Nitrogen boom may boost prices

Yara International foresees price increases in next few months as demand outpaces supply.

By Jim J. Jubak Jan 11, 2010 4:40PM

Jim JubakDo Norwegians grin? Surely that was a trickle of a smile at Yara International's (YARIY) annual update for investors on Dec. 10.


The Norwegian fertilizer company reported that the nitrogen fertilizer market was headed for demand-driven price increases in the first half of 2010. Urea supply, a major form of nitrogen fertilizer, should remain tight in 2010, with only three projects likely to come on line.


Supply (except for China) in 2010 will increase by 3%, according to Deutsche Bank, while demand will climb 5%, the bank projects.


Chinese exports are likely to remain limited in 2010 as higher production costs limit the competitiveness of Chinese urea.


Yara International's plants ran at about 63% of capacity in 2009, and these scenarios should result in a pickup to near 80% of capacity. 


As of Jan. 10, I'm raising my target price for Yara International to $53 a share by November 2010 from the prior target of $47.20. It traded at around $49 Monday. (For more on my other fertilizer stock pick, Potash of Saskatchewan (POT), see this post).


At the time of this writing, Jim Jubak owned shares of Yara International in his personal portfolio. 

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