Outlook
With the completion of our capital expenditure program and the concentration of turnarounds and debottlenecking projects at four of our nitrogen sites during the third quarter, together with the consolidation of the Fertiglobe joint venture, we expect to benefit from a significant increase in sales volumes in the fourth quarter and beyond. We expect to continue to benefit from low natural gas prices in both Europe and the United States, maintaining a position at the low end of the global cost curve.
Nitrogen
•Our global order book is currently robust based on recent tenders awarded to Fertiglobe to supply a combined total of almost 700kt urea to India and to the fast-growing Ethiopian market.
•We expect higher sales volumes as a result of a significantly lighter program of planned turnarounds in 2020 than in 2019. We expect the biggest increases in volumes in 2020 to come from our lowest-cost plants, Sorfert in Algeria and IFCo in the US.
•In addition to higher utilization rates and better cost efficiency, we expect IFCo to benefit from a positive outlook for Diesel Exhaust Fluid (DEF), one of our fastest-growing products. Following an expected doubling of volumes in 2019 compared to 2018, we expect further strong growth in 2020 for this product.
•We have further strengthened our competitive position following the completion of the ADNOC Fertilizers joint venture, Fertiglobe, on 30 September. The consolidation of the JV has resulted in the addition of 2.1 million metric tons per annum capacity to our platform and is expected to generate substantial synergies.
Methanol
Methanol prices have weakened in 2019 to trough levels due to a number of factors including falling crude oil prices, MTO affordability and exports from sanctioned countries to Asian markets being offered at heavily discounted prices. While spot prices have risen modestly, prices remain well below 10-year mid-cycle levels.
In 2020, we expect to benefit from the first full year of the new methanol capacities (Natgasoline, BioMCN’s second line and the OCI Beaumont debottlenecking finalized in July this year), as well as the normalization of production following the shutdowns in 2019. This should result in a significant increase in our methanol volumes in 2020. Together with our position at the low end of the global cost curve, we will continue to be well-placed.
Gas Markets
We expect to continue to benefit from low natural gas prices in both Europe and the United States.
In 2019, European gas prices have been substantially below those seen in recent years. We believe there has been a structural shift in the European gas markets this year and expect prices to remain within a core bandwidth of $3 – 5 per MMBtu, barring any surprise weather shocks, as a result of increased Atlantic basin LNG exports; competing with Russian imports into Europe.
In the US, Henry Hub benchmark prices have been significantly below the levels of last year at globally competitive prices. The forward curve suggests this will remain for the foreseeable future, which will continue to keep our US operations on the left-hand side of the global cost curve.