CVR Partners LP CEO Mark Pytosh told analysts on April 26 that the company sees a more settled market in 2018 than in 2017, and he is not concerned over the USDA’s reduction in corn acreage amounts.
“At this time last year, we were experiencing domestic competitors marketing new production capacity, causing a change in trade flows,” he said. “Now that all of that new production is onstream and the trade flows are normalizing, the market is more settled than in 2017. We believe customers have grown accustomed to purchasing more of their urea needs from domestic producers. They can provide a steady supply, as well as just-in-time deliveries to meet the demand. Ammonia and UAN are supplied largely from domestic production. China has not been very active in the export market this year, allowing the new production to fulfill the need.”
He said as the industry finishes the planting season in the second quarter, he expects the nitrogen fertilizer market to be in better balance than last year, adding that he expects the second-half 2017 pricing to have been the low of this downturn.
Currently, Pytosh believes customer inventory levels are lower than normal, and CVR expects good demand through sidedress season.
Despite USDA moving its corn acreage projections down to 88 million acres from 90 million, Pytosh expects a solid demand year for nitrogen fertilizer. He said the lower acreage should help with reducing corn inventory carryover into the 2019 planting season. “I’d rather see the corn price at $0.50 or $1.00 plus or higher than where it is today; that would be better for us long-term.”
In other news, CVR noted that the Coffeyville, Kan., plant took a turnaround on April 15-30. The company estimated that expenses associated with the turnaround, exclusive of 15 days of lost production, were $7 million. Pytosh estimated lost UAN production as 42,000-45,000 st. In the meantime, the company said the East Dubuque, Ill., plant that took a turnaround in the first quarter is now producing ammonia at very high rates, just north of 1,100 st/d – the highest levels it has seen since purchasing the plant.