Group’s Consolidated Output (Operating Results for Acron, Dorogobuzh and NWPC)**

“Due to sale of our Chinese Hongri Acron facility in mid-2016, we do stopped consolidating its operating results. As far as our Russian facilities are concerned, they boosted output with the commissioning of a new ammonia unit and shorter maintenance downtime year-on-year. 

 

“Over 9M 2016, the total commercial output at our Russian facilities was up 13% to 4.7 million tonnes, and fertiliser output increased 18.9%. The new Ammonia-4 unit successfully reached its design capacity and has produced 176,000 tonnes of ammonia since commissioning. 

 

“We used surplus ammonia to optimise nitrogen fertiliser production, boosting output 24.3%. Moreover, output of all key products, AN, urea and UAN, hit record high. 

 

“Therefore, in the reporting period, increased product output at our Russian facilities offset the missing capacity of the Chinese facility. From now on, we expect to expand output annually due to reaching maximum capacity of finalised projects and production streamline projects that are still in progress. 

 

“In the reporting period, in addition to its core products Veliky Novgorod-based Acron produced 38 tonnes of rare-earth metal compounds (in terms of oxides), of which 24 tonnes were shipped to consumers”.

 

Q3 2016 saw an end to the slide in urea prices. Chinese producers with considerable market share could not compete with prices way below USD 200 FOB and cut supplies. Over the first eight months of 2016, urea exports from China were down 22% year-on-year, and the country’s capacity utilisation decreased to 55%. Late in the quarter, prices slightly recovered due to strong demand. In September, India entered the market to purchase approximately 1 million tonnes of urea. A degree of recovery was seen in the market for coal, which is the principal input for urea production in China, resulting in an upward push on costs for Chinese producers. This factor notwithstanding, a considerable price upswing is restricted by additional supply from new capacity to be brought on stream soon in several countries. In general, the urea market seems well balanced, with China being the key offsetting factor. 

 

In Q3, ammonium nitrate prices recovered on the back of robust seasonal demand in Europe and Russia, and the AN premium increased compared to the basic product, urea. UAN prices have remained stable since mid-2016. New capacity in the U.S. puts pressure on these prices and results in a lower UAN premium compared to urea. 

 

In late Q3, ammonia prices fell below USD 200 per tonne due to newly introduced capacity in the U.S. and Russia. At this level, many producers are unable to cover costs, which will inevitably result in reduced supplies shortly. The surplus of commercial ammonia on the global market is likely to be exhausted in one to two quarters, which will spark a price recovery. 

 

Since early 2016, NPK prices have gradually decreased, belatedly reflecting a cut in prices already seen on more liquid markets for basic products. NPK premium levels, however, are still considerable.

 

	Q3 2016	Q2 2016	Q3 2015	Q3 2016 /   Q2 2016	Q3 2016 /   Q3 2015
Ammonia	210	274	390	-23.4%	-46.2%
NPK 16-16-16	277	308	359	-10.0%	-22.8%
AN	147	154	194	-4.7%	-24.2%
UAN	127	143	183	-11.3%	-30.9%
Urea	181	196	265	-7.8%	-31.7%