Lower February Imports Bullish For U.S. Fertilizer Producers

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Includes: AGU, CF, OCIP, RNF, TNH, UAN
by: Chris Damas

Summary

Russian UAN solutions imports were up 46% to February YTD.

If Russian imports are sanctioned, U.S. producers would benefit.

U.S. ammonia imports were down 39% to February YTD.

Russia exported more UAN fertilizer to the US in February (149,000 mt) versus January (135,000) and Russian UAN imports were up 46% for the two months versus last year. Trinidadian UAN imports were up 2.2%. However, total US UAN imports were down 2.5%.

UAN Solutions - U.S. Imports for Consumption Annual + Year-To-Date Data from Jan - Feb.

 
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Quantity Description Country 2010 2011 2012 2013 2013 YTD 2014 YTD Percent Change
YTD2013 - YTD2014
In 1,000 Units of Quantity
metric tons Russia 679 611 681 1,193 194 283 46.2%
. Trinidad & Tobago 446 916 773 652 158 161 2.2%
. Egypt 111 106 200 332 30 34 12.7%
. Canada 396 560 365 302 32 53 66.3%
. Romania 230 442 258 216 35 0 -100.0%
. Netherlands 40 130 130 169 57 9 -84.0%
. Lithuania 72 443 359 108 63 26 -58.2%
. Germany 27 138 73 100 13 0 -100.0%
. Bulgaria 30 19 99 49 0 0 N/A
. Poland 0 0 0 38 0 0 N/A
. Turkey 0 0 42 0 0 0 N/A
. Suriname 0 0 0 0 0 0 N/A
. Oman 0 0 30 0 0 0 N/A
. India 0 0 0 0 0 0 N/A
. Algeria 0 9 0 0 0 0 N/A
. Ireland 1 3 3 0 0 0 N/A
. Saudi Arabia 0 6 0 0 0 0 N/A
. Estonia 106 83 0 0 0 0 N/A
. Mexico 0 0 0 0 0 0 N/A
. Ukraine 67 27 0 0 0 0 N/A
Subtotal metric tons   2,206 3,495 3,011 3,161 582 568 -2.5%
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Sources: U.S. International Trade Commission

Urea imports from Qatar were down in February to 92,000 metric tons from 155,000 tons in January, probably due to planned maintenance downtime at Qafco, but were up 124% YTD over 2013.

Chinese urea imports rose to 55,000 tons in February vs. 26,000 tons in January, but were still down 42.5% versus 2013. Typically Chinese urea goes to India and other non-North American markets.

Urea - U.S. Imports for Consumption Annual + Year-To-Date Data from Jan - Feb.

 
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Quantity Description Country 2010 2011 2012 2013 2013 YTD 2014 YTD Percent Change
YTD2013 - YTD2014
In 1,000 Units of Quantity
metric tons Canada 1,732 1,580 1,428 1,072 242 171 -29.6%
. Qatar 405 393 449 1,059 110 247 124.7%
. China 749 422 345 776 141 81 -42.5%
. Oman 467 376 1,023 553 291 33 -88.5%
. Saudi Arabia 546 587 451 497 121 127 4.8%
. Kuwait 460 365 500 385 130 84 -35.3%
. United Arab Em 78 0 80 360 82 88 6.7%
. Indonesia 33 63 291 345 54 33 -39.0%
. Russia 78 48 490 291 66 15 -76.9%
. Trinidad & Tobago 593 377 369 288 55 60 9.4%
. Bahrain 266 352 381 265 0 85 N/A
. Egypt 546 523 493 130 52 0 -100.0%
. Netherlands 7 8 9 113 18 14 -22.2%
. Venezuela 319 356 294 99 99 0 -100.0%
. Libya 107 66 0 78 0 0 N/A
. Singapore 0 0 0 32 32 0 -100.0%
. Romania 142 162 77 29 0 0 N/A
. Malaysia 0 53 53 27 0 28 N/A
. Argentina 0 0 0 27 27 28 2.9%
. Germany 13 24 28 27 6 7 27.2%
. Georgia 0 0 0 8 8 0 -100.0%
. Poland 6 2 4 5 0 0 -100.0%
. United Kingdom 0 1 1 1 1 0 -100.0%
. Lithuania 0 0 0 0 0 0 N/A
. Latvia 0 0 0 0 0 0 N/A
. Dominican Rep 0 0 0 0 0 0 -60.6%
. Italy 1 0 3 0 0 0 -100.0%
. Japan 0 0 0 0 0 0 36.0%
. Mexico 7 4 10 0 0 0 4.5%
. Liechtenstein 0 0 0 0 0 0 N/A
. Hong Kong 26 0 0 0 0 0 N/A
. India 0 0 0 0 0 0 50.0%
. Niger 0 0 0 0 0 0 N/A
. Ireland 0 0 0 0 0 0 N/A
. Israel 0 0 0 0 0 0 N/A
. France 0 0 0 0 0 0 N/A
. Korea 0 0 2 0 0 0 N/A
. Austria 0 0 0 0 0 0 N/A
. Denmark 0 0 0 0 0 0 N/A
. Chile 0 0 0 0 0 0 N/A
. Bangladesh 23 0 0 0 0 0 N/A
. Ukraine 0 0 0 0 0 0 N/A
. Croatia 20 85 103 0 0 0 N/A
. Estonia 0 0 27 0 0 0 N/A
. Spain 0 1 2 0 0 0 N/A
. Australia 4 1 0 0 0 0 N/A
. Switzerland 0 10 0 0 0 0 N/A
. Slovak Republic 0 0 0 0 0 0 N/A
. Taiwan 0 0 0 0 0 0 N/A
. Chad 4 0 0 0 0 0 N/A
Subtotal metric tons   6,631 5,860 6,914 6,469 1,536 1,101 -28.3%
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The US imported 39% less ammonia in the first two months of February, probably due to severe winter weather conditions which prohibited early field application versus the warm winter last year.

Traditionally the largest suppliers, Trinidad exported 212,000 mt of ammonia in February versus 236,000 in January, and Canada exported 54,000 tons in February, versus 85,000 tons in January.

Russia and Ukraine supplied 200,000 tons of ammonia to the US last year to February, but so far no ammonia imports have appeared this year.

Anhydrous Ammonia - U.S. Imports for Consumption Annual + Year-To-Date Data from Jan - Feb.

 
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Quantity Description Country 2010 2011 2012 2013 2013 YTD 2014 YTD Percent Change
YTD2013 - YTD2014
In 1,000 Units of Quantity
metric tons Trinidad & Tobago 4,453 3,773 3,770 3,460 543 448 -17.6%
. Canada 1,012 1,161 1,129 1,213 217 139 -35.6%
. Ukraine 478 588 303 461 92 0 -100.0%
. Russia 281 546 538 430 108 0 -100.0%
. Venezuela 88 234 206 156 47 65 39.8%
. Saudi Arabia 0 57 117 79 0 0 N/A
. Indonesia 36 42 57 45 23 0 -100.0%
. Mexico 55 31 86 40 0 0 N/A
. Latvia 76 38 0 35 23 0 -100.0%
. Estonia 46 109 0 30 13 0 -100.0%
. Brazil 34 13 7 25 0 0 N/A
. Colombia 27 5 6 23 5 6 9.4%
. Argentina 0 0 0 15 0 0 N/A
. Switzerland 0 0 0 10 0 0 N/A
. Cayman Is 0 0 0 6 6 0 -100.0%
. Korea 1 5 4 3 0 0 -1.5%
. Germany 0 0 0 0 0 0 N/A
. Taiwan 0 1 0 0 0 0 N/A
. Japan 0 9 0 0 0 0 N/A
. Belgium 0 1 0 0 0 0 N/A
. Turkey 0 35 23 0 0 0 N/A
. United Kingdom 0 0 0 0 0 0 N/A
. China 0 0 0 0 0 0 N/A
. Egypt 90 162 49 0 0 0 N/A
. Libya 20 0 0 0 0 0 N/A
. Oman 47 0 0 0 0 0 N/A
Subtotal metric tons   6,742 6,811 6,295 6,032 1,078 658 -38.9%
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According to Farm Futures magazine, ammonia prices are firming up in the Midwest corn belt after a spike in Tampa benchmark prices of $120 USD/mt to $580 late last month.

Retail ammonia was being offered at $732.50/st up $97.50 according to the USDA's survey of Iowa crop production costs as of April 8. The State of Iowa is the leading corn grower in the Union and corn needs the most nitrogen of all the row crops grown.

Seasonal UAN solutions prices are supported by the bump in ammonia prices. Gulf wholesale UAN-32% was $282.50 and in the Midwest, retail UAN solutions were steady at $393.50/short ton on average.

These sharply higher ammonia and steady seasonal UAN prices have not been completely reflected in the equity prices of some of the most leveraged nitrogen producer stocks and MLPs.

Included in this group are Terra Nitrogen LP (NYSE:TNH), CVR Partners (NYSE:UAN), Rentech Nitrogen Partners LP (NYSE:RNF) and OCI Partners (NYSE:OCIP).

CF Industries (NYSE:CF) should also benefit although the stock has had a good run. Agrium Inc. (NYSE:AGU) recently curtailed a plant in Alberta, losing an estimated 20,000 tons of ammonia production, but should benefit due to its largest Canadian ammonia production and extensive North American retail ammonia application services.

If Ukrainian fertilizer exports are curtailed due to a lack of natural gas supply from Russia, about six million tons of capacity could be affected. Recently, the largest private nitrogen producer Group DF, indicated three of its four plants were operating at capacity. However, these plants were producing mainly ammonium nitrate for the domestic growing season. Ammonium nitrate is not exported to from the Ukraine to the US due to a countervailing duty action.

Russian imports of ammonia and UAN could be prohibited if the US chooses to impose trade sanctions, benefiting domestic producers.

The first USDA Crop Progress report was delayed a day and released yesterday afternoon. It showed parts of the US winter wheat crop in bad condition similarly to last year, caused by excessive drought and cold.

The April USDA WASDE and Crop Production reports are going to be released today at Noon EST. Corn futures are mixed, soybeans are rallying and wheat futures are down modestly this morning. Higher soybean prices could draw acres from corn, reducing nitrogen fertilizer demand and mitigating some of the beneficial impact of tighter nitrogen imports.

Disclosure: I am long TNH, OCIP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.