Dutch fertilizer OCI expects prices to rebound during 2017

06 September 2016 16:38 Source:ICIS News

LONDON (ICIS)--Nitrogen fertilizer prices have slumped to “unsustainably low levels” and will almost certainly rebound over the next 15 months, the head of Dutch chemicals and fertilizer major OCI N.V. predicted on Tuesday.

In comments accompanying the manufacturer's first half results, OCI CEO, Nassef Sawiris, said the 2016 slump in ammonia and urea prices, along with downward pressure on ammonium nitrate (AN) and urea ammonium nitrate (UAN) prices, could not last for much longer.

“Fertilizer prices are currently at what, we believe, are unsustainably low levels,” he said.

“Not only are prices below break-even costs of many producers, mostly in China, the supply-demand balance is expected to tighten as global supply additions start declining significantly from the second half of 2017.

“As one of the lowest-cost producers globally, strategically located near some of the largest end markets for fertilizers in Europe and the US Midwest, OCI is well-placed to benefit from improvements in underlying markets.

Methanol prices already started improving in recent months and demand remains strong, supporting a promising outlook for our methanol operations.”

Adjusted net income fell by two thirds year on year to $45.1m, although two own product volume sold increased by a quarter from the year-ago period to 3.1m tonnes thanks to growth across all regions.

Net revenue fell 14.6% year on year to $982m, a fall attributed to a decline in the selling prices of most products and loss of revenue from a lengthy stoppage at local subsidiary OCI Nitrogen's Geleen site following a September fire at a calcium ammonium nitrate (CAN) plant.

The group remains upbeat about its short and long term prospects, with production expected to “step up in the US and North Africa [Algeria and Egypt] in 2016/2017”.

By Richard Ewing