be able to do so under a strict market economy. For example, RAO GazProm, the main supplier of natural gas in Russia, has been reluctant to deny services to nonpaying firms in all sectors, although it has recently taken steps against several companies.

• Producers of AN in the United States and in much of Europe have benefitted from relatively stable financial policies over the past 10 years that have held inflation rates to low levels which, in turn, facilitated business planning and access to capital. For example, most AN plants in the United States, primarily built in the 1970s, have been modernized and retrofitted. In contrast, Russia has experienced high inflation and an uncertain business climate, preventing mature capital markets from emerging to replace the state investment capability of the former Soviet Union. As a result, many Russian AN producers have slowed investments in retrofitting and modernization programs. Exceptions include JSC Acron, which characterizes itself as the largest producer of AN in Russia, and some of the other exporting producers.

• The U.S. producers' share of the U.S. market for solid, fertilizer-grade ammonium nitrate decreased from about 86.4 percent to about 81.3 percent during 1993-94, before increasing slightly during 1994-97 to about 82.2 percent. In comparison, the Russian share of the U.S. market increased during 1993-97 from zero to 7 percent. The EU share of the U.S. market during these years rose from about 3.4 percent to about 6 percent in 1996 before falling to about 3.5 percent in 1997. During the first half of 1998, U.S. imports from both Russia and the Netherlands, the major EU supplier, declined by 44 percent and 17 percent, respectively, compared with the same time period in 1997.

• The outlook for the U.S., EU, and Russian industries producing solid, fertilizer-grade AN is uncertain based on existing market dynamics. The decline in worldwide nitrogenous fertilizer prices, including those of AN, is expected to continue, at least in the near future. While the exact effect of import prices on U.S. prices has not been ascertained, AN price decreases in the United States through the first half of 1998 may have made the U.S. market for AN less attractive to exporting nations, and may have contributed to the decline in U.S. import levels from the Netherlands and from Russia during that time.

The ITC's report Ammonium Nitrate: A Comparative Analysis of Factors Affecting Global Trade (Inv. No. 332-393, USITC Publication 3135, October 1998) will be posted on the ITC's Internet server at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may be faxed to 202-205-2104.