US CF Industries projects global nitrogen balance will remain constructive in the near-term

HOUSTON (ICIS)–CF Industries said in its latest nitrogen fertilizer market outlook that in the near-term it expects the global supply-demand balance to remain constructive, led by nitrogen import requirements through year-end for Brazil and India.

The producer also anticipates there will be continued wide energy spreads between North America and high-cost production in Europe.

The fertilizer producer said from the end of the second quarter of 2024 into the third quarter of this year this segment of fertilizers has faced challenges which include gas curtailments in Egypt and Trinidad, along with scheduled outages and a lack of substantial urea export availability from China.

These factors the producer said have actually been beneficial for supporting global nitrogen pricing during a period of year that typically sees lower prices and low global shipments as demand shifts from the northern hemisphere to the southern hemisphere.

“Over the medium-term, significant energy cost differentials between North American producers and high-cost producers in Europe and Asia are expected to persist. As a result, the Company believes the global nitrogen cost curve will remain supportive of strong margin opportunities for low-cost North American producers,” said CF Industries.

“Longer-term, 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 for traditional applications and new demand growth for clean energy applications.”

It further said that global production is expected to remain constrained by the ongoing challenges related to cost and availability of natural gas.

Looking specifically at North America the producer said it believes nitrogen channel inventories in the region for all products are below average based on strong demand for urea and UAN during the spring application season and higher-than-expected planted corn acres.

CF added that reported UAN and ammonia fill programs achieved prices above 2023 levels despite softening farm economics in the region as corn and soybean prices have fallen due to higher forecasted production in 2024 in the US and Brazil.

For Brazil urea consumption is forecasted to increase 3% year over year to more than 8 million tonnes, supported by improved supply availability and lower global urea prices.

Urea imports to Brazil in 2024 are expected to be in the range of 7 million to 8 million tonnes as domestic production remains limited.

Regarding India CF said the country is expected to be active importing urea through the second half as the country secured lower-than-expected volumes in its two most recent tenders.

In addition, urea consumption is expected to rise to support rice, wheat and other crop sowings.

Currently CF expects urea imports to India in 2024, including volumes supplied on a contractual basis, to be in a range of 5 million to 6 million tonnes as there are recently revitalized plants and new facilities operating at higher rates.

For Europe, the producer said there was approximately 25% of ammonia and 30% of urea capacity reported in shutdown or curtailment mode in early July.

CF said because of this situation it anticipates ammonia operating rates and overall domestic nitrogen product output in Europe will remain below historical averages over the long-term, especially given the region’s status as the global marginal producer.

As a result, the company does expect imports of ammonia and upgraded products to the region to be higher than historical averages.

Looking at China, CF said the ongoing urea export policy continues to cause limited urea export availability from the country.

For the first six months of 2024, China exported 140,000 tonnes of urea, which is 86% lower year-on-year.

For Russia, the producer said their view is that urea exports will increase this year due to the start-up of new urea granulation capacity and the willingness of certain countries to purchase those volumes, including the US and Brazil,

Russian ammonia exports are projected to rise with the completion of the country’s Taman ammonia terminal in the second half, though annual ammonia export volumes are projected to remain below pre-war levels.