The Farmers Gazette | Page 50

Urea prices near 4 year low U rea prices, at their lowest in four years, may have hit the bottom as an unusually large number of producers are making thin, if any profits, according to Russian fertiliser producer Acron as it revealed a 28% drop in earnings. Urea market values have declined not just to the marginal cost of Chinese producers, some of whom are currently operating at a loss, but to levels at which factories in other countries are also struggling to breakeven. A drop in the cost of the coal which Chinese producers typically use as their power source for making energyintensive urea, has rendered their costs of making urea "comparable to that" of the gas-based plants more common in the likes of North America, the former Soviet Union and Europe. As a result, the number of marginal cost producers has gone up Acron said. This in turn means that the potential for further urea price reductions appears to be limited, with further reductions in values risking a drop in output which would support market price increases. Urea prices measured in the Baltic sea ports were $246 a tonne as of the end of November, well below the $800 a tonne reached at their 2008 peak, and down 23% so far this year, according to Credit Suisse, the Swiss bank. The bank sees the decline in values continuing but with improved signs of stability in other nitrogen markets, including ammonium nitrate whose prices were flat at $200 a tonne in the Baltic. Although this price is down 30% so far in 2015. NPK fertilisers have proved to be more stable, declining by 7% this year to $340 48 FARMERS GAZETTE November 2015 a tonne in the Baltic. Acron said that "unlike the prices of basic products, NPK prices tend to demonstrate less volatility and remained almost unchanged from the beginning of the year.” However, in September NPK prices finally declined following prices for basic products. Prices of ammonium nitrate have been under pressure from Brazilian factors, including the weaker Real and higher interest rates, which have brought down the purchasing power of local farmers, who are major AN consumers Acron said. The comments came as Acron unveiled a drop in earnings for the July-toSeptember quarter to 2.26bn roubles, from 3.66bn roubles a year before. Revenues rose 68% to 28.58bn roubles, supported by the devaluation of the rouble, which boosts the value the group of sales of nitrogen fertilizers which are priced in dollars on the international market. Operating profits at the group more than doubled to 11.92bn roubles. However, profits were dragged lower than last year when the group logged a 4.94bn-rouble gain on asset disposals as well as finance costs on the back of the weaker rouble. Acron is seen as a low cost producer as a result of its access to low-cost Russian gas supplies, but also thanks to selfsufficiency in phosphates required for NPK fertiliser production. P hosphates are typically distributed as compounds with nitrogen, eg monoammonium phosphate (Map) and diammonium phosphate (Dap).