Global Processing

Yara, BASF plan investment in US ammonia plant

October 21, 2013

<photocredit>Photo copyright Yara International</photocredit>

Norway's Yara, the top global producer of nitrate fertilizers, is planning a big investment in the United States in partnership with German chemicals giant BASF, Reuters reported.

Yara made the announcement during the presentation of its third-quarter financial results. The company said that it was holding talks with BASF over the construction of a "world scale" ammonia plant but did not provide any specific figures. The planned facility will be located on the Gulf of Mexico coast and will help Yara expand its footprint in the United States, Reuters added.

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The financial results reported by the Norwegian company showed the impact of Chinese overproduction on the market. According to Yara this led to a supply-driven market, forcing the highest-cost fertilizer makers to reduce output in order to impose a balance. Yara's third-quarter EBITDA (one-off items excluded) came in at 3.22 billion crowns (about $543 million) compared to 4.18 billion in the same period of last year. Despite the 23% decline in core earnings, the company delivered results in line with expectations.

Chinese production was stoked by a tax credit and this combined with higher output in other low-cost markets to drag down urea and ammonia prices, Yara pointed out. According to Reuters, falling fertilizer prices have been weighing on Yara's profit this year but analysts believe that the trend may have reached the point of reversal. With consumer demand rising and the Chinese tax break ending, prices should start recovering although it will be a slow process.