Sector News

Yara benefiting from US-China trade war as Brazil exports boom – execs

June 27, 2019
Chemical Value Chain

The US-China trade conflict has benefited Yara’s operations in Brazil, a country not subject to newly imposed Chinese tariffs on agricultural products, executives at the Norwegian fertilizers major said on Wednesday.

The export-oriented US agricultural sector has been at the centre of the trade war as China is a large consumer of soybeans, corn and other products produced in the US.

Yara’s sales in the US have not been greatly affected by the conflict and, moreover, the dispute has benefited its operations in Brazil where producers are replacing US suppliers to China.

“If anything, in the short term we are benefiting [from the US-China trade war]. We have a clear position in Brazil, and due to the trade conflict but also due to the weather, production is coming to that country from the US,” said Terje Knutsen, Yara’s executive vice president for sales and marketing.

“The response [to the trade war] is in Brazil, and this gives a boost to production there, where our position is relatively much longer than in the crop segment in the US.”

Knutsen added that Yara’s operations in the US where not centred in the Midwest farmlands, but on the East and West coasts, where there are “high value” crop operations.

For that reason, while the Midwest was heavily affected by floods in the second quarter, delaying the planting season, extreme weather did not dent Yara’s operations, the executive said.

In Canada, he added, weather patterns are different, allowing Yara to weather the flooding issues which affected farmers further south.

Yara is due to report second-quarter financial results on 16 July.

The fertilizers major announced earlier on Wednesday it was to carve out its industrial nitrogen operations by early 2020.

Yara’s CEO, speaking at the firm’s capital markets day in London, said that the decision to carve out the business via an initial public offering (IPO) on the Oslo Stock Exchange was still subject to a process of “defining the scope” of the new entity. That will be subject to “varying degrees of integration” with Yara’s remaining assets.

However, Svein Tore Holsether added that some of Yara’s assets will be “fully dedicated” to the new entity.

Tove Andersen, executive vice president for production at Yara, said that the company’s joint venture ammonia plant in the US had been running at 110% of nameplate capacity in the past three months.

Earlier, sources had claimed that the 750,00 tonne/year facility in Freeport, Texas – a joint venture with BASF – had only achieved 90% of capacity up to a year after start up in 2018.

Earlier this month, Abu Dhabi’s crude oil major ADNOC and Netherlands-headquartered fertilizers major OCI announced they would combine their fertilizers assets in the Middle East, creating a major producer with expected revenues of $1.7bn.

Yara’s CEO said that “in general, consolidation in the [fertilizers] industry is good” and added that the merger between ADNOC and OCI was “very” interesting.

“It seems like a good combination. Our exposure in the Middle East is rather limited,” said Holsether, adding that Yara would be open to increase its presence in the region.

Yara has a 25% stake at Qafco, a joint venture with Industries Qatar (IQ, which owns the remaining 75%), a large producer of urea, among other products.

Source: ICIS News

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