Thank you, and welcome to this telephone conference on Yara's second quarter results. I'm Silje Nygaard, Head of Investor Relations, and I am here today together with the representatives from Yara's management. Svein Tore Holsether, our CEO, Thor Giæver, our CFO, Lars Røsæg, our Deputy CEO, and Dag-Tore Moe, our Head of Market Intelligence, as well as other representatives from Yara. We presume that you've all seen the presentation, and we are happy to go straight into questions. Operator, if you can please open the line for the first person in the queue, please. Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star one. We will now take the first question from Lisa De Neve from Morgan Stanley. Please go ahead. Lisa, please ensure the mute function on your telephone is.
Hi.
Oh, you're.
Can you hear me now?
There we go.
Okay, wonderful. Thank you. Good afternoon, and thank you for taking my questions. I have two. The first question is, so you mentioned in the presentation that some of your European production plants are exposed to gas prices that are decoupled from hub prices. Could you be so kind to share which plants are typically exposed to non-hub prices in Europe?
My guess is that it's the Norwegian assets, but it would be great to get a full picture. Then the second question is, you stated that you may consider special returns associated with your third quarter results. Given your balance sheet is in good shape, if you look at your net debt EBITDA and equity ratio requirements are which both look to be fulfilled, should we consider other variables why you may or may not announce a form of special returns in the second and the third quarter results? Thank you.
Yeah. Hi, Lisa. This is Thor. You're on the first one, you're right. The main plant in Europe that is not hub gas exposed for us is the Porsgrunn plant in Norway. I should also mention within that, as you're probably aware, I mean, the different hubs in Europe, apart from, you know, in addition to TTF, which is the one that we sort of base the guidance on, of course there are other hubs and there has been price variations between those as well, generally with TTF being the highest.
Also the fact that we have other plants that are on Zeebrugge and other hubs has also contributed to that, if you like, better than a TTF modeled gas price. On the cash returns, yeah, I mean, as we noted in the presentation, we've only just paid out the annual dividend, and we have in recent years when we've had stronger returns, we've had one additional dividend during the second half, and that's what we're saying that we'll specifically consider in connection with the third quarter. As you point out, our metrics are strong. I think probably the only thing to add to that is that the It's a volatile market, but certainly, our statement represents a strong intent to have an extra dividend also this year.
Okay, great. Thank you so much. I jump back into the queue.
Our next question is from Joel Jackson from BMO Capital Markets. Your line is open. Please go ahead.
Hi, this is Alex on for Joel Jackson. Thanks for taking my questions. For our first question, maybe like to ask if you could perhaps provide some color as to why maybe urea prices are trading well below the European cost curve. Maybe why you might think this will change. For my second question, just wanted a bit more clarity on the breakdown of the 1.3 million tons of ammonia production that was curtailed. How much of it was curtailed in Q2, and whether or not Yara will need to curtail more production going forward considering higher gas costs. Thank you.
Yeah. I mean, I can start maybe on the urea question. Hi, this is Thor again, and then we have Dag Tore here who can also perhaps add some comments. I think my main observation on urea, and it's important to say urea is a fertilizer in the European context because, you know, a large part of our urea is still running and also for the industry in Europe, for the industrial business. As you probably know, I mean, there we have I mean, the fundamental difference there is that those products are needed 24/7 for, you know, a wide range of products every day, all year round. You know, for example, AdBlue for transportation.
That's the fundamental difference compared to fertilizer, which is applied at just a few specific points, typically mainly in the spring. For the industrial part, its production is generally running and we've implemented surcharges and I would imagine most if not all of our competitors are doing the same. You have the fertilizer part which is different.
You say the combination then, as we mentioned in the report, of it being off-season, you know, far away from physical application season now, and the high gas prices means that it's a bit of a concerning situation, if you like, from the point of view of the nitrogen production and ultimately food security. That's why we warn a little bit about that. At the same time, as for Yara, you know, we're as you can see, delivering strong results and also have high flexibility to adapt to these situations.
Go for it if you want to.
Thanks. Alex, could you please repeat the second question?
Sure. The second question was, in regards to the 1.3 billion tons of ammonia production that was curtailed, if you can maybe break that down and see how much of it was curtailed in Q2, and whether or not, more curtailments are needed going forward because of the higher gas prices?
I'm looking at [Lars], please answer this with the details if necessary. I would say overall, you know, most of this is plants that or curtailments that have started in Q2. Some of it is linked to where we've had maintenance or reliability issues, but then chosen to not restart or restart slower. With regard to, you know, the second part of the question is not possible to really give a firm answer to, or at least a good answer to, because you, as you've probably seen, I mean, this is a, it's a, you know, there's movement in the parameters nearly all the time, you know, both the gas price and the fertilizer prices. As mentioned, there's a bit of a difference then between the industrial sector and the fertilizer sector. As we've seen in the past, you know, prices will, you know, can change. Certainly what we saw last autumn was that when energy prices rose, with some time delay, fertilizer prices rose too.
I can maybe just confirm as Thor says that, in a way, some of the plants, like for example, the one in Italy, the Ferrara plant, which you maybe have seen in publication as well, that was down due to an unplanned stop in second quarter. With the high gas prices, we've chosen then to continue to keep it down basically and then a curtailment. Part of it was also stopped in the second quarter.
Okay, perfect. Thank you for that.
We will now take our next question from Aron Ceccarelli from BNP Paribas. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. Just firstly on your gas cost guide, can you remind us if this assumes full production? And if you adjust for the curtailments you've made and discussed, and also for external ammonia sourcing, what does that gas headwind number look like for H2?
Secondly, just coming back to the conversation around the production cuts you've made. Within that 1.7 million of finished product production, could you maybe provide a breakdown between the different products and plants in which that falls upon? And I guess similar to the question asked previously, I mean, if we look at a lot of spreads out there for nitrates and urea, those are in negative territory right now. How should we think about that 1.7 million number going forward? Do we expect that to, I guess, become a bit more material? Thank you.
I can maybe start, Thor, on the details on the finished fertilizer, the breakdown of the 1.7 million. That is basically around or a little bit more than half of it is urea. As Thor pointed to earlier, it's mainly urea for fertilizer use because we have this system of surcharges on the industrial side, which enables continuous production. A lot of our urea production in Europe goes to industrial purposes. The remaining half of this 1.7 are nitrates and NPK. Of course, just to mention that as well, in a way it's we will monitor and adapt to this going forward as well. We have this flexibility in our production mix in a way to take out that product at any point where it makes the most financial sense for Yara.
Yeah. Hi Aron. The last part of your question, I think, was maybe similar to the previous question I answered that sort of, if I understood you right, it was sort of how do we think about this going forward? That again will depend on market development. But as we've seen in the past, you know, past year or so, the energy price rises have at least in the past led to fertilizer price increases.
Maybe, Aron, if I can just add on to your question on the energy guidance. I just got to confirm that is based on the production volumes from last year, as we always do, both on the energy guidance, but also on the realized energy price. For the third quarter, actually as you may recall, we had the curtailments last year just at the end of the third quarter, but there were no major impact in third quarter, and then we had slightly or somewhat reduced ammonia production in the fourth quarter. Of course this and that will not be reflected in the energy guidance. I think when we approach the fourth quarter, happy to have a discussion with the IR team on that to go through how you can model that and whether it's necessary to make adjustments.
Thank you.
We will take our next question from Tristan Lamotte from Berenberg. Please go ahead.
Hello?
Yeah, please go ahead.
Yeah. Okay. Yeah. Considering the prices cannot really afford the $900-$1,000 per ton nitrates, which would be needed for producers to be in positive territory. How do you think about prices going forward if crop prices remain muted for nitrates? That's the first one. The second one is around your utilization rate. How should we think about the level at which you need to shut down the plants in the event of a gas rationing in some European countries, or if you already have visibility whether or not you will receive a priority allocation, that would be helpful as well. Thank you.
Yeah, I can start. Hi, this is Thor again. I mean, your first question, you were talking about nitrates, but I suspect you maybe meant urea, because as of today, nitrates are. I mean, urea is the issue. That's where prices now are not high enough in a way to justify production. I think your angle was farmer affordability, which as far as I can see, is actually strong enough to justify higher urea prices in Europe. I don't know, Dag Tore Mo, if you want to comment further on that.
Yeah. Yeah, sure. I mean, as we've seen a consumption decline as we talked about then, so there is of course the marginal volumes are of course maybe not viable for the farmers either, but it doesn't mean stop fertilizing, but maybe reducing somewhat because of the price worsening price ratio between the input and the output costs.
But then recently we've seen, probably seen that nitrate prices have already picked up a little bit from the starting price that was announced. There is of course a very different dynamic in the nitrates market in Europe compared to global urea market, because we don't have alternative nitrate sourcing basically for the European market, while you can of course always import urea. It's a little bit different dynamic.
On the second question, if I understood it right, it was about sort of gas rationing scenarios, where I mean, it's not really possible. There isn't one scenario here, to put it that way. As you've probably seen, the E.U. are, you know, still in the process of working out their potential scenarios, how you would allocate between markets. There are agreements being made between countries and so on, but it's still not a, what should we say, not a finished product, that we can all analyze. Naturally, we are and have been planning for such scenarios, at plant level, at national level, and at Europe level.
I would add at this stage it's important to say that Yara is contributing to saving gas in Europe because we are importing more ammonia from our overseas assets and curtailing our European ones, even if, you know, not from a rationing standpoint, but from an optimization standpoint. The general statement I would then make about rationing scenarios is we need to see obviously how they unfold. We have quite detailed contingency plans in place, but I think you can expect us to use our flexibility to its full extent, then as well.
We will now take our next question from Mubasher Chowdhury from Citi. Please go ahead.
Hi, thank you for taking the question. Tapping on the more on the macro side, can you talk about the progress of the harvest in Europe at the moment, especially in the kind of hot temperatures, kind of how is the yields looking like? I guess there's a question which is on a high level, any comment on the key moving parts impacting the global grain inventories? Just trying to understand kind of the dynamics with these stock to use ratios there. Secondly, linked to the European gas situation, how much capacity do you estimate is currently offline in the region? I know you've given numbers on Yara specifically, but I don't know if you have estimates for kind of Europe as a whole in terms of how much capacity is down. That'd be really helpful. Thank you.
I think, when it comes to yield outlook in Europe, of course, when it comes to winter wheat, it's more or less harvested or pretty much so. There is a clearly worsening outlook because of the dry and very hot conditions. Whenever there is an update from the European Union or others, there is always a downgrade.
I don't know exactly where the number will end, but there has been a deteriorating outlook for European yields clearly over the last couple of months. In other parts of the world, North America, they have a very poor winter wheat, but now they have very good conditions for spring wheat. So far it looks also good for corn, even though they got started late.
You can probably see that prices for grain have. Now rice is fairly stable have been all through this crisis, but both corn and wheat prices have dropped quite a bit recently. It's also just an interesting comment maybe that in parallel with that, you can see that financial investors, those regarded as non-commercials in this context, they have sold more than half of what they were sitting on of long positions just a few months ago. There's clearly been a negative sentiment in the financial markets concerning this.
You can of course speculate. We can both speculate how much of that is due to a strong U.S. dollar, how much is due to macroeconomic uncertainty and recession fears and these kinds of things also. Because it's hard to see fundamental factors in the food or grain markets that are suddenly much better now than they were a couple of months ago, although these discussions are ongoing whether to allow Ukrainian grain exports or not and these kinds of issues. I don't know what the right price is, but it's, I guess, as you were alluding to, it's a little bit hard to understand the recent price development in view of fundamental news, just yeah.
On the curtailments on others, we, you know, not everybody announced, and a lot of people do adjustments. Let's say from a urea perspective in Europe, Fertiberia has announced closure in Spain. Romania has an announced closure. We have announced our closures. We are pretty sure that the most players are adjusting downwards and are not selling urea to agriculture in Europe these days, right? Because that doesn't make sense. There is not much exports out of Europe either. I think we can safely assume that it's a fairly market-wide reaction to this, both on the ammonia and urea side.
Sorry, just to follow up on the first question. Any comment from you to a lot of kind of on China, the China grain or the corn demand there, you're hearing data concerning that being significantly lower than it has been in the prior years. Any comments or thoughts on that, again?
Yeah, I don't have any particular insights. I observe that USDA is now working on an assumption that it will drop some. They imported just 62-63 million tons of grain last year or something. I think USDA is working on an estimate of, let's say, 67-68 at the moment for the coming year. They recently bought quite a bit. But I also seen stories, as you are probably hinting at, that there will be a little bit of a reduction in Chinese import demand on grain. If so, that's of course one factor that will make it a little bit more available for others. Yes, it's certainly an important point because one of the key drivers for this shortage we are having is clearly an increased appetite from China on actually importing grains. Went from 20-something million tons to 60 million tons in a year.
That's very helpful. Thank you.
We will now take our next question from Chetan Udeshi from JPMorgan. Please go ahead.
Yeah, hi. Thanks for taking my question. Apologies if any of these questions have been answered because some of us had to wait for 15 minutes to just get on the call. I mean, my question was, I saw that chart you guys had on the nitrate stocks at the producer level in Europe. I was wondering if you can help us with any sense you get or any data you have on, like, the stock level for finished fertilizers in other parts of the world. Because we keep seeing these news of, you know, warehouses flushed with fertilizers in Brazil, et cetera.
I don't know how much, like, how to keep a track of it, but I'm sure you guys have a bit, you know, better pulse of the market in the key regions globally. Any color there would be useful. Just on cash returns, we've seen Yara now operating at well below target leverage for last few quarters. But every time it seems like the cash return decision is being sort of pushed out for
For the future quarters, I'm just wondering if there is an element of like do you guys have some particular concern around gas rationing which is making maybe you guys a bit more cautious at this point to return cash right away? Or, I'm just trying to understand why we've not seen the cash to equity enough, today for instance. Thanks.
Yeah, I can start with the last one. I mean, as we touched on in the presentation, we certainly recognize and have a strong dividend capacity given the earnings we have. Of course in recent years when that has been the case, we have typically had an extra dividend in the second half of the year. Of course, we have only just paid a record annual dividend in May.
We'll consider this for the third quarter. I mean, what you mentioned about gas rationing, I mean that's one example of, I think, several. I mean, more even more general statement is that these are quite volatile markets. With all those comments in mind, I think that's really how we view the situation. As we say, we'll consider this specifically in connection with third quarter. I guess on the stocks question, Tore, you can have a try.
I can have maybe a try. You know, China has of course basically disconnected itself from the market by now, introducing or what is widely accepted as not only a constraint on exports like so far, but the full stop of urea exports until April is the kind of latest information, and quotas on their phosphate exports that are well below normal levels.
They kind of, they've disconnected themselves from the global market. When it comes to India and the rest of Asia, I think that stocks must be running at fairly low levels. People are struck by these high prices across all nutrients and are, I think, pretty much buying last minute. In Europe we don't think it's only the industry stocks that are low.
I suspect that we hardly mention farmers sitting on a lot of inventories. They're probably trying to buy as little as possible, basically. You and Africa are also struggling with the financing issues, working capital, high prices, having to kind of cancel or postpone and so on. You are kind of left with Americas, which is a little bit more of a question mark. U.S., you've probably seen that U.S. have been seeking to export some urea now. It actually looks like they sourced a little bit too much for this season and maybe underestimated a little bit the farmer response to the high prices. Right now there is a slight bit weaker sentiment in the U.S. Gulf.
You can probably observe that for instance a year ago when stocks were extremely low and you got the hurricanes and so forth, later on. For U.S. year-on-year, a little bit weaker. In Brazil it's a little bit hard to know, you know, because it's off-season. What you often see, if it's very optimistic and farmers are very keen to buy forward.
Now I think they are a little bit less keen to buy forward because of the high prices. The value chain is still having to make sure that the product is entering Brazil. They have imported quite a bit of product. There is probably some unsold in inventories in Brazil. There is a question mark. That doesn't, that's not necessarily bad because the season is now coming up in the second half of the year. It might well be very needed. But of course it creates maybe a little bit more concern among players than if it's already sold to the farmer. I don't know if there are other comments. Something like that is.
No other comments around the table. Chetan, I hope that's helpful.
We will now take our next question from Andrew Sheridan from UBS. Please go ahead.
Yeah, good afternoon. Thanks. Again, apologies if this has been asked. I also struggled to get on. The comment, Thor, I heard you say on the webcast about Americas being impacted by sanctions. It's also in your financial report. I'm slightly confused as to what exactly is the issue there? Because I think back to Q1, you said that you were fairly seamlessly sourcing potash elsewhere away from Russia and Belarus. Maybe I'm mixing up two issues, two separate issues. If you can help me there, that'd be great. I've got another question in a second as well, but we'll start with that. Thanks.
Thanks, Andrew, and appreciate one question at a time. [crosstalk] No, that's these are not unrelated, and it's a good question. I think the key thing is that we have been able to operate our NPK plants. You know, we've had to switch quite a bit of sourcing there. And also of course there's been demand changes because of the higher prices, not least for potash.
Overall we have not had to, in a way, reduce NPK production despite all this. When it comes to Brazil, the main sourcing we do there is you know, straight P and K imports, and a lot of them were from Russia and Belarus. What we've done there is quite significantly reduce our sourcing and where that doesn't hit our compound NPK production. That links to the comment we're making about Americas there, is that we're selling, we have significantly lower deliveries of blend NPKs in particular.
Okay.
Hopefully that clarifies.
Yeah, that does. Thank you. Yeah, the second question, apologies it's a bit picky, but it's just so I understand the math. The comment you made, I think, Silje, you said that the basis for the gas guidance was on Q3 production levels last year. If I take 410, which I think was the year-on-year headwind, maybe this is the wrong way of looking at it. Then I look at your chart in your slide deck, slide 21, it's roughly a threefold increase year-on-year. On my math, that's sort of, you know, somewhere, well, north of $1.1 billion, which is your guidance. I just wondered if you'd help me what I'm doing wrong. I can't get to $1.1 billion. Thanks.
Sounds like maybe something we need to follow up.
I could take it offline if it's easier, absolutely.
Andrew, it's Silje here. If you just send me that calculation in an email, we'll be happy to.
I'll do that. Yeah. Thanks a lot.
Thanks.
We will now take our next question from Joel Jackson from BMO Capital Markets. Please go ahead.
Thanks for taking my additional questions. I have two, I'll ask them one by one. Maybe you guys can provide a bit of color on the demand destruction that you're seeing in Europe, Brazil and elsewhere for the different fertilizers. What among nitrogen, phosphate and potash is most at risk for demand destruction?
To you, Dag Tore Mo.
Yeah. I think Brazil, this is difficult, right? Because this hit after the peak season happened in Brazil. We haven't. I don't think we have really seen yet what the farmers action will be in Brazil. Of course, they are export oriented and are growing a lot of crops that have a very favorable pricing. That should help quite a lot and actually possibly expanding their margins. But you know, it's a different seasonality in Brazil.
What we've seen in Europe is that there is demand destruction from all three nutrients, and P and K more than N, but also on N, partly due to the weather factors in Southern Europe, which also plays into this with extremely dry conditions, but also because of a more risk and a poorer relative pricing between the inputs and outputs. Yes, but I don't think we know yet exactly how Brazil will play out. On the risks, I think you clearly need the most demand destruction. I mean, you have demand destruction in the sense that you have a drop in consumption, right? Or lower consumption that people would like.
It's not a demand that is dropping as such. As I said earlier, there are supply limitations. If you look at available supply, you will see that you can measure what kind of volume effects you can expect. Then of course, you need the most demand destruction on potash because there is less supply of potash with Belarus being out of the market almost 100%. Russia is coming back closer to normal recently, but they had also a significant drop. On phosphate, the factors are lower exports from China, Morocco, et cetera, not so much the Russian situation really, which also leads to demand destruction there. On the nitrogen side, you have export reductions from China. You have lack of Ukrainian production, and you have also more than interruptions in Europe. It's basically the supply side that is making this demand destruction dynamic necessary. potash the most.
Perfect. Thank you. Appreciate that. The second question I have is, in regards to sourcing potash, is Yara currently sourcing from Uralkali and EuroChem? If not, maybe why not? Whether or not Yara is having any difficulty sourcing potash in general. Thank you.
Yeah. I mean, I'll refrain from commenting on specific suppliers. In general, we have reduced sourcing where we see. As you probably know, you know, in some cases, it's not 100% clear what the. Let's say in many cases there are sanctioned individuals where it can be open for discussion to what extent they are linked to some of the companies. As you can imagine, we have a very low risk appetite for doing any trade that could be exposed to sanctions.
As we stated in the presentation, and actually in the previous question, we have been able to maintain our NPK, our compound NPK production by sourcing more from other existing suppliers and in some cases entering new supply agreements. Where we have reduced the significant flow is to Brazil in particular, which has led to a reduction in blend NPK deliveries for us.
Okay. Thanks for the clarity.
We will now take our next question from Lisa De Neve from Morgan Stanley. Please go ahead.
Hi, thank you so much for taking my two extra questions. The first one, and I'll put them one by one, bit of a weird one maybe. You've announced some curtailments and the curtailment situation going forward clearly hinges on a number of dynamics which are beyond your control. At the same time, you have seen that demand has been very soft and your production year to date has been with some small maintenance rounds and some small curtailments, very limited. Could you be able to give us an idea of how your inventory levels are at the moment in terms of volumes? It's really hard for us to ascertain that given the wild price swings we've seen. That's my first question.
Yeah. I think it's important to say that we, you know, need to manage risk as well. Part of this is, as we've mentioned that, for the northern hemisphere, this is off-season. Farmers tend to be more preoccupied with harvest. It's not the time of the year where you normally have a lot of order taking or deliveries for that matter.
As you are no doubt well aware, I mean the gas prices are high now, particularly relative to the urea price, but also so volatile that we are, you know, quite reluctant, let's say, to produce without having a firm order, or put the other way around to take orders that we are going to produce further ahead in time where we don't know what the gas cost is. That's really the key dynamic. Another way of putting that is that we don't have particularly high stocks, and most of our stocks are sold.
Okay, great. Thank you very much for that. Just another follow-up on the raw material procurement. We talked about the quarter and the fact that your compound NPK production was not affected in second quarter. How should we think about the second half? Secondly, because you're supplying less blended NPKs to Brazil, have you seen demand switching to other nitrogen products? Thank you.
Could you repeat the first question, please? I didn't quite catch it.
My first question is on second half compound NPK production, and then because you're supplying less blended NPK to Brazil, do you see farmers switching the demand that normally would be there for blended NPK towards other nitrogen fertilizers?
Yeah, no. The NPK part is I think can link actually to the previous answer that this is, I mean we have curtailments in place, mainly due to this sort of off-season issue. You know, assuming that is a temporary situation now, you know, there isn't any reason to believe that we should have major NPK curtailment. As for Brazil, I maybe look to Dag Tore Mo too here, but there I think that partly some of this product that we are not sourcing is making its way into Brazil through other channels. That would be my. It's not obvious that this, you know, creates a big shift in the market. Having said that, our premium product deliveries are almost in line with a year ago for Americas as a whole t hat.
Okay, that's very helpful. Just one follow-up. Of course, you have some temporary NPK curtailments right now, but is this blended or compound?
Yeah, that's, yeah, I mean, our curtailments are all compounds.
Okay, great. Okay, thank you.
I'll rephrase that. We don't really. I mean, for blend NPK, it. Yeah, we don't include that in our guidance. It's a more, shall we say, at any given time the operating rates of blend NPK vary quite a lot. Also, it doesn't have the same kind of earnings impact as if you have curtailments for compound NPK.
Okay, thank you very much.
We will now take our next question from Andrew Noël from Kepler Cheuvreux. Please go ahead.
Hi. Good morning. Thank you for taking my questions. The first one is just on M&A. There's a fair amount of specialist nutrient assets on the market currently. Given you sort of said you are fairly cautious around an extra dividend, is that the same for you in M&A or. It'd be interesting to know what might be on your wish list in terms of technology in that direction. That's the first question. Thank you.
Yeah, I will keep it quite brief there. I think first of all, we have a strategy which is now I would say more focused on improving our operations and growing to some extent organically within new business areas. Secondly, to the extent we are looking at M&A opportunities, we will not be very transparent on them upfront. We will tend.
Yeah.
Tend to announce when we've done them, not before.
Okay. Just a second, again, a short one. Just following on from the previous questions about gas rationing and the E.U. prioritizing supplies. You know, if that eventuality comes to pass, I mean, you've mentioned you've got contingency plans. Is there anything the industry is doing proactively, though, in terms of lobbying to make sure you're at the head of the queue? I'm just kind of starting to visualize lots of different sectors within the chemical industry all battling to be at the front of the queue here. Any color you can provide on that would be interesting. Just how the dynamics are playing out, perhaps politically. Thank you.
Yeah.
It's something I can a few things around this topic. First of all, we have a very good dialogue both nationally and within the European Union in terms of the importance of our industry and the impact to farm yields. We all know the impact it's gonna apply. Fertilizers for some crops, we're talking about 50% yield reduction in the first harvest. That's one part. So it's an important product to be produced. Then we have all the other implications and industries that we also serve.
Thor touched on several of them within the industrial segment with AdBlue being the biggest. We're t hat's a vital component of infrastructure as the trucks will not be able to run unless they have access to AdBlue. Then there are all the other industries that also depend on ammonia and fertilizer production in Europe.
Whether it's for food production, food preservation, water cleaning, and so on. We saw some of the impacts of that already before the war with two tailwinds back in fall of last year. Then we really visualized how many industries depend on our industry for vital input. That said, we're also part of a solution in order to reduce gas consumption in Europe as well.
I mean, for Yara in particular, since we have flexibility in our operating model. Since we're also the world's largest trader of ammonia, and we have an infrastructure globally, including ships to bring ammonia across regions that definitely can help to reduce the gas consumption in Europe.
It's important to have a dialogue around that, how we can contribute with our flexibility to reduce gas consumption and to see how that could potentially be compensated as part of the solution. This is changing every day. We see now in recent months that gas prices have doubled. They're five times where we're at last year. For us, it's about using our flexible operating model, both to optimize results for Yara to produce a vital product and also to be transparent on the importance of what we produce. I feel like we have a good dialogue around that.
Thank you very much.
As a reminder, to ask a question, please press star one. We will now take our next question from Bengt Jonassen from ABG Sundal Collier. Please go ahead, sir.
Hi. Yeah. I was just wondering whether you could clarify your outlook on the Chinese supply and Chinese exports? Thank you.
Yeah. They have curtailed exports significantly from when they introduced in October 15 last year, these new inspection routines in the ports, et cetera. Both nitrogen and phosphate exports are down sharply. All the recent information now suggests that they are maybe not issuing official statements, but that they have basically, except for some government to government deals and maybe those smaller cargos to neighboring countries of which AdBlue could be one element, that they are pretty much banning urea exports through March next year, is the latest information we have.
That on phosphate, they have, because of their larger domestic surplus, that they are doing it a little bit differently. They have actually given allocations, quarterly allocations to the major phosphate exporters on how much they are allowed to export that these levels are sharply down from what their usual exports have been. Overall, both on nitrogen and phosphorus, a significant reduction in Chinese exports.
Thank you.
Okay. As there are no further questions at this time, I'd like to turn the call back to your speakers for any additional or closing remarks.
Thank you, operator. Just the practical information that, and apologies that some of you had some issues with dialing into the call today. There will be a replay available for those of you who are interested in that. You can find the details in the invitation we sent a week ago. If you don't find it, you can just reach out to the investor relations team, and we will help you. That will be available from this afternoon at 4:00 P.M. Oslo time. With that, thank you for listening and dialing into today's telephone conference, and we wish you a nice summer. Thank you.
Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.