CF Industries Holdings, Inc. (CF) Earnings Call Transcript & Summary

Good afternoon, everybody. I'm Joel Jackson. I cover fertilizers and chemicals at BMO. Very pleased to be moderating the next discussion here at the BMO Growth & ESG Conference. It's going to be with the C-level team of CF Industries. Of course, one of the largest nitrogen producers. We're going to discuss CF's ESG and sustainability initiatives as well as the nitrogen market. We want this discussion to be very interactive so please submit your questions to me in the Q&A field. You can e-mail it to me if you want. No topic is off limits.

Let me kick off by saying that in the last couple of months, CF has been quite out front in expressing its view that the shift to decarbonization is inevitable and ammonia should be supported as an efficient medium for hydrogen storage and distribution. The management team with us today has been quite clear that CF will walk, not run on all of this, but started initiate projects to sequester and capture CO2 at existing plants and will start looking at developing green ammonia capacity, first with a small project at the Donaldsonville, Louisiana complex. So with us today are Tony Will, the CEO; Chris Bohn, CFO; and Bert Frost, who run sales, marketing and the supply chain for CF. So Tony, welcome. Welcome to you. Let's start off with you, Tony. Why does CF now deem the blue and green ammonia opportunity as so important? And please outline the main parts of your strategy and opportunity set.

Yes. Good afternoon, Joel. Thanks for having us and a pleasure to be here. So I think for us, what we have seen is not only the kind of the dramatic push toward decarbonization on many fronts and the commitments made by many nations to move that direction. But in order for that to come to fruition, the real need for a clean energy source. And it's only been here recently with some technology advancements and some other developments where that has become both economically feasible and available for us. And so this was the perfect kind of confluence between availability of technology, the economics around how to make that work and the availability of sequestration and having more and more caverns open up. So this really became the opportune time for us to jump in and move ahead fully. And as you mentioned, we've made kind of a comprehensive commitment across our business. So that includes all of the following: a massive decarbonization effort; we're going to reduce emissions at 25% by 2030; we'll be net carbon zero by 2050; we have allocated money, call it, circa $100 million to build a green ammonia plant using electrolysis in Donaldsonville; and we're well along the way of developing carbon sequestration opportunities at a number of our plants. In the U.K., the Prime Minister announced a massive carbon sequestration project in Teesside, which is where our Billingham plant is on the northeast. There's also the high net project going on the northwest where our Ince plant is located. And we're really excited about both the demand for this product, not only being used as a platform for a very efficient hydrogen transport and storage, but also as a fuel in its own right. There's been tremendous uptake in demand from the marine industry on becoming IMO 2030 compliant using ammonia as a transportation fuel. And so this really seemed like the tipping point both from a demand standpoint and also, again, the technology for us to move forward. So there's -- our ESG commitments are not only around carbon. We've also made substantial commitments around reducing water usage and becoming more efficient there. Around diversity and inclusion, having 30% of our senior leadership team be represented by female and ethnic minorities by 2030 and commitments around our involvement in our local communities in which we operate as well. So it was a pretty comprehensive package that we put together when we announced this a couple of weeks ago, and that also included the establishment of a new committee of the Board around environmental, sustainability and communities to help kind of -- from a governance standpoint, oversight and ensure that management continues to make progress and does it effectively across all of those initiatives.

So we're getting a lot of questions in. I'm going to ask one more here on the story. So let's turn to your overall ESG story or at least on the sustainability side for CF. Currently, you primarily nitrogen fertilizer, as we all know. You help grow food. And that may be sufficient to say, you're generating carbon, but you grow food. But now you're really trying to want to seek to capture different value streams right now more of the kind of renewal -- more into the renewables and the energy kind of value or transportation value of ammonia. Can you talk about that a little bit?

Yes. You bet. So ammonia, when it's used as a fertilizer, NH3 is the chemical symbol for it. You're really selling it for the nitrogen content, the N. That is the primary use or it's about between sort of, call it, 65% and 70% of our production. 20 million tons a year goes as fertilizer. The rest of it goes for industrial applications. As we tap into the energy market, what you're really selling is the hydrogen content of the ammonia molecule rather than the nitrogen content of it. And ammonia tends to be a much more efficient storage and transport medium for hydrogen than hydrogen gases. The liquid ammonia has a boiling point of minus 28 degrees Fahrenheit, whereas hydrogen, it's minus 4 -- I think it's 425. And so you end up using more energy by compressing and refrigerating hydrogen than you do by converting it into ammonia and shipping it. So the storage density is outstanding for ammonia, and it really is the shift in terms of the valuable part of the molecule away from N and towards the 3 hydrogens that attach to it as -- use as a fuel.

Do you think that it's going to be nitrogen producers -- if we're going this way, hydrogen, is it the nitrogen producers globally that are going to be advantaged in this space, yourself, Yara, Middle Eastern companies, OCI, whatever, because you're used to handling ammonia, used to making ammonia, do you think that's going to be a competitive advantage?

Well, I certainly think that we have a big advantage both in terms of in the installed base from a production standpoint, but also the assets in place from a logistics and a storage and transportation perspective. We have 5 -- access to 5 deepwater docks. There's 120 seaports globally that are already set up to store and transport and move ammonia around the world. And so clearly, the people that are already in the nitrogen game and the ammonia game have -- it's 4 to 5 years to build a new plant, and it's at least $1.5 billion to build a new plant. So the people with installed capacity are years ahead and billions of dollars ahead than those that are trying to just enter the industry. Now the good news, I think, for all of us is our expectation at some point in the future, some people will tell you, it's 10 years. Some people will tell you it's more like 25 or 30, is that our expectation is demand for ammonia between use as a fertilizer and use as an energy source will more than double from where it is today. So what that means is there needs to be price signals to bid into the marketplace all of this additional capacity that's coming. And for those of us that already have existing production capacity without requiring substantial new capital that goes along with it, as the price goes up to bid in new production capacity, we are going to be the huge beneficiary of that. So we're really excited about the path forward in the next few years look like for us.

A couple of questions coming in already. [Operator Instructions] So one more overreaching question for I drill down a little bit more. So your CO2 reduction goal you disclosed a month or 2 ago. You're targeting 25% reduction by 2030. Now you made that off of a 2015 base before some of your new expansions came on. Why was that the right number? Why was 2015 the base you want to cite? What would 2030 levels look like versus 2019 levels?

Yes. So on a -- an efficiency per product ton 2015, we think, is the right number to look at because basically, between then and now, we've spent pretty close to $6 billion of investment in the infrastructure to already dramatically reduce our footprint from 25 -- 2015 levels. And what we hate to do is to not sort of recognize the fact that we have already been a consistently good actor in the industry. Now that said, by the time for us to get to net zero by 2050, what it really means is we have to go after all of the carbon that we're producing, not just off of the 2015 metric. So our -- as we reported in our sustainability report last year, our Scope 1 emissions goes 18.3 million tons of CO2 equivalents. And so we have tied executive compensation against emissions reduction goals and against safety, and it's fully our intent to go as hard at this as we possibly can and reduce it well below the 25% level and as soon as we can. The good news is, I think, with the new administration in the U.S. that's going to be coming in along with what's going on in both the U.K. and in Canada, we believe there's going to be significant economic incentives to provide the right kind of carrot-and-stick environment for private industry to decarbonize. And that typically goes along, particularly in the cap and trade environment with opportunities to benefit from making those big reductions. So we're in the process of developing a comprehensive list of emissions reduction opportunities for the company. And not only is it doing the right thing from an environmental standpoint, but we believe it's a way to generate significant value for our shareholders at the same time.

Okay. Let's drill down more now into a little more of the things that you're looking at. So you have a question that's come in and it says, let's talk about supply and demand a little bit here, what green and blue ammonia might look like. So the question is, what milestones are you looking for to monitor the market adoption of the potential for low-carbon ammonia?

Bert, do you want to talk a little bit about what you're seeing on the ag side in terms of farmers receiving credit for carbon sequestration and the soil? And then we can also talk about what we're seeing from an initial outreach of industrial customers in the U.K. and marine application. So Bert, why don't you start off?

Well, I think it starts with that initial comment that Tony just made. There are several pathways that we're pursuing that are exciting. And it's energy, whether that be Asia. There is energy and hydrogen, whether that be Europe. There is energy as a fuel for transport, whether that be trucks and vessels. And then this component that Tony just mentioned of ag. And today, when you look at the ag value chain and you look at a producer who's, let's say, a corn producer in the glacial soils of North Dakota down through Iowa, Illinois to Nebraska, the principal area where you participate in the ammonia market, today, that farmer is applying ammonia and generating a yield to corn, wheat, canola. But let's go with corn. And so he's applying x amount of ammonia, and that ammonia is a carbon of gray ammonia. And then at the end, every crop, whether a photosynthesizing crop is pulling in carbon from the air and putting that into the ground. And so for a farmer with the whole structure that they have with understanding their soil types, their inputs being seed, chemicals, fertilizer and then the output in yields, as we're able to yield more, there will be more carbon pulled from the air. So that's the value chain. But if you can create a value chain that's zero or low carbon, whether that be low carbon fuels or a zero-carbon ammonia, that just starts the whole chain together to be a very attractive carbon zero going in and then capturing carbon for the farmer to get a capturable credit or a value to his farm center.

And Joel, in that regard -- sorry to interrupt, but we are seeing a voluntary market for carbon trading already develop with farmers in the U.S. And there's been a couple of high-profile case studies that have been talked about, and it's exactly what Bert is alluding to, which is the lower carbon inputs that you end up using, you can actually certify more net carbon sequestered in the soil as a result of that, and it becomes even a more economically profitable endeavor even in a voluntary market where credits are kind of, call it, $3 to $5 in an environment that's regulatorily back where you're talking about $35 to $50 a ton, we expect the demand for low-carbon inputs on the crop nutrient side to go up dramatically. That's before you even get to marine applications where we think that, that's really going to be taking off. And also Bert talked about the Japanese utility industry that -- it's affected to be over 2 million tons of anhydrous a year that gets used for energy production and in low-carbon ammonia. So we think that tipping point is happening sooner rather than later. And we're working with all -- its median to get to a position where we can provide 2 million, 2.5 million tons of low-carbon kind of blue ammonia to the world.

Actually, I want to come back to that a little bit later in this about that, what we're seeing some of your peers. Now they're talking about trying to really lobby and rally around trying to get more carbon credits for farmers for soil sequestration of carbon. We'll make Woody Harrelson [ copy ], right? Sorry. Just on your slide deck, you did an ESG update a month or maybe 6 weeks ago, and you showed a bunch of illustrative demand suggested that maybe the demand for green ammonia could be something like up 1 billion, 2 billion, 3 billion tons ammonia, 5 to 20x currently what the current ammonia demand is right now. Can you give a bit more granularity on the buckets? You talked about different applications in the last 20 minutes of the buckets. How you get to 5x, 10x, 15x, 20x?

Yes. You bet. So let's just start off with -- from hydrogen consumption today. Ammonia, which has a higher energy density than hydrogen does because it's NH3, right, only represents about 5% or 6% of the total amount of hydrogen that is consumed currently. So it's a very small percentage of the actual demand for hydrogen. And as we see hydrogen demand increase, the requirements around storage and transportation movement of hydrogen start increasing dramatically and ammonia becomes a very efficient way to do all of that, as we've talked about. And so we would expect the first places where you really see demand for blue or green ammonia and the use other than on the carbon sequestration in soils that Bert were talking about earlier is in marine applications and then electric utilities. So we think that, again, Japan will represent about 2 million tons of demand here within the next couple of years. We think that on the marine application, even if -- when it...

Even it can go only -- if with IMO 2030 and 2050, there's almost the thought that it'd be about 75% of the current market today, if only half of it went to marine vessels. So I mean, it's a...

75% increase in demand for ammonia. So you're talking about...

About 150.

150 million tons of ammonia being consumed, even if only half of the marine applications go to ammonia. So -- and that's by 2030 to hit IMO. That's when the requirement...

2050.

Or 2050. But we see us stepping into that here very quickly, and it's -- this is not decades away. This is around the corner. And we also believe there's a tipping point element to it where we need not only our production. You talked about our competitors. We actually view them as being integral in terms of the success of this industry. We need the Yaras and the Nutriens and the Middle Eastern producers, all rallying around this so that the supply base is sufficient in order to support the demand as it's developing because you have developing demand but no supply, then pretty soon, you start finding other alternatives. So what we want to make sure is ammonia is plentiful and readily available, and that's the solution that people gravitate toward.

I mean, you've been clear that you see the opportunity in ammonia, obviously first. It's obviously easier. You put some of the capital in. Maybe talk a bit more about wanting to be ready there with green ammonia, but why blue ammonia is ready now? And how fast could you ramp up to 2 million or 2.5 million tons?

Chris, do you want to talk about that?

Yes. So blue ammonia -- if you think about blue ammonia, it's really the sequestration of the CO2. And unlike a lot of the other plants through other industrial producers that don't strip or remove the CO2 and capture it, our plants do because if you think of it, we use that CO2 to upgrade to urea and UAN product. So we already have the capital infrastructure in place to strip the CO2 and to capture it. So the only element we're missing is the dehydration and the compression and then putting it into a sequestration point. And the one thing that we've looked at is partnerships along the way that allow us -- that someone who has sequestration permitting in place that we could do. So I think the time frame for blue is going to be relatively quick here because: one, the capital is in place already; and then two, if you look at even just the Donaldsonville facility, your ability is probably to do over 1 million tons of CO2 sequestration, which creates that amount of blue. The storage is in place. The logistics [ floating ] is all in place. A molecule of blue, green or conventional is all the same. So a lot of that infrastructure has been put in place already, which allows us to move much more fast on this.

And when you think of green ammonia, where is -- I mean, you guys, you have to think about -- you don't know exactly what subsidies will look like, public funding. You don't know, I guess, [mixed signals] you have to develop renewables technology, [ clay ] is developing, does the small project at [ Hugo ], the 50,000 expansion -- or sorry, 20,000? 20,000 then.

[ It does. ]

Yes. Does it -- is it NPV positive on its own without public funding?

Yes. So if you look to where the market is trading today for green hydrogen, it's a very frothy marketplace. And it's because it's a relatively specialized, more niche market. The demand is for those people that are very sensitive to kind of carbon and the energy source. And so they're willing to pay a premium for that product. And on the basis of -- 20,000 tons per annum is a relatively modest amount. It's also a relatively modest capital investment for us because, as Chris mentioned, we've already got all the infrastructure in place. And it's, call it, $100 million over 3 years. It fits easily within our capital budget. But that product, based on where the market is trading currently, is an NPV positive kind of project without subsidies based on just voluntary marketplace. Now in order to do a world-scale plant, a full greenfield plant, you're talking about huge capital. You're also talking about higher OpEx, and you need a very big demand base in order to make that happen. I'm not sure that the demand for green ammonia currently globally is deep enough to support a world-scale greenfield plant. It certainly could get there in 3 years, 5 years, 10 years, but not today. So you mentioned earlier, that's why we're starting out kind of walking before we run here. We're building 1 plant that can produce green. We think that the economics around does -- based on the size of the plant that we're building are positive. And some of the investment that we're making, the Donaldsonville, some of that 100 million, it goes into common infrastructure that we can leverage for subsequent increases in capacity. So the next increment of 20,000 tons might be closer to 60 million to 70 million instead of 100 million and so forth. So each unit after that starts benefiting from the initial investments that we've made. We also expect there to be ongoing increases in the efficiency of the electrolyzers and other components in the system so that the OpEx of producing green ammonia will continue to come down over time. And you've mentioned renewable energy. About 25% of the total energy consumption that we have across our system today comes from renewable sources. So our view, as Chris mentioned, the molecules are identical between blue, green and conventional ammonia, that it doesn't make sense to try to isolate individual molecules and trace those to the system. It becomes horrifically expensive than cost-prohibitive process to do that, that this is much more of a ledger system approach like carbon trading basically is already. And in that environment, we would allocate the renewable energy that we're already purchasing in our facilities to the green and blue production. So we think we've got a really good foundation for the production of low-carbon energy, and we think the world needs it, and it's going to demand it.

So let's talk about cap allocation. [ Team ], you have bought back a lot of stock last decade. You paid down a bunch of debt the last few years. Going forward, so how do you look at how the buybacks have gone and turn? And going forward now, should we see buybacks would be on the back burner, really? Do you want to have dry powder to the decarbonization investments?

Yes. I mean, I think one of the things that we're really excited about is that this is not a fundamental change from our capital allocation philosophy. We've always said the first call for capital is growth initiatives within our strategic fairway that have positive return profiles associated with them. And I think that, that -- nothing changes around that. I think what has changed is our expectation around being able to find really good growth projects with positive return characteristics given the development of the demand for low-carbon ammonia and low-carbon energy. And so we see the opportunity to be able to deploy capital back in the business with great return rates to take advantage of some of that growth. And so from my perspective, that's a terrific outcome. I will say that having gone through sort of the cyclical downturn of 2016 and '17 where industry prices came down pretty hard, and obviously, even this year, with the pandemic, if you go back to March, April time frame, our shares fell dramatically. Having more dry powder either in the form of cash on the balance sheet or reduced debt would be a good thing because one of the opportunities I think we do have being a cyclical, more volatile industry is when you see those periods of artificially depressed share price well below intrinsic value, the opportunity to go in and kind of arbitrage those drops. And so I think our philosophy around how much liquidity we want to maintain and how much debt capacity we want to have changes so that the people that are with us for the long term can really benefit from having gone through a drop for us to vacuum up a huge chunk of shares during those instances. And I think that, that's a more value-creating way of returning capital than on a consistent day in and day out being buying the shares. But we dropped below $20 for a brief period of time. If we could be buying all of the shares in the low 20s, that's hugely value-added to the people that are with us across the cycle. So while our philosophy hasn't changed, and we have a great growth opportunity in front of us. I think the way that we execute, and when we would execute share repurchases, we're thinking about how to optimize that for the people that are with us for the long run.

Before we get to Bert, a bit more in the market, I had a couple more questions. So just coming back to some earlier conversations. So we're seeing Nutrien, Yara, [Western Europe] can really roll out these ideas and now using like digital ag tools, help farmers monitor and monetize how well they can sequester carbon in soil using [toxins] like [Notel] or some of these niche slow- and controlled-release urea fertilizers, other things. But I think the idea here is really got to push the government to -- I don't think this process is set up, the infrastructures that's set for the governments to understand how carbon credits work in farming. Tell me how it all plays out. What is CF's role in that?

Yes. So our view is we're all in favor of the direction that Nutrien is going and pushing. Our personal view is the RFS, the renewable fuel standard, in the United States had all sorts of benefits. Some of them were couched under environmental. Some of them, frankly, ended up being a subsidy to farmers because it dramatically increased the amount of corn consumption for ethanol production. And as you see, the increased penetration of electric vehicles and better fuel economy, and you've hit sort of the blend wall with the possibility as that continues of a reduction in ethanol, that starts potentially putting some restrictions on corn. And therefore, that subsidy doesn't work anymore as a way to pass along to growers. So instead, if you move that subsidy scheme toward carbon sequestration, not only are you improving the environment, which is something that I think both sides of the aisle can get their mind around, but you're still providing a subsidy scheme to Middle America and the growers. And it provides then this framework where there's this demand for low-carbon input. So our view is we're 100% behind the initiatives of let's make sure that carbon credits get applied to the growers for a sequestration of what they're doing every day because that is only going to make them enhance their profitability and also create more demand for the product that we should be producing, and it's good for the environment all the way around.

On someone who covered some of these slow- and controlled-release sulfur-coated and polymer-coated urea over the last 12 years, I covered [ stock ] Hanfeng Evergreen in China, remember that name. Canada's [ Ingram ] and Nutrien has done some of this, too. They're pushing the idea of more of these slow- and controlled-release urea fertilizers. It seems like there's a real niche thing in China. Nutrien is barely selling it now. I mean, is that something -- that's never really taken off. Is it that farmers just don't see the premium in paying for this? Or is that something you would ever do or why you haven't done it?

Well, we haven't done it because our belief is the efficacy of that product is better applied near the end-use from a grower perspective. And then if you produce the slow-release, controlled-release product in bulk, and then you ship it and store it for 9 months before it hits the field, actually, the efficacy of the controlled- and slow-release starts diminishing, integrating over time, and you haven't really provided the benefits. And a lot of that can be not really field applied, but at least endpoint or near endpoint kind of last-mile applied. And so our belief is that's the appropriate place for it to be done. It's an additional value-added step that the retail portion of the channel can provide and that you get better agronomic outcomes, and you also get better environmental outcomes when that happens. So we're about kind of full supply chain efficiency. And therefore, we probably don't see ourselves necessarily getting into it because we don't touch the grower, but we think that our channel partners downstream from us should get involved in it. And anything that we can do to reduce nitrous oxide, emissions or fugitive ammonia emissions are a good thing. It helps the environment and it helps the growers.

We have 10 minutes left. Let's talk about the nitrogen market. Bert, how strong is the fall application season? Where are inventories? And what's the set up into the spring?

So the fundamental question right now is what's going on is fall. We've just completed or in the process of completing the fall application, which starts end of October, early November. And everything aligned this year. We had early uptake or offtake of the crops. We had very good weather platform from -- during that period. And we just talked about this inside the industry, but at least within CF, of pricing it appropriately to encourage fall application because, agronomically, it's a good step. And we've had probably the best fall application period in the last 5 years because all those components came together to support. So inventories, we believe, are low because we're generally the last inventory carrier and getting that higher price in the end. We've already priced premium [ N ], and that's been an increase in price of $80 to $90 over the fall because of what we believe is the pause of nitrogen dynamics going forward. So we think a good exercise to prove that fall applications of ammonia is going to stay. It's a good thing for the industry. I don't believe it took from the spring demand. And I think with healthy corn pricing and the components around the corn value chain, we have a pretty good spring coming before us.

And if you look into 2021, there's lots of puts and takes investors are asking about every day. Been a bit of improvement in coal price in China. Gas prices in the States have been coming down. You may see a step down in [ India ] demand after really strong this year. You may get better corn acres. You may get good carbon industrial demand. Like how do you think about '21 versus 2020?

Well, I mean, there's a fundamental thing of this thing called COVID, which we see going away, whether that be through dissipation or through the vaccine, but we will get there. And this has been a very difficult year for a number of reasons. Just contacting how we're interacting today, how we've had to interact with customers, a risk-off period, a collapse in the energy markets, really a fear-based mentality of inventory positioning and a gas compression or energy spread compression globally, which brought on the marginal producer. Rolling into 2021, all of those components are looking positive. We've got a great position relative to a weaker dollar, a stronger RMB, encourages imports into China and discourages exports of urea, phosphates and those things. We've got a very healthy -- a weak dollar also incentivizes an already healthy price structure for corn, wheat, cotton, soybeans, canola, sugar. All those nitrogen consuming crops are in a good shape globally. We've had very good demand from India, Brazil, and anticipating better demand in Asia, Pakistan. Ethiopia is going to need to tender, and that doesn't even count in the North American and European demand season. Inventories are fairly low globally just because of India and Brazil and some good demand components. And then energy spread is widening. In Asia today, we're at $7 to $9 depending on the region or the country. And in Europe, we're at 5 50. And in the United States, we're at $2.50 for gas. And so you see some very healthy position going forward, not including our -- there's a possibility of La Niña, which means drier conditions in South America. And so we have a stocks-to use ratio for corn and soybeans, it's fairly low. So you have a lot of positives going forward into the planting season, and we're anticipating additional acres coming into production for corn in North America, which will lead to higher levels of nitrogen demand.

UAN pricing relative to urea has been quite weak the last year or 2. I mean, certainly been damaged since you had European anti-dumping import duty tariffs that were called. When does UAN recover back to kind of the historical spread or is it ever?

Well, and it traditionally did trade at a premium to the other products. And you're correct, it is trading at a discount, and it is a direct reflection of those EU duties, which we believe were imposed erroneously. However, that is the case. So what you're seeing CF do is, in the U.S., we have a lot of capacity. We've been moving a greater portion of that ton to the urea production, granulating more, producing more DEF, or bringing on nitric acid. So our plants are running at optimal rates, and our UAN production is staying fairly stable. We've accessed new markets in California and the East Coast. But I do think there is a point where that's going to come back into parity, at least with the other products because it's a highly demanded product and a good product. We've seen some of our other competing countries -- Acron in Russia has dropped in a urea plant. So they'll be allocating tons towards urea. I think with this energy spread in Europe, you're going to see tons from Trinidad probably going to Europe because it's value accretive for them. So markets will balance, and I think UAN will come back into favor. And it's been growing in South America, Mexico as well as North America over the last couple of years.

Okay. A couple more questions before we end this. So maybe it's for Tony. So Tony, on the Q3 call a month ago, you had said that 2020 EBITDA should finish within a few percentage points of 2018. That would imply Q4 EBITDA about [ $50 ] million above consensus for Q4. Do you still hold that view?

Well, we -- as Bert mentioned, we've had a strong fall application, good ammonia demand. Pricing on urea has started to recover as we've gotten through November and December. Now it's also true, a lot of that price recovery is not going to kind of show up on the P&L until we get out of the Q1 because we're typically running kind of 6 to 8 months of gap in terms of production and sales versus when we're actually making shipments against those orders. So I still feel like we're close enough from a percentage point perspective not to want to go out and make a modification to our guidance. That's not a precise science. There's still a lot of movement that goes on from a weather standpoint. And at the end of the day, Joel, we're not a CPG company. People aren't looking at our EPS to the penny. It's based on how our -- what's our production looking like. Are we consistently doing well, keeping the plants online, getting good asset utilization? And what's our cash flow and EBITDA coming off of that? And so I think as people look forward, and they see the positive trends that Bert mentioned with a more robust commodity price environment for grains and soft commodities, I see a relatively weaker dollar and a stronger RMB. You see much higher energy cost differentials across the world with JKM trading in the $9 range and Henry Hub, on the spot basis, it's about $2.40 currently. And we see this growth trajectory in front of us around low-carbon ammonia, blue and green ammonia. I'd say things look really positive for us both in the near term and the longer term. And that matters a lot more than plus or minus $10 million or $15 million in terms of how this year ends up because at the end of the day, we're ultimately going to produce all that we can and sell everything that we produce. And so whether that falls into Q4 this year, Q1 of next year is sort of pay me now, pay later. It's -- in any kind of a reasonable time horizon, it's still cash that's available to the equity holder.

I think just to sum it up, the fundamentals from when we had our Q3 call, to now and what we're seeing going forward, both for Q4 and Q1 and all 2021 are much stronger than what we saw for all the factors. Both the marginal and second and third quartile energy spreads have widened significantly from where we were, and Bert's gone through all the demand side. So just a really good outlook looking forward, not only for Q4, but forward.

Actually, my last question is going to be, what is the Street missing on CF? You 2 have actually answered the question. And so thank you very much for being us, Bert, Martin, Tony and Chris. Appreciate the time. Have a good afternoon. Thanks, everyone.

Joel, thank you and happy holidays.

Stay safe.

Happy holidays. Bye.