Poland's ZAP facing mixed ferts, melamine and capro outlook

01 March 2013 15:35  [Source: ICIS news]

LONDON (ICIS)--Poland's Zaklady Azotowe Pulawy (ZAP) is facing a good outlook for fertilizers, a questionable melamine business horizon and difficult caprolactam (capro) prospects, the company said on Friday.

“The fertilizer business is predictable. It remains good in terms of price and volume, and in the current fiscal year [which for ZAP is the 2012/2013 year that runs to 31 June 2013] we should repeat the volumes achieved in the previous year,” said Marek Kaplucha, the ZAP management board member responsible for sales, marketing and logistics.

Although EU anti-dumping duties on Ukrainian fertilizer exports were being gradually relaxed, fertilizer companies in Ukraine are not very competitive compared to Polish producers, due to the inefficiency of their installations, ZAP noted.

“In Poland we need 845 cubic metres of gas to produce one tonne of ammonia, but in Ukraine the figure is 1,300 cubic metres,” Kaplucha said.

Larger problems would be posed if the EU lowered its tariff barrier against Russian exports of ammonium nitrate (AN) – a possible extension of the current barrier, which expires on 31 July, is under review – and by the elimination of tariffs on fertilizers from the US, he added.

Russian fertilizer producers enjoy much cheaper gas than their Polish counterparts because of Russia's vast natural gas resources, while the US's fertilizer makers are accessing cheap gas thanks to the shale gas boom, Kaplucha said.

With an eye on such threats on the horizon, ZAP had started to diversify its range of fertilizers, for instance by investing in specialty products with sulphur content, a type of fertilizer that is missing from the Polish market, he added.

The fertilizer segment generates around two-thirds of ZAP's revenues.

ZAP's melamine business, which accounts for approximately one-fifth of the company's revenues, saw price surges late last year and during the first two months of this year due to planned and unplanned shutdowns at rival businesses in countries including Germany, ZAP said.

However, it was difficult to estimate how long this trend might continue, it added.

The capro business, meanwhile, has been hit by market oversupply and price falls caused by 600,000 tonnes of new production capacity coming onstream in China last year, as well as benzene feedstock price increases.

Capro generates about 17% of ZAP's sales revenues. About 90% of ZAP's capro is sold to Asia.

ZAP said it is working on capro business consolidation plans with Polish chemical group Zaklady Azoty Tarnow (ZAT), a fellow capro producer that since mid-January has owned 83.7% of ZAP and will bid to acquire the remaining shares in the company in a share call to be launched on 7 March.

By: Will Conroy
+44 20 8652 3214

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