NRZ (ASX) Ann: Trading Halt

Originally posted by J L: ↑

Danharks, Thank you for commenting on my post. Now I would like to continue the discussion by giving you my thoughts.

"you would have to be a mental defect to think the catalysts behind urea price rise (Covid, trade friction with China, china’s division with the west, conflict in Europe, rising energy prices) will go away over night, which is what you and Others seem to have espoused."
I believe that, in the short term (say 4-5 years) this is probably the case. But after this, things should return to something like normal, before NRZ is in full flight. This timing is an opinion held by several analysts. The world is not sitting on its hands through this predicament. As you know China is a massive user of urea, and uses about 90% (I think) of its own production. The world seems to have coped with their restrictions on exporting.

"there will be an enduring global shortage of urea, and with dramatically increased cost of feedstock, the fundamentals of economics would dictate a significantly higher urea spot price is the new norm (I think it will pull back somewhat, but would likely settle long term somewhere between current price and that used during PFS)."

Now Russia, I believe, exports about 7-9 million tonnes PA of urea. You will also note that Nigeria has, in the last month or so, has commissioned a USD 2.5 billion, three million tonnes PA urea plant. In addition, it has been reported that India will be very soon self-sufficient, whatever that means.

The free world will pickup the slack, I believe, and when these countries come back on line, and they must, there could be more than enough, sufficient anyway, of urea to go round. I see no "enduring global shortage of urea"! They're my thoughts for what they are worth.

Regarding current prices playing a significant role in a BFS, I don't think so. The BFS will probably span 5 plus 10 to 30 years. The PFS spanned about 5 plus 10 years. I am assuming that NRZ didn't pluck the long term urea price used in their calculations, out of the air for the PFS. It would, presumably, be obtained from an authoritative source. Therefore, I think that it should be almost the same now as it was then. I would pay little attention to current pricing conditions as a prediction of long term prices.

J L.

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interesting points, and I’m not saying your wrong.

regarding urea price and duration before pull back. I think there is too much uncertainty for analysts to be able to predict with any certainty based off past economic indicators. The political instability is now moving the situation out from economic prediction and into geo-politics..

what I think many people underestimate is the extent that political friction precipitated by stark ideological difference (democracy verse communist/totalitarian) can and will affect status quo of the economic world order as we understood it.. all extant price predictions are still based on a more or less global free trade economy. China’s turning inward, and set conditions to project military power into SEA, Russia has crippling sanctions and is looking to suspend all urea exports.. Look how long the Cold War lasted, Russia is now in a hot war with neighbours, this won’t blow over soon.

there is no way that the same price should be used for the BFS. seperate to geopolitical factors, gas prices have doubled over the last 18 months and trending upwards, feedstock alone indicates urea price would be close to, or more than double that of the PFS assumption.

I don’t see urea hitting sub $500 this decade.