The current fertilizer market is difficult to call, but the longer-term outlook is for tighter nitrogen product availability, global fertilizer manufacturer Yara International stated at the first half of its 2019 financial year.
The Norwegian-headquartered company cited greater global grain market uncertainty, particularly after the US corn crop was late to be planted and then faced challenging spring weather.
The US Department of Agriculture (USDA) has forecast a global grain deficit for 2019-20 season, with an ending stocks-to-use ratio of 107 days, 3 days lower than the figure at the start of the season.
Excluding China, the projected ending stocks-to-use ratio at 58 days of consumption is down by a day.
Yara’s second quarter nitrogen deliveries in Western Europe were 9% higher year-on-year, with full season deliveries down by 3%. Brazil has imported 2.5m tonnes of urea in the first half of 2019, up from 2.3m tonnes at the same stage of 2018, and second quarter urea production in China is 2% higher.
Strong sales are reported in India, with increased import demand making up for static domestic production and low stocks.
Tighter urea supply/demand balance
Yara said global nitrogen prices are “currently volatile”, but the global urea supply-demand balance “looks set to tighten going forward, as nitrogen supply growth is declining and lead times for new projects are typically three to five years”.
It added that fertilizer demand growth is likely to pick up as an increase in grain production will be needed to keep pace, at a time when global grain stocks are relatively low.
The Norwegian multinational returned a second-quarter net income of $230 million after the prior year’s net loss of $211m in the same period. The recovery reflects higher production volumes and higher nitrogen margins. Yara’s ammonia production was up 6% and finished fertilizers by 4%.
“Yara’s results are significantly improved in the second quarter, with EBITDA excluding special items 62% higher, an improvement mainly driven by higher production and lower energy costs,” commented Yara president and CEO Svein Tore Holsether.
"I am pleased to see Yara-produced deliveries increase across all main product groups, as our growth projects generate increased volumes and revenues.”