CF expects global demand to boost nitrogen market

CF Industries said stronger demand in Brazil and India, coupled with lower exports from China, will boost global nitrogen demand through 2018.

Brazil imports during the second half of the year are forecast to rise from a year ago and offset lower imports from the first six months of 2018. The anticipated closure of the Petrobras' two urea plants in August also supports the country committing to more imports to offset lost output.

In India, MMTC issued a purchase tender that closed on 1 August. Preliminary results indicate that about 544,000t of urea was offered.

CF said environmental regulations in China has curtailed urea production this year, which has sharply reduced exports by 74pc year-over-year to 710,000t between January-June. Reduced output from China signals a longer-term trend for CF, who estimates that 7.1mn t/yr of nameplate urea capacity will be taken off line in Brazil, China and Kuwait. If realized, the closures would offset a projected 4.3mn t/yr urea capacity start up in 2018, the company said.

CF's total quarterly sales rose from a year earlier, driven by delayed spring demand. The rise in sales volumes, low feedstock costs and rising nitrogen prices resulted in a $148mn profit for CF during the second quarter.

Urea sales volumes climbed by 17pc year-over-year to 1.43mn st during the second quarter. Additional production from the company's Port Neal, Iowa, facility and higher warehouse inventories contributed to the overall rise in sales.

The company's urea production was nearly stable from a year ago at 1.23mn st. Year-to-date (January-June) production climbed by 6pc year-over-year to 2.38mn st.

CF's average sales price for granular urea rose by $39/st from a year ago to $251/st. Urea prices through the first half of the year averaged about a $30/st premium from the prior year at $258/st.

Postponed spring demand also fueled higher UAN sales volumes during the second quarter. CF sold 1.82mn st of UAN during the three-month period, marking a 12pc increase from a year ago. Stronger year-over-year demand also supported an $11/st increase in average sales prices to $186/st. Sales prices through first half of the year averaged $178/st for CF, up by $5/st from a year ago.

UAN production declined during the quarter by 10pc from a year ago to 1.56mn t, amid lower gross ammonia production. Year-to-date production also declined by 5pc year-over-year to 3.36mn st.

Decreased ammonia production and tight terminal inventories through the first six months of the year resulted in reduced sales volumes during the second quarter.

Gross ammonia production declined by 7pc year-over-year to 2.46mn st. Sales volumes fell at a similar rate by 5pc from a year ago to 1.1mn st. Total sales volumes through first half of the year lagged behind last season by 15pc at 1.76mn st.

But higher sales prices during the quarter potentially offset reduced output. Average sales prices during the three-month period climbed by $4/st from a year ago to $342/st. CF's ammonia prices averaged $333/st during the first six months of the year, up by $9/st year-over-year.