Hello, and welcome to our third quarter results presentation. The presentation today will be held by Yara's CEO, Svein Tore Holsether, and CFO, Magnus Krogh Ankarstrand. Once the presentation is done, we will move straight into the Q&A session. If you wish to listen only to this, you may remain in this window. To ask questions, please press the link under the window to enter the Teams meeting after the presentation is done. First, let's start the presentation. It's my pleasure to hand over to our CEO, Svein Tore Holsether.
Thank you, Maria, and good morning, good afternoon, good evening, depending on where you're calling in from. Thank you for joining our third quarter earnings call. As always, I will begin with our safety performance. Our 12-month rolling total recordable injury rate stands at 1.2, as we had a stable development through the third quarter. We have made significant progress over time, but colleagues are still being injured at work. I take this very seriously. Safe by Choice remains the foundation of our safety work. We know that further improvement requires consistent commitment across the organization every day. Every accident is avoidable, and our ambition remains zero injuries. This is a responsibility for all of us. Let me turn to the key developments in the quarter. We delivered an EBITDA excluding special items of $675 million, and a return on invested capital of 13.5%.
Regional price differences persisted while overall nitrogen prices increased compared with a year ago. However, this was more than offset by higher European gas costs, which pushed European ammonia margins into negative territory towards the end of the quarter. We used our ammonia flexibility to curtail production accordingly, as I will return to later on in the presentation. In Europe, Yara increased deliveries, particularly of nitrates, despite a year-on-year decline in industry deliveries, demonstrating strong commercial performance. At the same time, slow demand across most key markets, particularly for NPKs in Latin America, resulted in a negative volume impact of $40 million in the quarter. Production volumes were also affected by some plant-specific reliability issues. Increasing output is central to our improvement program and making reliability and tight cost control clear priorities.
Purchasing for the 2027 season is lagging in Europe, in the U.S., and Brazil, leaving significant volume still to be bought as the Northern Hemisphere application season approaches. In this environment, we remain focused on what we can influence directly, including accelerating delivery of our EBITDA improvement program. In parallel, the Gulf Coast Ammonia acquisition will further diversify our gas exposure upon closing. Turning to the EBITDA development, we delivered $675 million compared with $804 million in the same quarter last year. In addition, we sold the EUAs for $22 million in the quarter, and this is reported as a special item and is not included in the figure shown on this slide. As noted on the previous slide, volume had a negative impact in the quarter. Lower deliveries across segments that were partly offset by higher nitrate volumes in Europe.
We also have some third quarter spillover from the turnarounds at Pilbara and Belle Plaine. NPK premiums improved compared with the second quarter, but remained under pressure year-on-year, as it is typically the case in periods of rising commodity prices. Fixed costs were up $4 million year-on-year, excluding currency effects. Had costs developed in line with inflation, the impact would have been negative $18 million . We, therefore, beat inflation by $14 million in the quarter, demonstrating continued cost discipline. Our improvement program remains on track with the $60 million delivered so far in 2026, and Magnus will provide more detail later on in the presentation. Together, the cost program completed in 2025 and the $60 million year-to-date EBITDA improvements have contributed to approximately 1.5 percentage points to return on invested capital.
This demonstrates stronger underlying profitability over the past 12 months. Our focus is to strengthen returns further through improved operational performance and continued capital discipline. Nitrogen markets continue to be shaped by volatility and uncertainty. As I noted in the second quarter presentation, the disruption in the Middle East came at the very end of the previous season. While weak crop prices and poor farmer affordability reduced some northern hemisphere demand, most of the demand implications came for the new season by starting in May. Prices increased gradually during the quarter, although development in China and India continued to weigh on the market balance. As we now approach year-end, the Chinese export window is closing, and there was limited interest in the latest Indian tender.
At the same time, the northern hemisphere still has significant purchasing ahead of them, while supply uncertainty persists due to reduced exports through the Strait of Hormuz and production curtailments in Europe. Yara has demonstrated its ability to navigate this volatility by optimizing across the system and prioritizing profitable production. Our global business model and diversified product portfolio strengthens Yara's resilience in volatile markets, including periods of high European gas prices. Approximately 80% of Yara's finished goods portfolio is not directly exposed to TTF, reflecting both our production outside Europe and flexibility to source ammonia for our European nitrate production. The remaining 20% include industrial urea and upgraded fertilizer urea products with sulfur. So both typically command a higher margin than commodity fertilizer urea and remained profitable in the quarter. In addition, some of our nitrates are dependent on locally produced ammonia.
As a response to the increased gas prices, Yara curtailed most of its excess ammonia production in Europe in third quarter, maintaining only what was required to possibly produce upgraded nitrogen products. This flexibility allows us to remain resilient amid higher European gas prices and to optimize across markets, products, and plants. Since 2022, we have been focused on increasing the flexibility and the resilience of our system. We have a high raw material flexibility, but we also run our plants on a lower technical minimum than prior to the energy crisis in Europe that started in 2021. In addition, we have closed ammonia production both in Pirdop and in Hull and continue to work on reducing our logistical costs and increasing optimization within our system. This makes us more robust in the face of the ongoing volatility. Let me now bring us back to our central priority, strengthening returns.
As highlighted earlier, our 12-month return on invested capital stands at 13.5%, and we remain focused on further improving the underlying performance of the business. We are actively optimizing our operations to limit downside exposure in volatile markets. Above all, we are focused on the areas within our direct control. As noted earlier, production performance faced temporary setbacks at some locations in the quarter, and we are following up with urgency and discipline.
We are an industrial company, and reliable plant performance is fundamental to generating strong returns on the capital invested in our assets. Our EBITDA improvement program remains on track with a sharp focus on converting initiatives into measurable results. Capital discipline underpins our approach, supported by strict prioritization of where we allocate resources. Over time, broader gas diversification and sustained focus on our core operations will further strengthen Yara's competitiveness and return. With that, I will now hand over to Magnus Krogh Ankarstrand.
Thank you, Svein Tore. As mentioned, Q3 EBITDA stands at $675 million compared to $804 million in Q3 2025. In addition, sale of EUAs contributed another $22 million . This translates into $0.95 per share, down from $1.33 per share last year. A year-to-date EPS of $4.26 per share, an increase of 31% compared to 2025. Return on invested capital stands at 13.5% for the last 12 months versus 8% at the same time last year. However, please note that this number also includes the sale of EUAs with a cash effect of $153 million in Q2 and $22 million in Q3. Looking towards the cash side, the buildup of operating capital was lower than Q3 last year, and inventory is reduced in the quarter.
This led to an increase in cash from operations and combined with a flat development in CapEx, this leaves us with a free cash flow on par with last year. Looking at the volumes, we see a mixed picture. As mentioned in July, European buying slowly started picking up after a very slow start to the new season in May. This has gradually picked up further with nitrate deliveries ahead of last year and a strong order book. NPK deliveries have been slower in the quarter, particularly in Latin America. With higher nitrogen prices, but unstable demand in local markets, our sale of third-party products reduced in the quarter, but with limited margin impact. Finally, we see that industrial volumes are down. This is mainly related to hibernation of assets as a part of our portfolio plan. Asset productivity is a key priority for Yara.
However, the quarter was impacted by lower production assets. Part of this is related to a higher turnaround schedule for 2026, as previously announced. For ammonia, part of the reduction is due to curtailment of European ammonia plants to replace production with imports as upgrading margins from gas to ammonia were negative. Year to date, we have also been impacted by reliability issues, although focused around specific incidents with major impacts. The outage in Pilbara ammonia last quarter, as well as the outage in Sluiskil nitrate productions, are the main contributors to this. In addition, we have experienced issues with sulfuric acid in our Finnish system. Other plants significantly exceeded last year's production numbers in line with our improvement program. Rectifying reliability issues is a top priority for our production system going forward.
As reported, increase in gas costs for the quarter more than outweighed the increase in prices, putting downward pressure on margins compared to a year ago. Premiums have held up well, even though the higher commodity price level in the third quarter, as well as in the second quarter, put some pressure on NPK premiums. This led to a negative delta when comparing premiums in Q3 last year, particularly in Asia. Low crop prices also had an impact on premium levels and have since improved for most crops through the third quarter, which is positive for premium levels. Looking to the market, we see that Yara's nitrogen deliveries in our core European markets increased 4% compared to last year. At the same time, the market contracted by between 5%-10% in the same period, a rough estimation at this stage.
As mentioned earlier, our order book intake in Europe increased significantly through the quarter. This indicates a European market returning to a more normal buying pattern as season approaches, despite a very slow start to the new season in quarter two. As you may recall, Q4 last year was impacted by significant market purchases ahead of CBAM implementation. This year, CBAM is still a factor, but nitrogen markets nevertheless seem to be significantly behind. Deferred demand picture displays across most regions. in March 2026, the crisis in the Middle East led to an immediate 20% reduction of available urea and phosphate supplies to global markets. To meet this reduction, demand had to be destroyed and price increases saw to that.
Even though there was demand reduction in the season, this happened after most of the Northern Hemisphere season was bought, and further demand destruction happened in other regions or in the shape of delayed buying for the next season. Looking at nitrogen imports to core markets, this effect becomes very visible. European imports for the next season are down 30% compared to last year, which also was a low quarter compared to history. Brazil imports of urea as well as ammonium sulfate are down as well. Meanwhile, the crisis in the Middle East remains unresolved, meaning that we are now moving into the first season in the Northern Hemisphere to be fully impacted by the 20% supply outage. So far, second half has also been impacted by India and China, with reduced Indian demand and increased Chinese export quotas.
And it is interesting to see that even with the last increase in Chinese exports, the Indian tender did not find much support a few weeks ago. Urea prices in North Africa and Europe are firmly back above $500 per ton. With grain prices above last spring and the Chinese export window closing, it will be interesting to see what urea prices are required to balance the market in Q1 and Q2 next year. At the Capital Markets Day in January, we announced EBITDA improvement targets. We aim to achieve a $200 million EBITDA uplift by the end of 2027 and an additional $150 million by the end of 2030. The program is currently progressing according to plan in most areas. The majority of the contribution comes from cost and portfolio reduction measures, as well as realized gains in new products launched in our system.
Logistic optimization effects are also materializing with increased scale in ammonia sourcing as the largest contributor. The production system is a key contributor to the targets. In terms of planned debottlenecking and increases, we are progressing well. However, the overall realization has been held back by the reliability issues we have experienced in some critical sites. Going forward, our improvement program is our core focus, we maintain all targets, and reliability improvements in particular. Looking to the Gulf Coast Ammonia acquisition, pending regulatory approval post-closing, this acquisition will have a significant impact on the Yara energy exposure. Coming from a time before Freeport, when less than 15% of our gas purchases were in North America, our portfolio will now be close to 40% exposed to Henry Hub or the Canadian gas reference.
Of the remaining European TTF exposure, half of the exposure is linked to nitrate production, where locally produced ammonia can be replaced by imports. The Gulf Coast Ammonia acquisition also adds considerable length to our internal balance between equity-owned production and consumption, which allows even greater flexibility on further portfolio adjustments. This opens for adjusting the relative energy exposure further in favor of low-cost production. Moving towards capital allocation, Yara maintains its policy after the Gulf Coast Ammonia acquisition. Our overarching target is always to maximize returns to our shareholders through return on invested capital, focusing both on growth CapEx as well as sustaining CapEx. Delivering on our improvement program is the first priority in achieving that, and as previously mentioned, the GCA acquisition will expand our EBIT margins by significantly lowering our cost position.
Beyond that, Yara will maintain our strict capital discipline, focusing on reprioritizing sustaining CapEx towards the highest return assets and ensuring realization of benefits from executed growth investments. Post-closing of the acquisition, it will be a priority to maintain a strong balance sheet, ensuring that we have the capability for high-quality investment opportunities at the right timing, while maintaining attractive shareholder distributions. With that, I give the word back to Svein Tore.
Thank you, Magnus. Looking beyond the quarter, I finally want to highlight the robustness of Yara's business model, despite the ongoing market volatility. As a nitrogen company, we are obviously highly impacted by nitrogen prices. But as we also see from our historic results, we are less impacted by the spread between TTF and urea. Our fixed cost reductions have increased its robustness further, and after the closing of the Gulf Coast Ammonia acquisition, our earnings quality will improve further. While we improve our cost position, our premium product portfolio is a significant stabilizing factor. Although NPK and nitrate margins contract somewhat when prices are high, as seen in this quarter, they make up a significant relative portion of our earnings when market balances shift downwards. Combined with our global reach and scale, the improvement program aims to further increase the stability and quality further, as well as earnings growth.
To conclude, our commitment to sustainable value creation and increased shareholder returns remain firm. We have a strong starting point in our global production and market presence, supported by an asset base that would be difficult and costly to replicate. Realizing its full potential requires safe, reliable operations and a strong culture of operational excellence. Our underlying EBITDA improvement targets remain $200 million by 2027 and $350 million by 2030. The Gulf Coast Ammonia acquisition provides a clear pathway to further energy diversification and value-accretive ammonia capacity expansion. We remain committed to a strong balance sheet and a mid-investment-grade credit rating. Our objective is to increase total shareholder returns and deliver consistent distributions with additional upside through the cycle. With that, I will now hand back to Maria.
Thank you, Svein Tore. That concludes today's presentation. We will now take a minute or two to prepare for the Q&A session. If you wish to ask questions, please click the link below the webcast to join the Teams meeting. We will revert shortly. Thank you for watching.
Welcome back to everyone. We are now ready to start the Q&A session. This is Maria speaking, and I am sitting here together with Yara management. For those that only want to listen to the Q&A, you can remain on the webcast page. If you wish to ask questions, you need to join the Teams meeting by pressing the link underneath the webcast window. Once you are in the Teams meeting, please raise your hand if you wish to ask a question.
If you are joining by phone, please press star followed by five to raise your hand, and when it is your turn, press star followed by six to unmute. When it is your turn to ask a question, I will introduce you, and you will be asked to unmute. Please state your name and which company you are from. With that, we are ready to take the first question, which is from John Campbell. Please unmute and go ahead.
Yeah. Hi, everyone. It's John Campbell with Bank of America. I wanted to ask you on your forward guidance of gas prices. If I remember properly, that's a volume neutral assumption. I think you're guiding something like $450 million higher gas costs, I think in Q4 and roughly similar for Q1. You've articulated in this presentation that you're going to be doing curtailments. I'd be interested, perhaps could you give a different figure to maybe guide us a bit more precisely on the outlook for Q4 and Q1 gas costs on a maybe non-volume neutral basis? Thank you.
Yeah. No, thank you for the question. As you rightly put, it's volume neutral. I think we also say in our presentation that we have the ability to curtail up to 1 million ton of our European ammonia production per year. Obviously, as long as the spread between TTF and ammonia prices is negative, we will curtail as much ammonia as we can. You can assume that from our ammonia production is where our gas consumption sits as well.
I suggest you model it by adding a volume assumption in the volume bucket, right? Which is then basically the ammonia margin or the negative ammonia margin that we are waiving by curtailing ammonia in Europe. I think that's the best way to model it. If you take the gap between the ammonia price and what the ammonia cash cost, that should be the positive impact of curtailing.
Okay. That's helpful. Thank you.
Okay. Thank you, John. David Symonds, please go ahead.
Hi. Thank you very much. If I look at current prices and take your sensitivities, I think that implies $200 million positive price impact in Q4. I do not know if that accounts for the pass-through of gas costs that you have in some of the industrial urea stuff. So volume neutral, if you have EUR 450 million negative gas, is the right number $200 million positive pricing, or is there some more offset than that? That is question one.
Then question two, could you talk a little bit more about the Sluiskil production issues, how big they have been, whether they are ongoing? Maybe if I could squeeze in question three, you are talking about 150,000 tons of curtailment in Q3, rising to 270,000 today. Could you maybe give some more detail on the plants that are closed down and maybe help us to size the volume impact that you expect in Q4 in the bridge? Thanks.
Can I just ask a clarifying question? You mentioned $200 million. Was that if you update the price sensitivities?
Yeah, just the price line rather than the price and gas. Just price as it is given today applied to the sensitivities.
Yeah. It is back to the question that we answered John as well, right? You need to adjust for the ammonia margin or the positive impact of not being exposed to a negative ammonia margin when we curtail. There are also some positive effects as we are able to uphold margins in industrial deliveries, but that is a positive offset of part of the negative cash cost, no gas cost impact. Yeah.
Yeah. As for the production issues. For the quarter, there was a limited impact on results as such from the production side. Some sort of remaining impact from Pilbara. But obviously, production issues or lost production over time, of course, will reflect in somewhat lower volumes, as we obviously don't have those to sell. Specifically, the issues in Sluiskil were earlier this year in nitrate production. Currently, Sluiskil is running as normal on finished fertilizer production.
And for the last question on curtailment in ammonia, which plants that is. It is across several plants. Both Porsgrunn, Le Havre, and Sluiskil typically have excess ammonia than what is needed for their integrated urea production. That is typically the first volumes we curtail when ammonia margins are negative. They could also be serving other plants that still positive margins for different reasons. Those are the ones that are included in that. And Tertre, of course, but that is both integrated and non-integrated ammonia.
Okay. Thank you very much.
Thank you. Alex Sloane, please go ahead.
Yeah. Hi, thanks for taking the questions. First one will be on nitrogen market outlook. You mentioned in the prepared remarks, grain prices above last spring. It would be interesting to see what urea prices are required to balance the market in Q1 and Q2 of next year. Do you have a base case that you could share with us on that? Be interested. That would be the first one. The second one, just on self-help. So you have delivered around $60 million of the $200 million target. Can you help us think about phasing from here and through the rest of 2027? What are the biggest building blocks that are left to hit that target? Thanks.
On your first question is, of course, we cannot share that kind of exact number for where we think this will balance. But what we observe is that we have now had some months of very strong negative impacts in the market of reduced Indian buying and stronger Chinese exports. It is just interesting just to look at the September numbers as an example, where India imported 1.1 million tons less, and China exported 1.1 million tons more, both compared to September last year. It is a combined supply addition for the rest of the world of 2.2 million tons in a month. And that compares to, let us say, full blast out of Arab Gulf is only 1.5 million tons a month. So it is interesting also for us to observe that prices actually increased through September in a market that was actually quite well supplied.
We see that as a very interesting backdrop for a situation where, as Magnus pointed to, and also Svein Tore, that we have not seen position taking, let us say, in European markets, in Latin American markets, in North American markets, during this period. There is a lot of demand that remains. So if you get now into a situation where these India and China effects are, let us say, sunk costs or history, and you have the continued supply disruptions out of Arab Gulf, combined with the curtailments in Europe, what we were alluding to then is that we are very curious to see exactly how this urea balance will develop as we get into the Northern Hemisphere spring.
Exact numbers, we cannot give that, but it looks for us that with the supply issues that we are having at the moment, I would be a little bit concerned if I was a big buyer, let us put it that way.
For your second question, we do not have a quarter by quarter forecast, or we cannot share a quarter on quarter forecast for the improvements, but it is not really a hockey stick either. But the bulk of the outstanding improvements, I would say, is linked to production increases. And there we have done some advancement on some of the debottlenecking and some of the additional capacity we wanted to get out, but then results have been hampered by the reliability issues that we have had. So if not for that, the numbers would have been somewhat higher, even now. But to your specific question, it is mainly in the production area where the bulk of the remaining improvement towards the end of 2027 lies.
Thank you.
Thank you. Let's move to Mazahir Mammadli. Please unmute and ask your question.
Great. Thanks for taking my questions. My first question is regarding the order book. Looking at the order book chart that you provided, would it be fair to assume that Q4 volumes in Europe will be substantially up year on year? Could you give some more color on the shape of the order book in other important regions, specifically Latin America? My second question is on GCA. In terms of the P&L impact and the impact of lower weighted average feedstock costs, when should we start seeing the first P&L impact, and by when will it be fully ramped up? Thank you.
Yeah. To your first question, we do not guide on volumes. So we cannot share any prediction for Q4 as such, other than the general market perception that we see right now, which is that buying in the Northern Hemisphere is significantly delayed compared to what is normal in the season, and also with strengthening crop prices. There is no reason to think that it would be a dramatic reduction in Northern Hemisphere demand as it stands now. Beyond that, we cannot comment specifically on volumes. Of course, sometimes it shifts a bit between the quarters as well, given how the season develops. As for the order book and the order book chart, what that points out is where it stood towards the end of the existing quarter, but it is not indicating what our order book looks like for the next quarter.
In terms of Gulf Coast Ammonia, the P&L effect will start when the acquisition is closed. The acquisition is pending normal regulatory approval. We are hopeful that we will see that in Q4. From the day we close the transaction, it will be a part of our accounts as well. The plant is currently in a turnaround that is known in the market. It is not yet commercially complete. The contractor is working on finishing off the commissioning. We are, no changes as to previous guidance when we think production will ramp up.
Thank you.
Thank you. We are moving to Christian Faitz. Please ask your question.
Yes. Thanks. Good afternoon. Two questions, please, from my side, Christian Faitz, Kepler Cheuvreux. First of all, in your view, is weak fertilizer purchase in January deferred demand, is that deferred demand or are farmers reducing nutrient applications in your view, and do you see that changing in 2027? Second question, how much of the winter gas cost increase can you offset, and what is the residual earnings exposure, how much of that winter gas cost increase can be recovered through fertilizer pricing avoided through imported ammonia or mitigated through production curtailments? Thanks very much.
On your first question, Christian, we think that in 2026, the season we have, let's say, behind us, there was considerable demand rationing that actually happened in most private markets, just in order to balance the market. That includes in Europe, where we see that total nitrogen supply for the 2025, 2026 season was down roughly 10%. Maybe you get that kind of a demand rationing around that number. Less so in North America, maybe closer to 5%, something like that. In Brazil, it's very interesting, right? Because we don't really know yet. What we can observe is that the nitrogen imports so far this year is down 22%, and I think that most people are not really expecting them to catch up. So there will be also demand rationing in Brazil.
If you think about 2027 with improved affordability ratios for nitrogen in particular, you would actually logically expect an increase in the demand and not a further rationing. So that's also one of the elements for why we are curious ourselves to how this season is going to play out. Particularly because nitrogen prices are much lower now than they were in March, April, at that time in the season. But also because crop prices have, although they have corrected some now in October, are way better than what they were half a year ago. We also hear from our markets that sentiment is better than half a year ago, to put it that way.
Yeah. Thanks very much.
And, we don't expect much of our finished product production in Europe will be impacted by gas prices for reasons that we talked about. One exception could be our plant in Italy, but that's of course a fairly minor part of our earnings, so it's not a big impact. When it comes to how to modulate, or sort of, it's really like the 1 million ton capacity that we have to curtail, and, you know, we would never produce at a negative margin. So that would be curtailed if gas prices, or cash cost production, is higher than the ammonia price, even if that ammonia is sort of in 50 kilos used to feed one of our own plants rather than replaced with imports.
Thank you very much . Very helpful both.
I can just add, if it helps. The current run rate of curtailment is 270,000 tons of ammonia. If you assume 36 million MMBtu per ton of ammonia and the fourth quarter gas cost of $24 per MMBtu, that gives $230 million in gas cost avoidance just there. We, of course, can't just add that on the estimate because it's a margin exposure in total. Just to illustrate the impact of it. Then as we touched upon, we have both urea with sulfate, which typically will still command a positive margin. We also have industrial urea, which also still has positive margins. The need to mitigate the low gas cost is less relevant because we're still producing at positive margins there.
No questions. Thanks, Maria.
Thank you.
Thank you.
Magnus Rasmussen.
Yes. Thank you. Magnus Rasmussen from SEB. A question on the gas cost guidance. It is, as far as I can see, EUR 100 million a quarter higher than what the sensitivity would give us. Just a quick comment on that, why is the estimate higher? I understand that you are counting consumption when you are guiding one or two quarters ahead, but it would be the third quarter in a row. Should there be a change in the sensitivity? Secondly, also, if you could comment on the gas cost guidance increase that you gave in the pre-quarter information. I think it was EUR 90 million higher than what you said at Q2. Given that you have two-month lag on gas prices, it seems strange for me that gas prices can increase EUR 90 million in the two weeks after you reported in mid-July. Thanks.
Yes. I can start with the first question. If you look at the slide in the appendix, which gives the details of the gas cost guidance, you will notice that the gas consumption for Q4 2025 was higher than a normal quarter and higher than what the sensitivities are based on. That gives a volume neutral higher gas price impact and then sensitivities, which have since been adjusted with, for example, plants that are being closed, et cetera, and a few other parts. It is really the starting point, which is then the last year's consumption being high, which is a bit specific. That quarter, we had quite limited turnarounds and reliabilities in the fourth quarter last year, so we had above average gas consumption in that quarter.
For the updated gas guidance that we gave in the pre-quarter, it is a little bit more related to when this is volatile, and we have different lags and different timing to take from we consume gas till we actually deliver the product with that gas. That varies way more when prices move as quickly as they have. We have some shorter lags in European plants and some longer lags in other plants that typically serve export markets. That is what has triggered the biggest difference from the original guidance to the updated guidance.
Thank you. Just one final question also on the Gulf Coast Ammonia Project. You sent out a message in August regarding a legal issue. It seems like things are moving according to plan. Is that because the legal issue has been solved, or is it because you are just assuming that will be fine?
Yeah, I think the regulatory process is the last step now for closing of the transaction, and that proceeds irrespective of the other issues.
Okay, thanks.
Okay. Angelina Glazova, please unmute and ask your question.
Hello. Thank you very much for taking my questions. I just have two questions left. First is maybe a follow-up on GCA or more broadly, your approach to managing the ammonia framework globally. You had mentioned that after the closing of acquisitions, the approach would be to stick to the capital allocation policy, but in a way that would enable Yara to accommodate high-quality investment opportunities should they come up. We are also hearing that at the moment in the U.S., apparently, a blue ammonia project is being offered for sale. When you were saying about investment opportunities at the right timing, were you thinking of a timing potentially in the future, or it could be relatively sooner? Any color you could give would be helpful. My second question is maybe going back to the economics of ammonia production in Europe.
We obviously already saw in the past that when gas prices rise significantly, there can be a period of time when making ammonia in Europe is uneconomic, and that results in curtailments, which we have seen a lot this time as well. What is different is that we also have significant supply outages now globally because of the Middle East conflict. To me, it was a bit surprising why this has lasted for such a significant period of time, this period of ammonia being uneconomic. When you were saying that you are seeing a pickup in your order books in Europe, are you expecting then the economics of ammonia production to also start improving because the ammonia price is starting to rise into the fourth quarter?
Yeah, maybe I'll do the last one first. What's important to distinguish here is finished products and ammonia. Of course, we also sell some ammonia as a finished product, so to speak. When we talk about our order books and we in general talk about nitrogen demand in Europe, we're talking about finished products, so urea, nitrates in particular, and NPKs. All our gas consumption goes into the ammonia production. There's a spread between cash cost of ammonia production and the ammonia price. Then there's a spread between ammonia prices and nitrate prices. Right now, the spread in Europe between cash cost of ammonia and ammonia price is negative, but the spread between gas prices and nitrates is positive. That's why there's still significant production economics for nitrates production in Europe.
If in order to produce nitrates, you have to keep your ammonia running, you would do so because there's a positive margin. If you can close your ammonia production, import ammonia to produce the same nitrates, your margin will increase. That's what we're doing. We are curtailing the excess ammonia production and the ammonia production that we can that goes into nitrates and replacing that with imports. Of course, there is another question whether European ammonia production will be needed for Sorry, that's to you, Tore.
Yeah. I understand your question. Was I a bit surprised by such a relatively poor ammonia market that production in Europe is not economical despite all the outages in the Arab Gulf particularly, I guess? I guess that was the question. I think that-
In that context, it's very important to be aware of the sulfur implications for the phosphate sector, to have that in mind, because half of world sulfur trade is coming out of Arab Gulf, and it's not possible to produce phosphate fertilizer without sulfur, because their phosphate rock is dissolved in sulfuric acid. That means that since phosphate producers are unable to secure sulfur, they don't need to buy ammonia. So you get a negative demand effect for ammonia globally that kind of offsets, to a large extent, those supply outages in Arab Gulf. That is why the ammonia market is hit differently than upgraded nitrogen products, when it comes to that Arab Gulf conflict.
Regarding capital allocation, what we mean is that when we, from a CapEx guidance perspective, we sort of illustrate the growth CapEx available between our maintenance CapEx and a $1.2 billion real CapEx level over the period. So it doesn't indicate that we spend $1.2 billion each year, but it indicates a certain flexibility that we would have. And, I think for us, it's important to have a strong balance sheet to be able to capitalize on opportunities like we did with GCA, but it's even more important to have strong capital discipline. So, we will be very selective on growth CapEx going forward, aiming at directing that towards high-quality investments with sort of clear shareholder value creation. And whether that shows up next year or two years from now, that is impossible to predict.
Great. Thank you very much.
Thank you. Then we are moving to Marcus Carley. Please go ahead.
Thank you. Just one question, really. We saw some curtailments in Europe in early August and September, but we have not seen that much or at least heard of that much ever since ADF and LAT Nitrogen posted these. Could you just give us a quick update or insight into what you are currently seeing or heard in the market? Are there more curtailment not being published? Are there operating rates being reduced significantly? Because also looking at European prices, it has not been a meaningful uptick given the surging gas prices. That would be very helpful. Thank you.
Yeah. We do not have very accurate numbers to share because most producers tend not to communicate very clearly around this, so it is very hard to monitor. But we can, of course, the publications or the market followers are trying to do their best and to have some assessments. And of course, it is logical to assume that as we are doing, that there are more curtailments on the ammonia level than on the finished fertilizer level, because of the, as Magnus said, the positive nitrate premiums or margins in particular. But I have seen consultants that are kind of adding numbers together to get to a, let us say, at least a 25% curtailment on the ammonia side. Some are saying 28% or higher as well, which I guess fits very well when you start to add together our own curtailments.
When we said what LAT, as you said, in the French operations, also Piesteritz is probably running only partly. Fertiberia has announced closures. It would be very surprising if the Polish went at full speed over East European as well. That kind of makes sense. So there is substantial curtailment. It does not look that different from 2021, 2022. Ammonia production in Europe went from 16 million tons in 2020 to 12 million tons and something in 2022. That is a 25% cut. Of course, now those 16 million tons never returned. Ammonia production only increased to 14 point something at the peak in 2024. So there is a lower base, but something similar, I would think is logical to expect.
Great. Thank you.
Okay. Then it is Lizzy Lancaster.
Hi. Thank you very much for taking my question. Just a clarification, really, if possible. You mentioned obviously the reliability issues of Sluiskil. Did that extend to any of the three ammonia units, or was it just on the finished fert side? Can I then infer when you said that it is operating well now plus finished ferts, is that the same on the ammonia side, or are there any issues there at present? Thank you.
Two different things there. We had an outage in nitric acid, really, which impacted nitrate production back in Sluiskil, back in Q2, I believe. All of that is back up and running now. Those were unscheduled outages. When it comes to the ammonia side, the curtailments we do there are for market reasons. Then we curtail the excess ammonia and maximize our import capacity or capabilities into Sluiskil. Those curtailments are purely market-driven. Great. Thank you. The nitrogen finished fertilizer is running full blast.
Currently no more hands up. I will give everyone a final chance to ask a question, but if not Okay, we have a question from a phone number. I do not have a name, but the phone number ends with 565. Can you please unmute and ask your question? You can unmute to press star followed by six.
This is Lisa De Neve from Morgan Stanley. I am not sure if you can hear me.
Oh, now we can hear you.
Okay, wonderful. Thank you. Because I did not understand the local language comments, so apologies for that. I have two small questions. One, can you just confirm to me that the phosphate outage in the Finnish system has been resolved? That is my first question, and check. Secondly, I would like to come back to the questions on the delay in purchasing activity. How should we think about the appetite for farmers and the timing around coming back to fulfill their purchases? To which extent do you think it is a function of El Niño uncertainty, and the current level of European gas prices? Overall, how do you think about the deadline for farmers in the northern hemisphere to come back to the market and fulfill any purchases they need for next application season? Thank you.
Yeah. Regarding your first question, I understood that to be regarding our production in Finland for phosphate production there. We have experienced some issues actually with our sulfuric acid plant there, which then impacts phosphate production. Those issues are not fully resolved, but we have implemented mitigating actions. We also have some flexibility there on the product mix to try to maximize our finished product capacities through slightly different grades and more nitrates as opposed to NPKs and so on. But we are working through that this quarter to resolve those issues. That is where farmers are buying?
Yeah. No, it is of course hard to say because it is a commodity market, so it is a game, right? We have been surprised a little bit by how late buying has been several seasons in a row, with very concentrated Q1 buying and spiking prices in Q1. I think if it happens again, it will be the fourth time in a row. From that sense, you would kind of find it logical that some would buy a little bit earlier. But let us see how that plays out.
It is a game between buyers and sellers. In Europe, as we mentioned, we are already seeing some effects, I think, of some concerns. Because as you said, September really picked up and we mentioned that the order book for Q4 is strong. So there is already some impact, I think, of the concerns that is triggered by the global market.
Of course, in Europe, last season was an exception because you had this CBAM introduction from January 1st that led to a lot of imports and also buying in general. But a lot of imports in Q4, particularly in December. That was an anomaly, I think, that we also have to be aware of it. I do not think you can expect that kind of imports in Q4 this year. So that could also then add to a Q1 tightness, if that does not happen. Your question of El Niño, I think, yes, you see a lot of reports, but you do not see a lot of evidence. But let us say Brazil as an example where there is some concern about too much dryness in one part of the country and excess rain in another.
That is one of the reasons why nitrogen imports into Brazil can be lagging so much as it is by as much as 10%. Could be that there are farmers that are concerned that the yield potential will not really call for so much nutrient application. But it is hard to specify concretely, I think. Sales in India, for instance, another country where there has been a lot of talk about El Niño and a country that has had poorer monsoon this year than the previous few years.
Sales of urea has been actually quite strong. It is only down 800,000 tons so far since April. So not that much impact. Same thing in Australia. Australia is going out of a very good season. It seems like the agriculture is doing very well, even though El Niño is mentioned as a potential very harmful event also there. I think it's too early to say.
Okay. Thank you very much.
Thank you. That was today's final question. The IR team remains available if you have any follow-up questions. But other than that, thank you for watching and listening.