China's fertilizer industry, which calls the tune in setting prices of some key nutrients, may not be as much of a threat as had been feared, Yara International said, noting "tight" world markets for its products.

The Norwegian group, the world's biggest nitrogen fertilizer producer, which in July warned over the risk of a jump in Chinese exports to dent urea prices, on Tuesday highlighted their importance in the market.

 "Global nitrogen fertilizer prices will be set by the balance between Chinese urea export availability and the farmers' increased willingness and ability to pay a higher price," Yara chief executive Jorgen Ole Haslestad said.

However, while Chinese urea shipments doubled year on year to 1.0m tonnes during July and August, after a seasonal cut in export taxes, with 2.0m tonnes sold for September and beyond, there are question marks over how long it can keep up the pace of supplies.

Chinese intentions 

A drive to cut pollution, and save on fuel, has seen Chinese urea production fall "steadily" since July, while higher prices of coal, a key raw material for the energy intensive nutrient, have risen.

This has fed through into higher domestic urea prices, eroding the global competitiveness of the supplies, and the incentive on producers to seek foreign sales.

"Even more important is the extent to which Chinese central authorities will limit urea exports to secure supply to domestic agriculture, improve a tight energy balance and reduce emissions," Mr Haslestad said.

China uses export taxes - which were cut from 100% to 7% in July, spurring to the summer boom in trade – to control shipments of the nutrient.

Furthermore, Mr Haslestad flagged unspecified "indications" that China may cut its ambitions for fresh nitrogen capacity, with construction of new plants worldwide plagued by delays.

Better results 

The comments came as Yara unveiled underlying earnings of NOK1.44bn for the July-to-September quarter, up more than 10 times on those a year before, helped by the improvement in nitrogen prices.

"Fertilizer margins improved, sales volumes increased, and our plants ran at close to full capacity," Mr Haslestad said.

Revenues rose 15.0% to NOK16.5bn, with earnings before interest, tax, depreciation and amortisation near-tripling to NOK2.49bn, some NOK130m ahead of analysts' expectations.

And fertilizer groups looked set to continue to benefit from improved crop prices fostered by disappointing harvests.

"The decline in grain production estimates has increased grain prices sharply and boosted fertilizer demand and prices," Mr Haslestad said.

"The shortfall in grain production demonstrates the need for a continuous increase in agricultural productivity, with more and better use of fertilizer as an important part of the solution."

Yara shares closed 1.5% lower at NOK281.00 in Oslo on a weak day for stocks.