CF to step up UAN, urea exports with expansions

Leading US nitrogen producer CF Industries is poised to grow its UAN and urea exports as it completes major expansions later this year.

CF expects to export 1mn tonnes (t) of UAN to Latin America over the next year, and to continue supplying European customers, chief executive Tony Will told investors this week.

That export target would mark a sharp and sudden increase in US shipments abroad and, particularly, to Latin America. The US exported a record 542,000t of UAN in 2015, up from 335,000t in 2014, to continue a trend of gradually growing exports. The US did not export any UAN until 2008, according to US customs data. Almost all of the US' seaborne UAN exports originate in Baton Rouge, Louisiana, near CF's Donaldsonville plant.

CF plans to further develop a growing Latin American market. The US exported just under 200,000t of UAN to Latin American countries in 2015, with the majority shipped to Mexico and Argentina. Brazil was a new destination, taking 15,500t of US UAN for the first time ever, according to customs data.

France has been a growing outlet for US UAN, importing 260,000t in 2015, up from 184,000t in 2014. CF will continue to supply the French market through existing long-term agreements with co-ops, Will said. The pending merger with producer OCI will also expand CF's reach into Europe. Will said CF will be able to satisfy import UAN needs of OCI's existing facility at Geleen, Netherlands. The Netherlands typically imports around 40,000 t/yr of UAN, according to customs data.

Exports will become increasingly necessary to balance the US UAN market. CF is adding almost 2mn t/yr of new UAN capacity between its expansion at Donaldsonville, Louisiana, and the soon-to-be-acquired OCI Iowa Fertilizer plant in Wever, Iowa. CF estimates that once the new capacity is fully realized, North America's UAN import needs will fall to around 1mn t. The US imports about 3mn t/yr of UAN, with about a third sourced from Russia, a quarter from Trinidad and Tobago, and a growing amount from China.

CF's Donaldsonville plant is ideally situated for exports, just north of New Orleans along the Mississippi river and featuring two deep-water docks. The additional production at Donaldsonville could squeeze out imports to the US Gulf, which totaled 1.1mn t over each of the last three years.

CF also plans to increase its urea exports from Donaldsonville, signaling a shift in the import-reliant US. The US exported just 29,000t in 2015, only 4,500t of which left from Nola.

" UAN is going to be the predominant [export], but a fair bit of urea as well," Will said.

The producer does not expect to ramp up ammonia exports from Donaldsonville because of a new supply contract with phosphate producer Mosaic that goes into effect in 2017. When it sold its phosphate assets to Mosaic in 2014, CF agreed to supply Mosaic with 600,000-800,000 st/yr of ammonia for up to 15 years beginning in 2017.

CF also dismissed the suggestion that once its new production comes online it will move toward a consignment supply model for urea and UAN in the domestic market similar to ones utilized by potash and phosphate producers. Will cited CF's limited attempt at consignment in 2008-09 with two customers, calling it "an absolute, just abject disaster."

"So, our answer is very firmly, no, we're not going to go to a consignment approach. We're going to find the price at which point there is liquidity in the market, and we'll sell it at that price," Will said. "But we're not going to be sort of at the mercy of where the market goes, and potential dishonesty within the channel."

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