Q3 2024 Fertilizer Manufacturer Earnings Results Highlights and Analysis
Over the last week I consumed earnings call transcripts and quarterly fertilizer manufacturer results, synthesizing the themes, trends and key takeaways across the fertilizer manufacturers segment of the agriculture industry.
In this article, I share:
Overviews from Q3 2024 results
Upstream Ag Professional Q3 2024 Financial Snapshot
Demand Stability
Overview of:
Nitrogen
Phosphorous
Potash
Clean Fertilizer
Biostimulants and Specialty Products
Noteworthy insights from manufacturer executive teams
Highlights and key takeaways from five fertilizer manufacturers essential for agribusiness professionals.
Mosaic
Nutrien
Yara
CF Industries
ICL Group
Eight financial comparison trend charts of major fertilizer manufacturers including:
Revenue
EBITDA
EBITDA margin
Return on invested capital
Inventory level
Employee numbers
Financial Snapshots
Upstream Ag Insights Comparison
For all of the financial comparison charts, see the end of the article.
Themes and Highlights
Fertilizer Companies Remain Bullish on Demand
From Mosaic:
Overall ag fundamentals remain strong for many crops. Fertilizer demand is running high around the world this year as nutrients remain affordable and growers are catching up after recent years of under application. Large crops and solid yields in many regions this year are drawing nutrients from the soil with the removal, particularly pronounced in North America with an additional 4% to 5%, compared to last year. So, we expect demand will remain solid in 2025 as nutrients are replenished.
Ag fundamentals are solid and fertilizers are affordable, which bodes well for fertilizer demand. Significant changes to phosphate supply will keep the market tight into next year and the potash market is balanced.
From Nutrien CEO Ken Seitz:
China is consuming record levels of NPK. We've seen that in potash. We're seeing that in nitrogen at the moment, and we're seeing it in phosphate as well. It is true that we've seen a very strong drop in North America and that ag commodity prices have come off, that's true. But at the same time, that strong profit pullout inside of the ground. And so those nutrients are going to need to be replaced.
North American farm margins being about its 10-year average. It's also the case, the softer input prices have stimulated some demand. So we've seen strong demand in this price environment.
Different outlook than equipment manufacturers, and more optimistic than crop protection manufacturers.
Nitrogen
Restricted Chinese urea exports, ammonia supply disruptions (e.g., in Trinidad and Egypt), and depleted inventories in North America have created a tighter nitrogen market. These factors and others shared below are expected to sustain high demand into 2025.
CF Industries:
Despite U.S. crop prices that are under pressure from projected large harvests. Today's nitrogen prices continue to represent good value for farmers.
Globally, the nitrogen supply-demand balance continues to be constructive. Urea exports from China are 90% lower through September than the prior year and is unclear when Chinese producers, will be allowed to resume exports. Additionally, lack of natural gas for nitrogen producers in Trinidad and Egypt reduced available supply in the third quarter at a time when we typically see length in the global market. Brazil and India both appeared to have significant urea import requirements, to be met through the first quarter of 2025. We also have seen strong demand from smaller importing countries - these include Australia, Thailand, Mexico and Turkey, among others, that have increased consumption over their three-year averages. Against this backdrop, our manufacturing network remains firmly positioned in the low end of the global cost curve.
Surrounding Yara taking production offline and Chinese dynamics:
The absence of Chinese tons available to the market is a 3 million to five million-ton pool, which could be up to 10% of global seaborne traded product. And then you go through different places that have experienced gas issues or high-cost gas issues like in Europe, where we've seen Yara and others take production offline, you have. I would say, an appropriate or a limited supply basis right now. And then when you look at demand with India stepping in for another tender and asking for 1 million tons to be shipped by middle December, and then continued demand in South America and Brazil and Argentina, then you'll roll into Q1 for the Northern Hemisphere, and we believe that the U.S. and Europe are behind.
When you look at what has been imported and what has been exported for a net balance and then what we think others lost in production, we think the nitrogen supply and inventories, whether that be with retailers or with producers is limited. And so that sets up a positive environment as we head into application season for the spring.
Nutrien on risk of further price increases related to weather in Europe:
We would probably mention that the last couple of winters in Europe have not been too bad. But if we get a harsh winter in Europe, those natural gas inventories could be quickly depleted and you could see that price move even higher. And we've seen some production curtailments there as a result.
Phosphate
The U.S. phosphate fertilizer market is navigating a period of tight supply and elevated prices. Import restrictions on Moroccan and Russian suppliers have constrained the availability of DAP and MAP, while Hurricane Milton exacerbated the situation by causing significant production losses of ~250,000 tons going into Q4.
Although MAP imports have declined, there’s been an uptick in DAP and TSP imports, reflecting shifts in trade dynamics. High price premiums for DAP and MAP are expected to persist, though potential changes in import duties could introduce uncertainty into the market.
From Mosaic CEO Bruce Bodine:
For the phosphate market, stripping margins are expected to remain elevated. Prices remain strong, driven by persisting global supply constraints and solid demand for fertilizer fuel and industrial uses. China has continued to restrict phosphate exports and we expect total Chinese exports to be around 7 million tons for 2024, down from 7.9 million tons last year and about 11 million tons at their recent peak.
Domestic phosphoric acid production is increasingly consumed by industrial uses, resulting in reduced availability for production of phosphate fertilizers. This trend will likely continue well into the future.
Hurricane Milton resulted in a production loss of about 250,000 tons, which will be reflected in our fourth quarter volumes. For the fourth quarter, we expect phosphate sales volumes in the range of 1.6 million to 1.8 million tons and prices in the range of $570 to $590 per ton.
Further from Jenny Wang, SVP of Global Marketing at Mosaic:
Phosphate markets are tight this year and expected to stay constructive as we get into 2025 and beyond. Overall demand in this year are generally at par at 2023, with supply constraints, holding back demand growth this year. Indian monsoon and the grower economics have driven demand outpaced supply. We see reduced shipments in 2024 due to unfavorable import economics, which is related to the government subsidy program. This is setting up a pent-up demand for 2025.
Potash
2024 will witness record global potash consumption (70–72 million tons), driven by replenishment needs and affordability. Limited capacity additions in 2025 may result in further supply tightness.
Jenny Wang, Mosaic SVP of Global Marketing:
We expect the global shipment of potash this year will be rebounded to the record year, as we saw in 2021. On supply side, supply from Russia and Belorussia have largely returned to the historical level or pre-war level. Globally, we see the potash market as balanced with low price now prevailing to spur further demand growth in 2025.
Nutrien delivered record potash volumes through the first nine months of 2024, and raised annual potash sales volume guidance to 13.5 to 13.9 million tons.
Nutrien CEO Ken Seitz on Potash inventory:
To reiterate that as we look around the world on these major potash markets, we're not really seeing any inventory build that's concerning to us. And as we talk to customers in each of those markets, they're also optimistic about demand for 2025, particularly as Ken said, that these prices remaining at affordable levels. And even if we were to see, for example, in China, inventories grow around 3 million tonnes, you put that into the context of apparent consumption at around 18 million to 19 million tonnes. And again, we don't see that concerning. So we do see the good consumption levels that we've seen in 2024 continuing into 2025.
Clean Fertilizer
The emphasis on clean nitrogen has been notable for a number of years, getting attention from analysts and being emphasized in CapEx plans by fertilizer company executives continued in Q3 with a few quick takeaways:
Companies are pursuing strategic partnerships for blue ammonia plants and exploring commercial off take opportunities for low-carbon products, leveraging first-mover advantages.
Low-carbon projects are becoming central to long-term strategies, providing opportunities for partnerships and innovation.
CF Industries and Nutrien are both advancing clean energy projects, including carbon capture and sequestration (CCS) and low-carbon ammonia production. These initiatives are supported by incentives like the 45Q tax credit and evolving regulatory frameworks (e.g., Europe's CBAM).
CF Industries shared a massive number that they are confident in surrounding the 45Q tax credits:
Next year we'll begin generating on an annualized basis, an incremental roughly $100 million of cash through the 45Q tax credit as we start sequestering CO2. So that's on top of the base business.
So we are confident that in 2025 will be one sequestering CO2 and to receiving the 45Q tax benefit.
We've spent a lot of time and effort putting in place all of the necessary system and controls and accounting procedures to be able to not only get the credit, but be able to accurately score and certify a carbon intensity on our production. And so that will be kind of among the first tons out there, with an actual carbon score associated with that.
Nutrien CEO Ken Seitz on clean ammonia:
On the clean ammonia side of the industry and the number of announcements that we've seen on prognosticated new plant. As we've looked at those announcements that if we look at the evolution of the potential there and our own experiences with looking at clean ammonia, we would say that we don't see speculative new plant being built being green lit and right now, it's a question about really the pacing of the energy transition and how you would then in behind that pace, the clean ammonia complex and what kind of risk you'd be willing to take in a market that you might be able to grab a premium on the energy side of the business. That's still evolving and timing of all of that is still very unclear.
Biostimulants and Specialty Products
For a deep dive on biostimulants and specialty products, check out The Rise of Biologicals and Specialty Fertilizers Report exclusively accessible for Upstream Ag Professional members.
ICL Group: