Any form of improvement will be good news for both Orica and Incitec Pivot, the world's two leading suppliers of mining explosives and the biggest in the large Australian mining market, who have both been hard hit by a market downturn.
Miners were focusing on cost reduction and high grading, which led to less overburden production and explosives demand. Explosives pricing was also hammered by miners' cost focus.
While there has been a recovery in explosives demand, the AN surplus means the new contracts are being negotiated based on the lower AN prices.
A report by UBS analysts looking at the Australian explosives market found the surplus is starting to tighten on Australia's east coast as coking coal demand increases. That means demand for AN will increase as those coal miners increase blasting to help them meet that demand.
It should be noted that Orica and Incitec Pivot, while competing in the same market, are very different companies.
Orica is predominantly an explosives-focused business while Incitec Pivot's business is split between its Dyno Nobel explosives and fertilisers.
In the explosives game, though, both believe they are at the leading edge of technology.
Orica CEO Alberto Calderon talks up the company's Bulkmaster 7 mobile manufacturing units, its Webgen wireless blasting system and its BlastIQ platform.
With Dyno Nobel it is its differential energy Delta E product.
Incitec Pivot managing director and CEO Jeanne Johns told the company's annual general meeting that Dyno Nobel's real point of difference was the ability to deliver precision blasting.
She said it could tailor the explosive density to match the unique composition of the different layers of rock down each hole.
"We do this through automated programming, delivering faster loading, increased efficiency and with higher precision than any of our competitors," Johns said.
"This technology is now being rolled out in Australia with a number of customers already signed up and a diverse group of miners conducting trials.
"One of our customers in Australia recently called Delta E a ‘game changer' for their business."
Orica is Australia's largest AN supplier with manufacturing nameplate capacity of 960,000t per annum across its Yarwun in Queensland and Kooragang Island in New South Wales plants. It is expecting to get another 330,000tpa once the plant it has on Western Australia's Burrup Peninsula in joint venture with Norwegian fertiliser giant Yara is finally fixed.
Orica's key exposure is to the thermal coal market and the big growth at the moment is in the Queensland coking coal market.
While Orica has its Yarwun plant there, some of the capacity from that is going west to fulfil Orica's WA iron ore contracts.
Incitec Pivot's Dyno Nobel is better placed. It has Moranbah with about a 350,000tpa output and Moura - a 50-50 joint venture with CSBP - that can turn out about 200,000tpa.
According to UBS, Dyno Nobel's AN volumes in Queensland will be re-contracted in 2019, which could provide Orica an in.
The Queensland AN market is almost double the size of the Hunter Valley thermal coal market and is also more competitive.
The UBS analysts believe Dyno Nobel's Moranbah plant has a freight and gas input cost advantage because it is located in the Bowen Basin adjacent to major coking coal mines.
Both Dyno Nobel's Moura and Orica's Yarwun plant are in the southern Bowen Basin.
"While we think Moranbah supply has a freight and gas cost advantage, we expect that Orica will tender those Moranbah volumes with a view to ramping up its Yarwun facility," the UBS report says.
"However, our base case assumption is that Incitec Pivot recontracts the volumes, albeit at a lower price."
In the WA iron ore market, Orica had hoped to secure bigger volumes through the Burrup plant.
However, that plant has had massive production problems and will not be up and running fully until 2020.
Dyno Nobel gets its WA contracts fulfilled from the CSBP AN plant near Perth.
Johns said in Australia the Dyno Nobel explosives business grew earnings before interest and tax 9% to $205.4 million.
"This was underpinned by strong demand in metallurgical coal in the Bowen Basin as well as record plant production of 371,000t of AN at Moranbah in Queensland," she said.
"Pleasingly, our manufacturing plant at Moranbah has been operating at record levels since its major turnaround and investment that was made in April 2017.
"While the Australian AN market is expected to remain competitive, the high quality performance of Moranbah positions the business well as we enter contract renewals with our foundation customers over the coming year."
*Noel Dyson is editor of www.miningmonthly.com