CF Industries’ Q3 results prove European nitrogen producers at a clear disadvantage

CF Industries released its Q3 earnings this week. The US producer benefited from a double helping of higher downstream nitrogen prices and lower feedstock and energy gas prices.

This resulted in its Q3 EBITDA more than doubling year on year to $308m with the average selling price of urea increasing by $64ps ton over the same period to $259ps ton.

By comparison, Yara, which released its Q3 earnings two weeks ago managed only a 16% year on year increase of its EBITDA to $402m and though Yara also benefited from higher downstream nitrogen prices, its Q3 average gas price was more than two and a half times that of CF’s.

CF reported its average Q3 gas price at $3.16/MMBtu for Q3, down $0.06/MMBtu year on year while in stark contrast, Yara’s average Q3 gas price increased by $2.50/MMBtu year on year to $8.20/MMBtu.

Indeed, the disparity in energy costs is set to continue with Yara expecting even higher prices in the coming months while CF will continue to benefit from an abundance of domestic US gas production.

As such, European producers are far more vulnerable to a lower long term average nitrogen fertilizer prices though at present there is no foreseeable threat to production.

by Michael Samueli, Nitrogen Market Report

E: Michael.Samueli@profercy.com