North American Nitrogen Outlook TFI Outlook November 2016 Doug Hoadley
: 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 +1-847-636-1747
Agenda Demand Outlook Changes to Capacity Ammonia Outlook Urea Outlook UAN Outlook Summary
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
World Nitrogen Demand shows consistent growth of near 2% Million tonnes N 180 160 140 120 100 80 60 40 20 0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F 2017/18F Ag Non-Ag
World Nitrogen Capacity growth to slow after 2017 Million tonnes N 9 8 7 6 5 4 3 2 1 0 2015 2016 E 2017 F 2018 F 2019 F East Asia Middle East FSU Africa N. America L.America
World Nitrogen operating rate declines near term, putting pressure on prices 86% 85% 84% 83% 82% 81% 80% 79% 78% 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F 2017/18F Operating Rate
Nitrogen Prices have declined to 7-year lows 800 700 600 500 400 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 Urea Gulf Ammonia Tampa UAN Gulf
USA nitrogen fertilizer demand forecast to decline 1% to 2% next year 14 Million tons N 12 10 8 6 4 2 0 2013/14 2014/15 2015/16E 2016/17F Ammonia Urea UAN Other
North American Nitrogen Capacity growth peaks in 2016/17 Million tons 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Ammonia Urea UAN 2015/16 2016/17F 2017/18F
Ammonia Situation and Outlook
New USA ammonia production will displace some imports, as demand grows 25,000 20,000 15,000 10,000 5,000-2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F 2017/18F Domestic Production Imports
USA offshore ammonia imports to decline, especially from Trinidad Million tons 9 8 Canada Trinidad Russia Venezuela Other 7 6 5 4 3 2 1-2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F
2015/16 Ammonia Cost Curve based on USA supply USA Production Trinidad imports
How high will offshore USA Ammonia exports grow? 300 250 Latin America Canada W. Europe Morocco Other 200 150 100 50-2012/13 2013/14 2014/15 2015/16 2016/17F
Urea Situation and Outlook
New USA urea production will displace about half of current imports by 2017/18 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F 2017/18F Domestic Production Imports
USA urea imports to decline, but Middle East remains very competitive Million short tons 10 Canada Middle East Trinidad China Other 9 8 7 6 5 4 3 2 1-2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F
2015/16 Urea Cost Curve based on USA supply USA production Middle East imports
Will Offshore USA Urea exports increase? 450 400 Latin America Canada W. Europe Other 350 300 250 200 150 100 50-2012/13 2013/14 2014/15 2015/16
UAN Situation and Outlook
New USA UAN production will displace over half of current imports 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F Domestic Production Imports
Lower USA UAN imports will impact Trinidad, Russia, China & Egypt Million short tons 4.5 Canada FSU Trinidad China Other 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F
2015/16 UAN Cost Curve based on supply to North America North American production
USA UAN exports will continue to grow 1,200 Mexico Canada France Other 1,000 800 600 400 200-2011/12 2012/13 2013/14 2014/15 2015/16 2016/17F
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
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 +1-847-636-1747 Go Cubs!