Acron's chairman comments on 1H19 results

“In 1H19, Acron Group set new records, with mineral fertiliser output up 4% y/y to 3 197 000 t and total commercial output up 1.5% y/y to 3 803 000 t.

“The Group’s ammonia output was up 6% y/y to 1 362 000 t, and the volume of ammonia processed to end products increased 11% to 1 189 000 t, setting yet another record. Ammonia output and the volume of ammonia processed will continue to expand. We plan to finalise upgrades to the ammonia unit at Dorogobuzh by the end of this year, increasing its capacity to 130 000 tpy. Due to the commissioning of a new urea unit at the end of 2018, agricultural-grade urea output was up 33% to 631 000 t. By the end of this year, we plan to complete the construction of a new urea granulation unit that will produce premium product. In the reporting period, the Group also continued to expand technical-grade urea production. Technical-grade urea output was up 12% y/y to 60 000 t. Production of UAN based on urea solution increased alongside the expansion of urea output. In 1H19, UAN output was up 29% to 858 000 t. Ammonium nitrate output increased 14% y/y due to the expansion of nitric acid output, which is a key feedstock for ammonium nitrate. In 1H19, we commissioned two new nitric acid units with 135 000 t each. Construction of another unit is underway and is expected to be commissioned at the end of this year.

“The Group’s total complex fertiliser output was down 17% y/y to 1 056 000 t, mainly because Dorogobuzh suspended its blend production due to weaker regional demand. However, in early 2019, the Group brought on stream a new blended fertiliser unit at the Acron production facility in Veliky Novgorod, significantly expanding its product portfolio with blends, which are increasingly popular globally. The Group’s NPK output decreased due to a temporary reduction in apatite concentrate supply from the Oleniy Ruchey mine, which was caused by such factors as a higher volume of overburden operations y/y and the lower phosphorus grade of the ore at this stage of underground mine development. We expect that in 3Q19, apatite concentrate output will recover to the level sufficient to utilise the full NPK capacity at the Group’s production facilities. It is expected that ore quality will improve and apatite concentrate output will go back up with further development of the underground mine”.

Market trends

In 2Q19, global urea prices were up due to strong demand in India and Latin America and high prices of urea available for export from China. Supported by higher production costs, urea prices in China have ranged between US$280 and US$300 freight on board (FOB) this year. Given growing demand, in the second quarter Baltics prices increased from US $230 to US$270 FOB. According to industry experts, in the third quarter Baltics prices for urea will remain relatively stable and range from US$260 to US$270 FOB, and in the fourth quarter prices will grow moderately due to increased demand before the spring sowing season in the Northern hemisphere.

In 2Q19, AN prices rose on the back of higher urea prices. UAN prices, which fell in 1Q19 due to the seasonal pullback in demand, did not recover significantly in 2Q19 due to unfavourable weather conditions and a delay in seasonal demand in North America, which is a key UAN market. To obtain higher net-backs, Acron Group continues to expand sales to end customers: in May 2019, the Group began direct UAN supplies to Argentina.

In 2Q19, NPK prices remained relatively stable. The support from the positive price trend in the nitrogen segment was offset by the negative trends in the phosphate and potash segments. In 2Q19, the NPK premium over the basic product basket was approximately 20%.

Read the article online at: https://www.worldfertilizer.com/nitrogen/23072019/acrons-chairman-comments-on-1h19-results/