Strengthened demand from farmers in the likes of Europe and
the US is enabling nitrogen markets to ride out a jump in shipments from China –
spurred by shipper getting round tax increases, Yara International said.
China's urea production rose 2.6m tonnes in the October-to-December
quarter, compared with the same period of 2011, "helped by lower production
costs, better feedstock availability and increased capacity".
The increased fuelled a jump of 170% to 4.3m tonnes in
Chinese urea shipments – despite the start on November 1 of a period of high export
taxes, of 77%, set to last until the start of July, when duties are expected to
fall to 2%.
Indeed, China's urea exports more than doubled in November,
to 1.45m tonnes, and topped 1.6m tonnes in December – the highest since at
least 2010 for any month, even ones with low export taxes.
Nonetheless, the benchmark Black Sea urea price - while down
some 14% from the year before, on a quarter-average basis, to $385 a tonne – had
proved "stable, despite record Chinese supplies", Yara said.
"Strong grain prices continue to support global nitrogen
demand, even absorbing a large increase in supply from China," said Jørgen Ole
Haslestad, the Yara chief executive.
Indeed, global nitrogen demand "has strengthened
signiﬁcantly during the second half of 2012 and into 2013, balancing the strong
increase in supply from China", the group said, adding that the high export tax
looked set, belatedly, to shut off this source of supplies.
"Minimal exports are expected in the ﬁrst half of 2013."
China's export volumes would also be depressed "in the event
of a more strict enforcement of the November 1 tax increase, and by potentially
reduced utilisation rates linked to increased air quality concerns".
Use of bonded warehouses, to which stock is delivered before
tax deadlines, allows exporters to lessen the impact of China's seasonal hikes
in export duties.
Demand growth has been seen in regions such as Western Europe,
where nitrogen deliveries recovered from a slow third-quarter to jump 15%, year
on year, in the October-to-December period.
US deliveries rose 7%, while urea volumes in Brazil rose
17%, ending a soft year on a strong note.
The market has also been tightened by shortages of gas – a major
raw material for nitrogen plants which do not rely on coal – to plants in Egypt
Egypt's exports during the November 2011-to-October 2012
period, at 3.0m tonnes, represented only 61% of potential capacity.
Volumes up, profits
Yara's own nitrogen fertilizer deliveries soared 19.0% to 5.0m
tonnes during the quarter, led by a 52% jump in urea sales, while strong
European demand lifted nitrate volumes by 25%.
Weaker prices of many products, including urea, limited the rise
in revenues to 1.1%, taking them to NOK21.0bn.
While earnings fell 36% to NOK2.17bn, depressed by higher
raw material costs and higher tax payments, the drop had been expected by
investors, who nudged Yara shares 0.5% lower to NOK295.50 by the close of trading in