Nitrogen gross margins
In the recent quarters, fertilizer companies (MOO) have rationalized their output and costs to survive the downward momentum in fertilizer prices. The trend was also evident in potash, phosphate, and nitrogen fertilizers. More recently, prices of natural gas, a key input for nitrogen fertilizers, have also trended lower and are estimated to further decline in 2019. Learn more in How Did Fertilizer Prices Move Last Week? On the other hand, the realized prices have increased in 4Q17 as we discussed earlier.
Gross margin by company
Overall, the median margin of the five companies in the above chart stood at 19% in 4Q17, which was down from the median of 30% in the corresponding quarter a year ago. CF Industries’ (CF) overall margins expanded to 13% from 10.8% in 4Q16. To learn more about why CF Industries’ margins increased, read CF Industries’ 4Q17 Results Show Improving Market Environment. Over the same period, PotashCorp’s (POT) (NTR) nitrogen segment margins also expanded from 19% to 22%.
In contrast to these two companies, the remaining three companies in the above chart experienced a margin contraction year-over-year. Agrium’s (AGU) gross margins contracted the most to 15% from 30% a year ago. Similarly, Terra Nitrogen’s (TNH) gross margins contracted to 0% from 52% a year ago and CVR Partners’ (UAN) margins also contracted to 19% from 32% a year ago.
Next, we’ll discuss phosphate segment shipments.