US CF Industries projecting constructive near-term global nitrogen supply and demand balance

HOUSTON (ICIS)–Global nitrogen industry fundamentals point to a constructive global nitrogen supply and demand balance in the near term as well as there being a tightening global supply and demand balance in the medium term, CF Industries said in its latest fertilizer market outlook.

The US fertilizer producer expects that in the near term global nitrogen demand will remain resilient and be driven by continued strong agriculture applications and recovering industrial demand.

Additionally, there is a view that the key producing regions will continue to face challenging production economics because of the cost and availability of natural gas.

For North America, CF said their management believes nitrogen channel inventories remain below average amid a strong fall ammonia run and nitrogen imports to the region being below the three-year average.

There was also some production downtime in the region during Q4.

Right now, CF is projecting 91 million acres of corn will be planted in 2024 and that North American farm profitability will improve in 2024 compared to 2023 as lower crop prices are offset by lower input costs.

As a result, the producer expects nitrogen demand in North America for spring applications to remain strong.

Looking at Brazil, CF highlighted that imports of urea were at 7.3 million tonnes in 2023, an increase of approximately 3% year on year.

The producer said it expects Brazil to remain the largest importer of urea globally despite reported farmer caution regarding fertilizer purchases during this growing season as they evaluate the potential impact of poor weather conditions on the upcoming safrinha plantings.

Another key market will be India which CF management sees as remaining a significant importer of urea this year even as their domestic production increases with higher operating rates at its new nitrogen facilities.

Imports of urea in 2024 are projected to be in a range of 6 million to 7 million tonnes.

For Europe there is challenges ahead as CF noted that approximately 40% of ammonia and 25% of urea capacity were reported in shutdown or curtailment as of early January with high natural gas prices and lower global nitrogen values primary factors.

The producer said it believes that ammonia operating rates and overall domestic nitrogen product output in Europe will remain below historical averages over the long-term given the region’s status as the global marginal producer.

It therefore expects nitrogen imports of ammonia and upgraded products to the region to be higher than historical averages.

Regarding China, the company said their expectations are that urea export controls and inspections imposed on domestic producers will remain in place to prioritize their output for domestic consumption.

CF does anticipate the government will allow windows during the year that will enable producers to export with volumes coming from China calculated around 4 million tonnes for 2024.

In Trinidad, the level of ammonia production in recent years has been approximately 1 million tonnes lower annually compared to the 2018-2020 average.

The producer is projecting ammonia production to remain below average due to anticipated higher natural gas prices and lower natural gas availability for facilities.

Looking at Russia CF is forecasting that ammonia exports will continue to remain lower compared to prior years due to geopolitical disruptions and the resulting closure of the ammonia pipeline.

It did say from its view that the exports of other nitrogen products are at pre-war levels, with product moving to countries willing to purchase Russian fertilizer, including Brazil and the US.

Viewing the near and medium-term outlooks, CF said the significant energy cost differentials between North American producers and high-cost producers in Europe and Asia are expected to persist.

As such the company believes the global nitrogen cost curve will remain supportive of strong margin opportunities for low-cost North American producers.

Longer term, CF said their management expects the global nitrogen supply-demand balance to tighten as global nitrogen capacity growth over the next four years is not projected to keep pace with expected global nitrogen demand growth of approximately 1.5% per year.

Also, global production is expected to be further constrained by continued challenges related to natural gas cost and availability.