What CF’s Realized Prices Say about Its Stock Price Direction
Realized price trend
Earlier in this series, we saw that CF Industries’ (CF) average realized prices saw a trend reversal in 2Q17 compared to 1Q17. Out of the five segments, ammonia prices fell the most YoY (year-over-year) during the most recent quarter followed by granular urea and UAN (urea ammonium nitrate) prices.
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Ammonia prices fell as much as 18% YoY to $328 per ton in 2Q17 from $411 per ton. According to CF Industries’ recent 10Q, its realized ammonia prices fell YoY because of higher global supply and the company’s increased exports. In the 10Q, CF Industries also stated that its exported ammonia is priced lower compared to the price for customers in North America.
Granular urea prices fell as much as 14% YoY to $212 per ton in the recent quarter. The prices fell due to higher supply and greater imports coming into North America, according to the company. UAN prices also fell as much as 13% YoY to $175 per ton from $202 to due to higher supply and more low-priced exports.
Looking at the above price softening, you can see that the excess supply has been the primary evil in lower price realization, which also impacted companies (MXI) like PotashCorp (POT), Terra Nitrogen (TNH), and CVR Partners (UAN).
With prices falling, CF Industries’ stock price has also taken a beating. While there can be several reasons for the stock to gain, positive momentum in prices will result in the stock price moving higher. In some of the recent industry updates, lower prices have pushed global players to curtail their production. As a result, nitrogen prices have started to move higher.
In the next part, we’ll analyze at the demand side by looking at shipments.