Acron Group Releases Q1 2016 Operating Results

Chairman of Acron’s Board of Directors Alexander Popov comments:

“In the first quarter of 2016, Acron Group’s output of core commercial products at its Russian facilities was up 7.2%. The Group’s total output of core commercial products was 1,589 kt, down 1.4% year-over-year.

Output decreased mainly due to equipment upgrades implemented to improve environmental sustainability at Hongri Acron. That notwithstanding, the Group’s most profitable Russian facilities: Novgorod-based Acron, Dorogobuzh and NWPC increased commercial output between 6% and 9% year-over-year, and commercial output at Dorogobuzh set an all-time record.

We are implementing an investment programme to secure further operational expansion at the Group’s Russian facilities”.

Market Trends

In early 2016, urea prices continued to decrease. Prices in the Baltic states dipped to USD 180 for a short time. Chinese producers were reluctant to continue dropping prices after they had slashed to USD 200. It is worth mentioning that the production cost for about half of the Chinese producers using anthracite is estimated at USD 240. As a result, non-competitive Chinese producers began to cut their output. In February, urea exports from China were at their lowest level since June 2014. This sustained the market and prices partially recovered. Currently urea prices in the Baltic states are approximately USD 200, and in China – USD 210 to 220. We expect that the most cost-intensive Chinese producers will be gradually squeezed out by new capacity outside of China. That notwithstanding, given the Chinese share of global urea production and exports, the unit cost for Chinese producers will remain a significant factor in global pricing.

In the first quarter of 2016, prices for premium nitrogen fertilisers such as AN and UAN decreased by less than the prices for their primary input product – urea, and as a result, extended their price premium.

In early 2016, NPK prices were less volatile than their inputs – urea, DAP and potash, and as a result NPK premiums increased against the basket of input products.

Average Indicative Prices, USD/t, FOB Baltic/Black Sea