Urea Production Down By 9% In January.

In January, urea production fell by 9% yoy, to 302.1 ths mt. Dniproazot (DNAZ: HOLD) reduced urea production by 2% to 67.2 ths mt, Azot Cherkasy (AZOT: BUY) – by 10% to 61.2 ths mt, Stirol (STIR: HOLD) – by 30% to 60.2 ths mt and Azot Severodonetsk – by 2% to 32.3 mt. The Odesa Portside Factory was the only company that increased its urea output (by 6% to 81.2 ths mt). Concorde Capital: The drop in output is in line with our recent forecasts and was due to several factors: seasonality (in January 2005 urea prices dipped by 8% yoy), relatively high base of comparison and the government’s recent efforts to lowering gas consumption. We believe the latter was the largest factor, while seasonality and high base may account for only 2-3% out of the total 9% drop. According to our forecasts, the restrictions on gas supplies will result in 10% yoy drop in nitrogen fertilizer output (for details please refer to our recent research from March 7, 2006).