Yara suggests fertiliser prices are set to rise

Yara’s second-quarter results were 16% lower compared with a year earlier. The largest nitrogen producer in Europe saw its underlying profits (EBITDA) fall 5% to $321m in the second quarter compared to the same quarter last year.

It blamed higher European gas costs and a weaker US dollar which did not completely offset higher volumes and higher sales prices. Total fertiliser deliveries were up 11% compared to a year earlier driven by increased deliveries in Europe. After a slow first quarter, deliveries in Europe picked up in the second quarter and were 18% higher than a year earlier. Yara says it has seen strong order taking since the start of June.

Yara’s fertiliser deliveries in Brazil were 19% lower than a year earlier. Margins in the quarter were somewhat lower than a year ago as higher realised prices were offset by higher gas prices in Europe.

Outlook

Although prices have increased recently, global urea supply increases are strong in 2018, according to Yara. Beyond 2018, the global urea supply-demand balance looks set to get tighter. Nitrogen supply growth is forecast to reduce significantly after 2018, and current nitrogen price levels do not provide economic incentives for new investment, says Yara.

It adds that demand growth is likely to pick up compared with the last three years, as global grain stocks are relatively low, particularly excluding China, and increased production is needed to keep pace with growing consumption. Gas cost has also increased in many regions.