Specialist
Former executive at Yara International
Agenda
- Natural gas price and availability – impact on Yara (OSL: YAR) plant closures
- Expectations for ammonia price development and impact on plant reopenings
- Fertiliser and CO2 availability and expected impacts
- EU Fertilising Products Regulation
Questions
1.
Can you estimate how much natural gas demand reduction there will be over the 2021-22 winter? Yara has curtailed 40% of its European capacity. BASF and CF have curtailed production as well. Why has this happened and how much capacity could be offline over this period?
2.
How much demand destruction has there been for tonnes of fertiliser at current pricing levels?
3.
You mentioned there will be fertiliser shortages, so the demand destruction is less than the curtailment. Is that right?
4.
How much undersupply could there be in the market?
5.
You said you don’t expect the curtailment to end until at least January 2022. Could there be any further curtailment of the existing capacity?
6.
How much existing capacity in Europe is curtailed? Could we go to 100% curtailment or will certain capacity in Europe always be running?
7.
Yara said it offset its curtailment in Europe through using lower-cost plants outside the region. How much would you say it has managed to offset from other plants? Will there essentially be a market balancing from capacity outside of Europe coming in?
8.
What’s the total ammonia storage capacity in Europe? Are there meaningful inventory levels that can be used to offset curtailments?
9.
What’s your ammonia pricing outlook? There is limited inventory and you touched on prices between USD 600 and USD 800. I had Platts pricing for northwestern European ammonia of USD 760. Can you comment on the margin-producing ammonia relative to the natural gas cash price?
10.
How might ammonia pricing develop? Could farmers come in, purchase more urea and push ammonia pricing up or have we hit the peak ammonia price?
11.
Might ammonia prices increase even further or be sustained if food prices were to follow? What’s the likelihood of that happening?
12.
What are your thoughts on China and the US’s ammonia markets and how they impact the European market? Do meaningful importing changes start at the prices we’ve discussed? Perhaps exporting to Europe isn’t possible.
13.
We touched on ammonia curtailment, but how is urea production being impacted? Are they in lockstep or is there a delay before urea production is curtailed?
14.
What’s the mechanism between urea and ammonia prices?
15.
How has Yara increased its prices to more than offset increased energy costs? Is this largely in the premium sector or is it also within the ammonia and urea elements?
16.
How have energy prices impacted the cash cost of NPK [nitrogen, phosphorus and potassium] production? How do you expect them to develop and therefore develop the margin for NPK products? Why is there a squeeze on urea and ammonia margins but NPK margins can expand?
17.
I’d like to clarify where Yara’s so-called EBITDA improvement will reflect the higher prices more than offsetting increased energy cost. In which product categories can the company pass through even more than the energy costs? It seems the urea, ammonia and NPK products have either 100% or reduced margins.
18.
How do you expect the (audio distorts 34.28) associated with volatile natural gas prices to impact Yara’s capital allocation in the medium term? Do you expect capital spend delays in any areas or more caution around building new plants?
19.
What is Yara’s ability to deal with volatile gas prices compared to its peers’?
20.
Could the energy crisis cause delays or concerns around allocating capital towards projects such as green ammonia?
21.
Could Yara divest any assets? Are there any meaningful market buyers for those assets?
22.
Why do you think Yara’s industrial nitrogen business IPO was shelved? What are your expectations for that returning to the market?
23.
I believe CO2 has dropped from EU ETS [Emissions Trading System] pricing highs in the last month or so. What does CO2 pricing mean for the European assets, particularly without cross-border CO2 credits? What are these assets’ longevity? Will there be assets around the border exporting to Europe to support farmers in the market?
24.
How much would USD 100-per-tonne CO2 increase the cost of food and stores if all the cost was passed through to the final consumer?
25.
How might the gas crisis and capacity curtailment impact crop yields in 2022?
26.
What do you expect Yara’s margin to be in the 2022-23 season?
27.
If gas prices normalise, what would be your pricing expectations? How much higher would you expect pricing to be due to low inventories?
28.
Might 2023-24 return to normal or will it also be a higher-margin year?
29.
How much of the total CO2 supply is a by-product of ammonia production and to what extent is there a CO2 shortage in Europe? What operational impacts might there be, particularly across the food sector?
30.
You said Yara will likely pull through this winter given the high season for CO2 demand is in summer. How close do you think supply and demand will come? Might there be a period of tightness?
