I'm a big fan of this industry, this company and this management team. However, it is not correct to assume that volumes can be easily directed into fertiliser from explosives. Urea is a cheaper substitute than AN and better suited to Australia's warmer climates. AN in fertiliser is traditionally used in northern hemisphere as it is cooler. AN in Australia has been applied to broadacre cropping and horticulture as a liquid (UAN) however this requires additional investment for liquid storage that hasn't yet been built. Explosives is also a more regular off-taker of product from plants compared to fertiliser which is highly seasonal. Gas is about 70% of cost base (I think) in AN from fully integrated plant (Moura and Moranbah both fully integrated) so the outlook for gas prices in QLD is important. Notwithstanding all of this, IPL has a proximity (and freight) advantage over competitors in QLD so in all likelihood, reduction in volumes should impact ORI first. Still a top class company but be aware of the risks.
IPL Price at posting:
$3.24 Sentiment: Buy Disclosure: Held
(20min delay)