As world supply tightens, US CF Industries plans more ammonia output, less UAN

HOUSTON (ICIS)–US producer CF Industries said given the increasing tightness in gas supplies – especially in Europe – that North American producers should continue to benefit from wide energy spreads and it will place less of a focus on urea ammonia nitrate (UAN) output and more towards ammonia.

Speaking during its quarterly earnings conference call, CF Industries said it has completed a limited UAN fertilizer refill programme which was launched at a price point it estimates was 40% higher than last year.

CF CEO Tony Will said there is less incentive for making UAN volumes right now as the producer is seeing the nitrogen market experience unusual market dynamics in terms of product pricing.

“We’re kind of margin indifferent between the type of product that is being produced, which is unusual that ammonia pricing and margins are so high on a nutrient basis. That’s pretty unprecedented,” said Will.

“But it also means that there’s no reason for us to make UAN and sell it at fill pricing into tanks or inventory at this point when the world is going so short ammonia.”

He said following the narrow fill programme they are now exporting some UAN volumes, but that specifically their focus will be heavily on ammonia and those upcoming exports because the value proposition is better.

“I think that’s going to bode really well for us, not only in the near-term based on what demand and margin opportunities look like, but also when it becomes spring time in the Northern Hemisphere next year, because all of those tons are not going to be sitting in the system and the channel in the US. So, we’re very constructive about what the forward looks like,” Will said.

With UAN imports now free to flow back to the US, with the market typically seeing between 1.5m-2.5m tons arriving annually, CF said Europe is probably a more attractive location than sending it to domestic destinations.

“With what’s going on today with the pricing that’s available in Europe, the tons from Trinidad, which should then, I think, are going more to Europe, and that makes sense. Our tons are being bid at a higher price than the domestic market. And so some of our tons are going to Europe as well as to South America,” said Bert Frost, CF Industries senior vice president.

In comments on the recent tariff case ruling, Frost said, “we won round one, we won round two, then we won round three. Round four was damages. And so they found that there weren’t damages.”

“And I would argue, obviously, that my position is that there have been and without that remedy, there would be future. So we’ll see how this settles out, but we’re positively moving forward and that’s the position,” Frost said.