North American Nitrogen Outlook

Transcription

1 North American Nitrogen Outlook TFI Outlook November 2016 Doug Hoadley

2 : Over 25 years of experience in the fertilizer industry Expert on the nitrogen, phosphates and potash industries Detailed knowledge of the competitive situation for North America Global competitive costs analysis for N, P & K Feasibility studies for new projects, expansions and M&A Strategic planning Economic and marketing analysis d_hoadley@hotmail.com

3 Agenda Demand Outlook Changes to Capacity Ammonia Outlook Urea Outlook UAN Outlook Summary

4 Key Nitrogen Drivers Low grain prices = slow demand growth New nitrogen capacity puts pressures prices Collapse in energy values plus currency devaluations results in lower costs for marginal producers Cash costs for most producers have fallen Cheap freight shrinks the globe China, China, China

5 World Nitrogen Demand shows consistent growth of near 2% Million tonnes N / / / / / / / /17F 2017/18F Ag Non-Ag

6 World Nitrogen Capacity growth to slow after 2017 Million tonnes N E 2017 F 2018 F 2019 F East Asia Middle East FSU Africa N. America L.America

7 World Nitrogen operating rate declines near term, putting pressure on prices 86% 85% 84% 83% 82% 81% 80% 79% 78% 2009/ / / / / / / /17F 2017/18F Operating Rate

8 Nitrogen Prices have declined to 7-year lows Urea Gulf Ammonia Tampa UAN Gulf

9 USA nitrogen fertilizer demand forecast to decline 1% to 2% next year 14 Million tons N / / /16E 2016/17F Ammonia Urea UAN Other

10 North American Nitrogen Capacity growth peaks in 2016/17 Million tons Ammonia Urea UAN 2015/ /17F 2017/18F

11 Ammonia Situation and Outlook

12 New USA ammonia production will displace some imports, as demand grows 25,000 20,000 15,000 10,000 5, / / / / / / / /17F 2017/18F Domestic Production Imports

13 USA offshore ammonia imports to decline, especially from Trinidad Million tons 9 8 Canada Trinidad Russia Venezuela Other / / / / / / /17F

14 2015/16 Ammonia Cost Curve based on USA supply USA Production Trinidad imports

15 How high will offshore USA Ammonia exports grow? Latin America Canada W. Europe Morocco Other / / / / /17F

16 Urea Situation and Outlook

17 New USA urea production will displace about half of current imports by 2017/ / / / / / / /17F 2017/18F Domestic Production Imports

18 USA urea imports to decline, but Middle East remains very competitive Million short tons 10 Canada Middle East Trinidad China Other / / / / / / / /17F

19 2015/16 Urea Cost Curve based on USA supply USA production Middle East imports

20 Will Offshore USA Urea exports increase? Latin America Canada W. Europe Other / / / /16

21 UAN Situation and Outlook

22 New USA UAN production will displace over half of current imports 2009/ / / / / / / /17F Domestic Production Imports

23 Lower USA UAN imports will impact Trinidad, Russia, China & Egypt Million short tons 4.5 Canada FSU Trinidad China Other / / / / / / /17F

24 2015/16 UAN Cost Curve based on supply to North America North American production

25 USA UAN exports will continue to grow 1,200 Mexico Canada France Other 1, / / / / / /17F

26 Summary New nitrogen capacity peaks in 2016; the global balance starts to return in 2018 and 2019 Fertilizer demand growth will be slow unless grain prices rally; industrial growth should remain strong New capacity, lower energy values and currency devaluations has put pressure on nitrogen fertilizer prices The cash cost of the marginal supplier to the USA will decline as high-cost suppliers are no longer competitive New North American production will result in lower ammonia, urea and UAN offshore imports, but.imports will continue USA offshore exports will expand for UAN & ammonia and probably urea

27 Appendix Sources are mainly TFI, IFA, & Company Reports Forecasts are by Years are USA fertilizer years (July-June) Data are short tons, mostly in 000 except where noted otherwise Costs are US$/ton, delivered to US Gulf for Offshore suppliers We do not guarantee the accuracy of any assumptions, data or forecasts More questions? Call Doug at Go Cubs!