RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Urea prices to stay under pressure, amid 'strong oversupply' - Yara

Twitter Linkedin

Yara International warned that urea prices, at their lowest in more than a decade, will remain under pressure thanks to a "strong oversupply", which had squeezed the group's margins, cutting profits below market expectations.

The Norwegian-based group, the world's largest nitrogen fertilizer producer, said that the benefit to values from weaker Chinese exports, down 32% at 11.3m tonnes in the July-to-May period, was being "effectively offset" by increased output in other countries.

"Strong urea capacity increases outside China are weighing on global urea prices, as non- Chinese fob [export] prices are reduced in order to displace Chinese exports," Yara said.

The group flagged in particular dynamics in the much-watched US Gulf region where, prices are "remain depressed" even compared to weak global values, which have fallen below $200 a tonne to hit their lowest level on data going back a decade.

"Urea supply to the [US Gulf] exceeds demand, not adjusting sufficiently to increased US nitrogen production," which has been boosted by the shale gas revolution, with energy a key need for nitrogen manufacturers.

'Strong over-supply'

"Our industry is facing strong oversupply of urea and other commodity nitrogen products," said Svein Tore Holsether, the Yara chief executive.

And the group forecast that the pressure on prices would "persist also into 2018, given the significant number of new plants entering the market over the next year".

The group forecast urea production capacity additions this year, outside China, of 8.1m tonnes – well ahead of the roughly 3m tonnes at which demand has historically grown.

The US, with 2.4m tonnes of fresh capacity, will lead the increase, ahead of Iran, where additions will total 1.4m tonnes.

The increases follow a 5.1m tonnes in extra capacity last year, again led by the US, with 1.0m tonnes.

Upmarket move

Yara said that it was itself increasing its own production capacity – but of premium products, for which it flagged "growing demand".

"We are focused on improving our operations and making growth investments primarily within premium fertilizer and industrial applications, where margins are more stable," Mr Holsether said.

Nonetheless, he acknowledged that "lower commodity nitrogen margins" were behind a 77% slump to NOK699m in earnings for the April-to-June period, on revenues down 9.3% at NOK23.47bn.

Analysts had expected the group to report earnings of NOK1.21bn.

Chinese woes

The group pegged at $201 a tonne the average urea price during the quarter, as measured in Egypt, a drop of 3% year on year, although Black Sea ammonia prices saw a rise of 3% to $282 a tonne.

By contrast, Chinese urea prices have been on the rise of late, standing at about $230 a tonne on the export market, reflecting higher costs of coal, the key raw material for the country's plants.

"From China, export costs are higher than a year ago, primarily due to increased coal prices.

"This cost inflation resulted in substantial production curtailments in China," where production for the July-to-May period, the first 11 months of the 2016-17 fertilizer year, is down 19% at 57.2m tonnes.

Yara shares stood 4.2% lower at NOK316.30 in morning deals in Oslo.

By Mike Verdin

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

© Agrimoney.com 2017

Agrimoney.com 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