CF Forms JV With JERA & Mitsui for Low-Carbon Ammonia Production

CF Industries Holdings, Inc. CF, JERA Co., Inc., Japan’s biggest energy company, and Mitsui & Co., Inc., a major global investment and trading firm, have signed a joint venture (JV) focused on building facility as well as production and offtake of low-carbon ammonia.

The JV will be structured with CF Industries holding a 40% stake, JERA 35% and Mitsui 25%. Together, they will develop a low-carbon ammonia production facility at CF Industries’ Blue Point Complex in Louisiana. The facility will utilize autothermal reforming (ATR) and include a carbon dioxide (CO2) dehydration and compression unit to prepare captured CO2 for transport and storage. With an estimated construction cost of $4 billion, funding will be shared among the partners based on their respective ownership shares. 

Once completed, the plant will have an annual nameplate capacity of approximately 1.4 million metric tons, making it the world’s largest ammonia production facility by nameplate capacity. Production is expected to begin in 2029. In addition, CF Industries will invest around $550 million to develop scalable infrastructure at the site, including storage and loading systems, and will operate the facility while receiving ongoing service revenues. Each partner will independently manage the offtake of ammonia in line with their ownership percentage.

This JV marks a significant step forward in creating a dependable and cost-effective low-carbon ammonia value chain aimed at meeting the anticipated strong global demand for low-carbon ammonia across both existing and emerging applications.

Shares of CF Industries have lost 12.8% in the past year compared with a 11.4% decline of the industry.

CF, on its fourth-quarter call, said that it expects the global supply-demand balance to continue to be positive since inventories around the globe are considered to be below normal and production economics for the industry's marginal producers in Europe remain challenging. 

CF currently expects average U.S. corn returns to be higher than soybeans, owing in part to rising corn prices as a result of robust corn exports and lower 2024 yield predictions, which are projected to benefit corn plantings and nitrogen demand in the region. Nitrogen imports to Brazil are likely to remain high in 2025 due to anticipated high corn plantings and ongoing minimal domestic nitrogen output. Urea inventory in India is predicted to be low due to strong domestic demand for urea, lower-than-targeted domestic urea output and lower urea import volumes in 2024 compared to 2023.

CF’s Rank & Key Picks

CF currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include Carpenter Technology Corporation CRS, Idaho Strategic Resources, Inc. IDR and ArcelorMittal S.A. MT

Carpenter Technology currently carries a Zacks Rank #2 (Buy). CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. The company's shares have soared 126.4% in the past year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Idaho Strategic Resources’ current-year earnings is pegged at 78 cents. IDR, carrying a Zacks Rank #2, surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with an average earnings surprise of 77.5%. The company's shares have rallied 80.4% in the past year.

ArcelorMittal, which currently carries a Zacks Rank #2, beat the consensus estimate in three of the trailing four quarters while missing once. In this time frame, it delivered an earnings surprise of roughly 4.1%, on average. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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