Viewpoint: Import uncertainty to buoy US UAN through 1Q

The threat of substantial duties on Russian and Trinidadian UAN imports into the US should crimp supply availability into the second quarter of 2022, prolonging market firmness through the key purchase window before spring applications.

Russian and Trinidadian shipments have comprised more than 90pc of offshore volumes to the US since the 2018 season, but suppliers from both origins now face preliminary countervailing duties from the Department of Commerce that are expected to limit imports and squeeze inventories.

Russian producers Acron and EuroChem face 9.66pc and 9.84pc ad-valorem countervailing rates, respectively, and are unlikely to book new cargoes to the US until preliminary anti-dumping rates are known and finalized by April. But cargoes from Trinidad are expected to continue after Commerce placed a 1.83pc rate on Methanol Holdings Trinidad Limited (MHTL) and all other Trinidad suppliers.

Total US imports from July-December are currently estimated at 861,000t on lower dutied volumes — about 2,000t below the same period a year ago and 27pc lower than 2019 offshore imports, according to Census Bureau data. The threat of further reductions in Russian availability is expected to bolster coastal US values preceding the key application period.

Russian and Trinidadian UAN imports to the US have accounted for about 14-18pc of total domestic consumption from the 2018-21 season, primarily meeting demand along the east and west coasts, according to Argus demand estimates and trade data from the Census Bureau.

Prices jumped by 96pc from July into early-December to the highest level in Argus' price series dating back to 2008 following the launch of Commerce's investigation in late June.

To offset reduced import availability, domestic producers were expected to have ramped up UAN output in the fourth quarter, but faced planned and unplanned turnarounds since the third quarter, which further supported domestic values. Upgrade margins are expected to continue to favor increased UAN output compared to urea for producers with flexible manufacturing slates based on 13 December 2021 paper values on the CME, which should partially fill the gap left by reduced offshore imports from Nola into the Midwest.

Despite increased domestic output, consumers along the east and west coasts face further potential supply shortages because of limited and costly logistics from domestic production facilities to key coastal terminals — sustaining regional price appreciation into 2022.

First quarter 2022 UAN values should draw additional support from rising planting and consumption expectations in the spring.

Corn production is forecast to climb from the 2020-21 season on strengthening demand from domestic ethanol producers after blending estimates for 2022 jumped, according to the US Department of Agriculture (USDA), supporting overall nitrogen consumption estimates into 2022.

US farmer profit is also projected to increase by 15pc in 2021 from 2020, reaching the highest level since 2013 and more than offsetting the 12pc jump in fertilizer costs, according to USDA forecasts. Substantially lower fertilizer affordability compared to prior seasons could still squeeze spring input positioning but is not expected to whittle nitrogen consumption.

By Connor Hyde