Ammonia market turbulence shows no sign of easing as supply/demand headwinds trigger fresh price falls
Nutrien’s sales volumes in the first nine months of 2021 decreased compared to the same period in 2020, due to more planned turnaround activity, temporary production outages, and lower inventory volumes at the beginning of 2021 compared to the same period in 2020. Meanwhile, the cost of goods sold per tonne increased during the third quarter and first nine months of 2021 due to higher natural gas costs, production outages at Nutrien’s lower-cost North American facilities, and a stronger Canadian dollar.
Natural gas prices were higher during Q3 as well as the first nine months of 2021, owing to higher North American gas index prices and increased gas costs in Trinidad where gas prices are linked to ammonia benchmark prices. Overall gas costs during Q3 2021 were at $4.78/mmBtu, more than double that during the same period last year when overall gas costs were $2.24/mmBtu, the producer commented.
The producer’s third quarter net earnings hit a record $726m, while it’s adjusted EBITDA was $1.6bn.
The company attributed its greater net earnings and adjusted EBITDA in the third quarter and first nine months of 2021 to higher net realized selling prices across its nutrient businesses, as well as higher potash sales volumes and earnings growth in Nutrien’s Ag Solutions segment.
It’s nitrogen segment saw adjusted EBITDA climb 173% higher in the third quarter to $532m, and 70% in the first nine months this year to $1.39bn, versus the same periods in 2020, primarily due to higher net realized selling prices which more than offset higher natural gas costs, the company noted.
Nutrien’s ammonia sales more than doubled during Q3 2021, up to $368m from $105m during the same period of last year. Urea sales climbed 64% from $193m to $316m, while sales of solutions nitrates and sulphates gained from $143m to $289m over the period. Nutrien commented that its sales volumes of nitrogen products all increased in Q3 2021 due to strong market demand, as well as higher availability from its facility in Trinidad.
The producer notes that it completed phase 1 of its nitrogen brownfield expansion projects during Q3 this year and anticipates benefiting from this expanded capacity in 2022. Nutrien has also commenced a second phase of brownfield projects that is expected to add around 500,000t of annualized, low-cost and environmentally efficient production capacity over the next few years.
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