Nutrien Gains on Strong Demand Amid Pricing Woes

Nutrien Ltd. NTR is expected to gain from higher demand for crop nutrients, its actions to reduce costs and strategic acquisitions. However, weaker fertilizer prices are likely to weigh on its performance.
Nutrien, which is a prominent player in the fertilizer space along with The Mosaic Company MOS, CF Industries Holdings, Inc. CF and Intrepid Potash, Inc. IPI, is well-placed to benefit from increased demand for fertilizers, backed by the strength in global agriculture markets. It is seeing strong demand in its major markets, particularly North America. It delivered record potash sales volumes in the fourth quarter of 2023 on solid demand in North America and increased offshore sales.
Strong grower economics, improved affordability and low inventory levels are expected to drive potash demand globally. The phosphate market is also benefiting from higher global demand and low producer and channel inventories. Demand for nitrogen fertilizer also remains healthy in major markets. Global nitrogen requirement is being driven by demand in North America, India and Brazil.
The company should also gain from acquisitions and increased adoption of its digital platform. It continues to expand its footprint in Brazil through acquisitions. NTR completed a number of acquisitions in 2023 and expects to continue pursuing targeted opportunities in its core markets this year.
Cost and operational efficiency initiatives are also expected to aid the company's performance. NTR remains focused on lowering the cost of production in the potash business. The company has also announced a number of strategic actions to reduce its controllable costs and boost free cash flow. Lower natural gas costs are also contributing to a decline in its cost of goods sold.
However, weaker fertilizer prices are expected hurt NTR's performance. Prices of phosphate and potash have retreated since the back half of 2022 from their peak levels attained in the first half riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Global nitrogen prices have declined since the beginning of 2023 driven by a rise in global supply availability. Lower prices are expected to weigh on the company's profitability in the near term.
Nutrien expects Retail adjusted EBITDA in the range of $1.65-$1.85 billion for 2024, anticipating increased gross margins across major product lines compared with 2023 levels. Potash sales volume guidance ranges from 13-13.8 million tons, reflecting anticipated demand growth in offshore markets and normalized Canpotex port operations. Nitrogen and phosphate sales volumes are forecast in the band of 10.6-11.2 million tons and 2.6-2.8 million tons, respectively.
Another prominent fertilizer maker, Mosaic recently said that it anticipates potash sales volumes and MOP prices to remain consistent with earlier guidance, ranging between 2-2.2 million tons and $225-$250 per ton, respectively. For phosphates, MOS sees sales volumes for the first quarter to be within the previous provided range of 1.6-1.8 million tons.
CF Industries, in its fourth-quarter call, said that it sees global nitrogen demand to remain resilient in the near term on the back of continued strong agriculture applications and recovering industrial demand. Major producing regions remain exposed to challenging production economics due to the cost and availability of natural gas, CF noted.

Intrepid Potash expects capital expenditure for 2024 to be between $40 million and $50 million. IPI's growth capital is focused on improving the production rates at its solar solution potash assets. The company remains focused on executing its capital projects, which are expected to drive its production.

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