- According to the International Fertilizer Association (IFA), global nitrogen fertilizer sales increased 1.1%, from 107.9 MMT nutrient tonnes (N) in 2012 to an estimated 109.1 MMT (N). Of note, the consumption of nitrogen fertilizers in Asia, which accounts for close to 60% of global volumes, increased 0.4% to 63.6 MMT (N);
Despite the year starting with unfavourable weather across Europe and North America, strong harvests across the globe reduced pressure on global food stocks and pulled down soft commodity prices from mid-year. On the Chicago Board of Trade, corn moved from US$ 6.9/bu in January to US$ 4.2/bu in December while wheat declined from US$ 7.5/bu to US$ 6.0/bu and soybeans retreated from US$ 14.1/bu to US$ 13.3/bu;
- Currency devaluations in several large fertilizer-importing countries (Brazil, India, and Indonesia) significantly reduced purchasing power for both fertilizer and agricultural products. Average prices for prilled urea, the most widely used nitrogen fertilizer globally, decreased 16% and finished the year with an average of US$ 341/t FOB Black Sea;
- In 2013 global ammonia capacity, which is the basic raw material used in the production of nitrogen fertilizers, increased 3% or by an incremental 7 MMT year-on-year, lifting global NH3capacity to 211 MMT;
- China remained the world’s largest fertilizer exporter, helped by a more favourable export tax structure. The export duty for domestic urea was cut back from 7% in 2012 to 2% in 2013. For the year, China exported 8.3 MMT of urea, a 19% increase as compared to the previous year;
- While several ammonia-urea projects planned for commissioning in 2012-2013 saw delays of six to nine months, most had nonetheless been brought online by the end of 2013. Major new capacity launched in 2013 included:
– Qafco 5 and 6 (Qatar) – aggregate 1.5 MMT pa of ammonia and 2.5 MMT pa of urea;
– Fertil II (UAE) – (capacity of 0.7 MMT pa of ammonia and 1.2 MMT pa of urea);
– Sorfert (Algeria) – (0.7 MMT pa of ammonia and 1.2 MMT pa of urea and a 0.7 MMT pa stand-alone ammonia plant);
- The number of nitrogen projects announced in North America was revised downward on account of escalating costs and revisions to CAPEX estimates which are being driven higher by the boom in shale gas and oil;
- The global nitrogen industry continued to face regular shortages of natural gas supply in several ammonia-producing countries (Algeria, Egypt, Trinidad, etc.), impeding output and restricting export capacity. The ammonia/urea ratio, which historically runs between 1.1-1.2x, had an average of 1.4x in 2013.
- Higher-cost producers in Eastern Europe, such as Group DF in Ukraine, had to shut down production as market prices moved below their production cost from early autumn. In October 2013, following a month-long shut-down, Gazprom offered a US$ 100/tcm rebate to Group DF. The new price of US$ 260/tcm considerably improved the global competitiveness of Ukrainian nitrogen producers;
- The global nitrogen market is expected to grow by up to 2% per annum over the next few years.
We are one of the world’s largest nitrogen producers by nutrient capacity, producing fertilizers and organic synthesis products.
We own and operate hydrocarbon deposits andnatural gas production facilities in Novy Urengoy(Yamalo-Nenets Autonomous Region), the mainraw material for the production of ammonia and subsequent production of nitrogen-based fertilizers, and gas condensate.
Our nitrogen operations in Russia and Belgiumproduce a wide range of nitrogen mineral fertilizerssuch as urea, AN, UAN, CAN and various regularand tailored NPK grades. We are Russia’s only producer of acetic acid, granulated urea and melamine.
Our nitrogen facilities also produce the following:
Industrial – nitric acid
Organic synthesis products – methanol,acetic acid, butanol, polyvinyl alcohol,methyl acetate, and paint and varnish solvent.
Industrial gases – gaseous and liquidargon, nitrogen, oxygen and carbon dioxide,and solid carbon dioxide (dry ice).
Others – food-grade crystallised urea, food-grade acetic acid, commercial acetone and flotation agent (sebacic acid).
Key projects underway
- +117 KMT ammonia production increase (pa)
- US $ 0.1bn Total CAPEX
- US$ 0.06bn 2014 CAPEX
- US$ 20m Incremental EBITDA (pa)1
- Technical reconstruction of TPS ammonia unit with capacity increase to 1,980 KMT per day
- Reduce raw material gap in ammonia and increase gas to ammonia ratio and unit efficiency
- +300KMT LDAN production increase (pa)
- US$ 0.2bn Total CAPEX
- US$ 0.05bn 2014 CAPEX
- +US$ 50m Incremental EBITDA (pa)1
- Upgrade of weak nitric acid unit and launch of production of low-density ammonium nitrate (LDAN)
- Broaden product mix; increase efficiency and phase out outdated production units
- 53% Completion2
- 1Assuming full capacity utilisation of project(s), Company estimates
- 2Based on capital expenditure incurred as at 31 December 2013
When combined together, atmospheric nitrogen (N2) and natural gas (CH4) yield ammonia (HH3), the basic building block of all nitrogen fertilizers as well as a key input in the production of certain phosphate-based fertilizers such as MAP and DAP. Accordingly, vertical integration in ammonia provides us with a sustainable cost-competitive advantage as well as the flexibility to optimise our production chain as market conditions evolve. With natural gas typically representing around 75% of ammonia costs, access to cheap feedstock and gas efficiency are significant components of competitiveness.
Over the past few years we increased gas efficiency at both of our ammonia facilities, Nevinnomysskiy Azot and Novomoskovskiy Azot, and invested in the production of premium, lower-gas-content, nitrogen products, including granulated urea, CAN, as well as melamine.
In 2012, we secured 25% of our natural gas needs with the acquisition of Severneft Urengoy, and while Russian gas prices remain relatively low, the efficiency levels at our ammonia units are at their peak. That same year, with our ammonia output already at full capacity, our acquisition of the non-integrated production in Western Europe (EuroChem Antwerpen, Belgium) considerably increased our reliance on external purchases of ammonia. The next logical step is now to launch incremental ammonia capacity in Russia or potentially in other regions with accessible and inexpensive gas, such as in the United States, the Middle East or Africa. Investments in new capacity will significantly impact our nitrogen operations and ensure EuroChem remains most competitive on ‘cash cost delivered to’ basis.
The first of these large-scale transformational investments involves the construction of a 1 MMT pa ammonia facility at our Phosphorit facility, in close proximity to the Baltic Sea. All engineering, procurement and construction (EPC) services, and equipment will be delivered on a turnkey basis and utilise industry renowned technology. The first of our new ammonia
capacity is expected to come on-line in 2017.