CF cuts UAN output, sees spring demand bump

CF Industries has reduced UAN production in response to record low prices but expects a boost to US UAN demand in spring.

UAN production has been cut because low prices have favored upgrading ammonia into urea, DEF and other products, CF said today. But the output cut was not reflected in the company's fourth quarter, with UAN output of 1.96mn st little changed from the same quarter last year. Fourth-quarter urea production dipped year-on-year by 5pc to 1.11mn st.

The company sees the US as oversupplied, with UAN imports set to outpace the country's annual 2mn t deficit. CF said it would continue to price competitively with imports at the coast.

Nitrogen consumption in the US is poised to grow in 2020, the company said, as farm fundamentals support corn planting.

CF expects US farmers to plant 92-94mn acres of corn. Autumn application of ammonia was several hundred thousand tons below normal and will need to be made up in spring, likely boosting urea and UAN demand, CF said. A timely start to fieldwork will be required to give the logistics system time to deliver sufficient ammonia to farmers to enable applications to catch up to annual potential of 4mn st.

The discount UAN holds to urea, which Argus this week measured as a record low of -$1.49/unit N for Nola barges, should support incremental demand growth, according to CF. But the producer also cautioned that farmer preferences and fertilizer practices would limit switching in some cases.

Fourth-quarter profit rose by 12pc from a year earlier to $55mn on lower gas costs. The producer's cost averaged $2.36/mnBtu during the three-month period, down from $3.24/mnBtu a year earlier. Revenue slipped by 7pc to $1.05bn on lower product prices.

By Bede Heren