Acron Group’s Fertiliser Output Up Increases 16% in 2017

22 January 2018

  Group’s Consolidated Output (including operating results for Acron, Dorogobuzh and North-Western Phosphorous Company)

Product, '000 t 2017 2016 YOY, %

MINERAL FERTILISERS

Ammonia 2,595 2,201 17.9
Incl. in-house consumption 2,044 1,895
Nitrogen fertilisers 3,807 3,635 4.7
Incl. in-house consumption 1,117 651
AN 1,975 1,748 13.0
Incl. in-house consumption 688 169
Urea* 882 762 15.7
Incl. in-house consumption 429 482
UAN 950 1,125 -15.6
Complex fertilisers: 2,894 1,953 48.2
Incl. in-house consumption 75 23
NPK 2,219 1,878 18.2
Incl. in-house consumption 75 23
Bulk blends 675 75 9.0x increase
Total commercial output for Mineral Fertilisers 6,060 5,221 16.1

INDUSTRIAL PRODUCTS

Organic Synthesis Products 445 386 15.1
Incl. in-house consumption 221 199
Methanol 102 80 26.2
Incl. in-house consumption 82 71
Formalin 162 143 13.3
Incl. in-house consumption 138 127
UFR 181 162 11.3
Incl. in-house consumption 2 1
Non-organic compounds 779 742 5.0
Low-density and technical-grade ammonium nitrate 132 172 -23.4
Industrial urea* 72 60 18.9
Calcium carbonate 514 449 14.4
Liquid carbon dioxide 56 54 2.6
Argon 6 6 -0.6
Total commercial output for Industrial Products 1,003 929 8.0

PHOSPHATE INPUTS

Apatite concentrate 1,167 1,142 2.2
Incl. in-house consumption 269 803
Total commercial output for Apatite Concentrate 269 339 -20.7
TOTAL COMMERCIAL OUTPUT

7,332 6,489 13.0

Note: 

Commercial output is output less in-house consumption.

2016 figures exclude Hongri Acron output (due to the sale of the plant in 2016).

* 2016 figures are adjusted for reclassification of part of urea as industrial urea.



Chairman of Acron’s Board of Directors Alexander Popov commented on the results:

“In 2017, Acron Group continued to set records and increased the output of its key commercial products by 13% to 7.3 million tonnes. The mineral fertiliser output was up 16% to 6.1 million tonnes. These record-high results were possible due to sustainable operation of the new ammonia unit launched in 2016 in Veliky Novgorod and ongoing upgrades of the main production units at Novgorod-based Acron and Dorogobuzh.

“The Group’s companies ramped up ammonia production by 18%. Following the upgrades, the new Ammonia-4 unit increased output to 786,000 tonnes, 12% more than its design capacity. In Q2 2017, the unit reached capacity of 2,300 tonnes per day, and we plan to take further steps to bring it up to 2,500 tonnes per day.

“We responded to weak demand for UAN by pulling back on UAN output by 16% and increasing production of other nitrogen fertilisers. Acron Group’s ammonium nitrate output was up 13%, and agricultural-grade urea output was up 16%. This was possible due to the Urea-1800 programme at Veliky Novgorod-based Acron, with increased industrial urea output 19%, including 70,000 tonnes of urea for AdBlue production.

“Acron Group’s complex fertiliser production was up 48% year-on-year. Dorogobuzh was the main contributor to this increase, which helped the Group adapt to changing market conditions. NPK output was up 18% due to that project, which increased capacity at the two Veliky Novgorod-based NPK units, and revamping of the NPK unit at Dorogobuzh as part of a scheduled overhaul.

“In 2017, apatite concentrate output was up 2% year-on-year despite considerable overburden operations in Q1 2017. In subsequent quarters , apatite concentrate output hit a record high. Mine expansion is underway. 

“We will continue increasing our output based on the new development strategy adopted by the Group in 2017 ”.

Market Trends

Following the growth in September, the global urea prices remained high in Q4 2017 supported by strong seasonal demand and greater production costs in China. India, which cancelled a tender for urea purchase in late October with a proposed price of USD 300 CFR and thus put a mild pressure on prices, had to return to the urea market in December, which had a positive effect on prices.
  
In 2017, the average urea price was USD 218 FOB Baltics, up 12% year-on-year, while during the year the price was very volatile. In periods of high seasonal demand, in Q1 and Q4, the price jumped up to USD 260 FOB Baltics, and during the low-demand season it dropped to USD 180 because China acted as a marginal producer. In 2016-2017, the production cost in China grew significantly on the back of higher coal prices and environmental efforts by the Chinese Government. During the high-demand period, the need for the Chinese products offered at high prices significantly supported the global prices, while during the low-demand season urea prices fell to a cost level in other countries. In 2017, the Chinese urea exports decreased to 4-4.5 million tonnes from 8.9 million tonnes in 2016. It is expected that in 2018 the Chinese export will further decrease to 2 million tonnes. However, the Chinese production cost will still affect the global prices.

In late 2017, the Chinese urea producers using natural gas were forced to stop production due to a shortage of fuel, redirected to heating and other priority purposes. Urea capacity utilisation in China was below 50% and prices in January reached USD 310 FOB China. It is expected that restrictions on gas shipments will be effective until the end of the heating season in March 2018. The Chinese government announced its plans to increase urea reserves by 5.5 million tonnes to 10 million tonnes in order to ensure supplies for the spring sowing season. Thus, the production capacity will be used to cover the domestic demand, and export sales in Q1 2018 will be significantly limited. It is also expected that U.S. buyers will actively purchase urea in Q1 2018 to cover seasonal demand. Thus, the supply and demand balance is a sign that the global urea prices will remain high until Q2 2018, and then may be under pressure due to a low seasonal demand. According to the industry experts, the average urea price in 2018 will be approximately USD 230 FOB Baltics, USD 10 higher than previous year. At the same time, the annual price fluctuations are expected to be less than in 2017 due to limited availability of the Chinese product.

The prices for premium nitrogen fertilisers, AN and UAN, traditionally follow the price for urea, the most popular nitrogen fertiliser. Following the growth in September, the AN prices stabilised in Q4 2018. The UAN prices that started to recover a bit later, were on the rise in Q4 2017. In 2017, the AN premium over urea increased to 20%, while there was no UAN premium due to higher U.S. output and stronger competition.

In Q4 2017, the NPK prices remained stable after the recovery in September and potentially may increase slightly following with the price growth in nitrogen and phosphorous segments. Throughout 2017, the NPK premium over the core product basket (urea, DAP and potash) remained high (15-20%).
 
Average Indicative Prices, USD/t, FOB Baltic/Black Sea
Q4 2017 Q3 2017 Q4 2016 Q4 2017 / 
Q3 201
change
Q4 2017 / 
Q4 2016 
change
NPK 16-16-16 271 262 254 +3.6% +6.9%
AN 218 184 179 +18.6% +21.9%
UAN 162 126 133 +28.1% +21.7%
Urea 239 205 204 +16.8% +17.2%
Ammonia 286 199 190 +43.9% +50.3%

2017 2016 2017 /  2016 
change
NPK 16-16-16 265 292 -9.4%
AN 193 166 +15.7%
UAN 145 139 +4.7%
Urea 218 194 +12.2%
Ammonia 267 237 +12.8%