Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Wilting Agrium flags China threat to urea prices

Twitter Linkedin

Agrium highlighted the threat posed by China to urea prices as the fertilizer-to-farm retail group unveiled a 98% slump in earnings, reflecting lower fertilizer values.

The Canada-based fertilizer group blamed "larger than usual" Chinese supplies for snuffing out a recovery in world urea prices.

Urea prices, having bounced by more than one-quarter from a late 2013 low, in the Middle East, have lost roughly half their gains, if retaining more of their gains in benchmark North American and Ukraine markets.

"China exported the same volume of urea in the first two months of 2014 as it did in the first half of 2013," Agrium said, adding that the country's shipments "will be a key driver" of the world market this year.

'Negative risk element'

The comments echo those of Norway's Yara International, the world's top nitrogen group which last week also highlighted the impact of China in undermining urea prices, estimating the country's shipments in the first three months of 2014 at 2.0.m tonnes, up from 800,000 tonnes a year before.

China's exports are, on an fob basis, "taking place below $300 per tonne, indicating lower production costs than in 2013, and perhaps also temporary effects as port stocks are liquidated", Yara said.

"It is also possible that export taxes are not being fully applied," with China operating a seasonal tax regime, with a 15% surcharge up until July 1 on top of the usual $40 per tonne, in a bid to underpin domestic supplies at key demand periods.

Lower prices of anthracite coal, a major raw material for Chinese nitrogen groups, is a "negative risk element for global commodity nitrogen prices longer term", Yara added, if also noting that the country's rising labour costs were "arguably more on the upside" for prices.

'Logistical challenges'

Agrium said that its gross profits in nitrogen tumbled by 43% to $100m in the first three months of the year, undermined by higher gas costs and soft fertilizer sales prices, a reflection also of July's break-up of the Belarusian Potash Company cartel which hit markets of all major nutrients.

In potash itself - in which Agrium is a member of North America's Canpotex, the remaining marketing consortium – gross profits dropped 45% to $46m, while in phosphates, they slumped to $2m from 37m a year before.

The group also echoed rival Mosaic in flagging the role of North American rail hiccups, blamed on the cold winter, in undermining trade, highlighting a slide of 24%, to 136,000 tonnes, in potash export volumes "primarily due to logistical challenges in getting product to Vancouver ports".

"Agrium's first quarter is traditionally our seasonally lowest earnings quarter and this was exacerbated this year by the record cold winter across North America," said Chuck Magro, Agrium's incoming chief executive.

'Sentiment is positive'

Group earnings slid to $3m from $141m a year before, on revenues down 2.4% at $3.08bn, with a rise in profits in farm retail operations, helped by the purchase of Viterra assets, offsetting some of the fall in fertilizer sales.

The earnings equated to $0.08 per share, down from $0.98 per share a year before, but a little bove market forecasts of a $0.05-per-share result.

However, Mr Magro highlighted an improvement to prospects from the rebound in crop prices, thanks to Ukraine unrest, drought in the US South and a slow spring sowings season, saying that "farmer sentiment is positive this spring and we are now seeing good demand for crop input products and services".

Agrium forecast earnings recovering to $3.85-4.35 per share for the April-to-June, including a $0.35-per-share hit from an outage at its Carseland nitrogen plant.

Nonetheless, this figure was below Wall Street forecast for earnings of $4.98 per share for the quarter.

Agrium shares closed down 1.2% at $103.04 in Toronto.


Twitter Linkedin
Related Stories

Festive staff shortages 'likely' as British growers cut ties with UK supermarkets

Faced with mounting concerns over labour shortages and fears they may not be able to fulfil retailer contracts, some British growers have sought to cut ties with UK supermarkets in favour of companies elsewhere in Europe.

Hard Brexit to have 'catastrophic' effect on European meat industry; new report

A hard Brexit will have a ‘catastrophic impact’ on the European meat industry, according to a report published by Europe’s meat industry body, UECBV, as the UK and EU continue negotiations.

Manufacturers stockpile agrochemicals in bid to keep post-Brexit prices down for farmers

Manufacturers of crop protection products are stockpiling agrochemicals in warehouses in a bid to keep input costs down for farmers after Brexit, according to the chief executive of the Crop Protection Association, Sarah Mukherjee.

Dairy groups sidestep shockwaves from GDT price slump

Indeed, shares in the likes of A2 and Beston soar. Still, that does not mean there are no losers from the dairy price falls...
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069