Yara International ASA (YAR) Earnings Call Transcript & Summary

Thank you and welcome to the telephone conference of 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 Giaever, our CFO; and Lars Rosaeg, our Executive CEO; and Dag Tore Mo, our Head of Market Intelligence as well as other representatives from Yara. So we presume that you all have seen the presentation, and we are happy to go straight into questions. So operator, if you can please open the line for the first person in the queue. Thank you.

[Operator Instructions] We will now take the first question from Lisa De Neve from Morgan Stanley. Lisa, please make sure the mute function on your telephone is switched off.

Can you hear me now? Okay. Wonderful. I have 2. The first question is, so you mentioned in the presentation that some of your European production plants are explicit gas prices that are decoupled from hub prices. Could you be so kind of share which plants are typically exposed to long hot prices in Europe? My guess is that it's the Norwegian assets, but it would be great to get a full picture. And then the second question is you've 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 which should 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?

Yes. Lisa, this is Thor. Your -- 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 -- but I should also mention within that, as you're probably aware, I mean, the different hubs in Europe, apart from -- in addition to TTF, which is the one that we sort of based the guidance on. Of course, there are other hubs and there's been price variations between those as well generally with TTF being the highest. So also the fact that we have other plants that are on Le Havre and other hubs has also contributed to that if you like, better than the TTF model the gas price. On the cash returns, Yes. I mean we've -- as we noted in the presentation, we've only just paid out the annual dividend than 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 will specifically consider in connection with the third quarter. And 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 is a -- represents a strong intent to have an extra dividend also this year.

Our next question is from Joel Jackson from BMO Capital Markets.

This is Alex on for Joel Jackson. For first question, maybe I'd like to ask if you could perhaps provide some color as to why maybe urea prices are trading well below the European cost curve? And is it because that demand is currently just not pushing into the need for European supply and maybe why you might think this will change? And for my second question, I just want to get a bit more clarity on the breakdown of the 1.3 million tonnes of ammonia production that's curtailed. How much of it was curtailed in Q2 and whether or not you all will need to curtail more production going forward, considering higher gas prices?

Yes. I mean I can start maybe on the urea question. This is Thor again. And then we have Dag Tore here who can also perhaps add some comments. But I think my main observation on urea. And it's important to say urea is a fertilizer in the European context because a large part of our urea is still running and also for the industry in Europe for the industrial business. And as you probably know, I mean, there we have -- I mean the fundamental difference there is that those products are needed 24/7 for a wide range of products every day, all year round. And so for example, AdBlue for transportation and -- that's the fundamental difference compared to fertilizer, which is applied just a few specific points typically mainly in the spring. So for the industrial part, it's -- production is generally running and we've implemented surcharges and I would imagine most if not all of our competitors are doing the same. But then we have the fertilizer part, which is different. And you say the combination then, as we've mentioned in the report of it being off-season far away from physical application season now and the high gas prices means that a -- as we say it, it's a bit of a concerning situation, if you like, from the point of view of the nitrogen production and ultimately, food security. So that's why we warn a little bit about that. But at the same time, So Yara you know where -- as you can see, delivering strong results and also have high flexibility to adapt to these situations. Dag Tore you want to? -- Alex, could you please repeat the second question?

Sure. The second question was in regards to the 1.3 million tonnes 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.

And I'm looking at Silje, please answer this with the details as necessary. But I would say, overall, most of this is in plants that or curtailments that have started in Q2. And 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 -- the second part of the question is not possible to really give a fair answer to -- or at least a good answer to, but as you've probably seen, I mean this is -- it's -- there's movement in the parameters nearly all the time, both the gas price and the fertilizer prices. So as mentioned, there's a bit of a difference then between the industrial sector and the fertilizer sector. But as we've seen in the past, prices will -- can change and 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 said 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 -- that was down due to an unplanned stop in second quarter, but then with the high gas prices with talks from them to continue to keep it down basically and then a curtailment. So the part of it is also -- was also up in the second quarter.

We will now take our next question from Rikin Patel from BNP Paribas.

Just firstly, on your gas cost guide. Could 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? And 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 different products and plants in which that falls upon? And I guess similar to the question as previously, I mean if we look at a lot of spreads out there for nitrates, and urea, those are in negative territory right now. And so how should we think about that 1.7 million number going forward? Should we expect that to, I guess, become a bit more material?

I can maybe start on the details on the finished product breakdown of the 1.7 billion. That is basically around a little bit more than half of it is urea. And then as we pointed to earlier, it's mainly urea for first last year because we have the system of cultures on the industrial side, which enables continuous production. And a lot of our urea production in Europe goes to industrial purposes. And then the remaining half of this 1.7 billion are nitrates and PK. And of course, just to mention that this one in a way as we will monitor and adapt to this going forward as well. So we have the flexibility in our production mix in a way to take out that product that's at an end point where it makes the most financial sense for Yara.

Yes. And in 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? And that, again, will depend on market developments. But as we've seen in the past year or so, the energy price like prizes have at least in the past led to fertilizer price increases.

And then maybe if I can just add on your question on the energy guidings -- and I just got to confirm that, that is based on the production volumes for -- from last year, as we always see both on the energy guiding, but also on the realized energy price. As 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. And of course, this -- so -- and that will not be reflected in the energy guiding. And I think when we approach the fourth quarter, happy to have a discussion with the IR team on that to go to how you can model that and whether it's necessary to make adjustments.

We will take our next question from Adrien Tamagno from Berenberg.

Hello?

Yes, please go ahead.

Yes. Okay. Yes. So considering the [indiscernible] prices, Customers cannot really afford the $900 to $1,000 per tonnes nitrates, which would be needed for producers to be in positive territory. So how do we think about price going forward if crop prices remain muted for nitrates? That's the first one. And the second one is around your utilization rate, how should we think about the level at which you need to shut down the plant in the event of a gas rationing in some European countries. Or if you already have visibility whether or not you will receive priority allocation that would be helpful as well.

Yes. I'll -- I can start. This is Thor again. I mean, your first question, you were talking about nitrates, but I suspect it may be nitrates 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. But 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, if you want to comment further on that.

Yes, for, I mean, the urea consumption decline, as we talked about -- 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 worsening price ratio between the input and outage costs. [indiscernible] but only recently, we have seen progress in the nitrate prices have already picked up a little bit from the starting price that was announced. So there is, of course, a very different dynamic in a nitrate market in Europe compared to global urea market because you don't have alternative nitrate sourcing basically for the European market, while we can, of course, over import urea. So it's a bit different dynamic.

So on the second question on -- if I understood it right, it was about sort of gas rationing scenarios where -- I mean it's not really possible to -- there isn't one scenario here to put it that way. As you've probably seen the EU are still in the process of working at their potential scenarios, how you would allocate between markets. There are agreements being made between countries and so on, but it's still not, what should we say, not a finished product that we can all analyze. But naturally, we are -- 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 not from a rationing start point, but from an optimization start point. So -- and the general statement I would then mention about Russian 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 Chaudhry from Citi.

Talking on the world market trend. Can you talk about the progress of the harvest in Europe at the moment, especially in the current? What temperatures kind of how is the yields looking like? And I guess there's a question which is on a high level, any comments on the key moving parts impacting the global grade inventory? Just trying to understand kind of dynamics with these doctor use ratios there? And then secondly, linked to the European gas situation. How much capacity do you estimate currently offline in the region? I know you've given numbers on Yara specifically, but I don't have estimates for Europe as a whole in terms of how much capacity it does? That will be real helpful.

Yes. I think when it comes to yield outlook in Europe, of course, when it comes to winter, wheat is more or less harvested pretty much. So -- but there is a clearly worsening outlook because of the dry and very hot conditions. So whenever there is an upgrade from the European Union or others there is always a downgrade. So I don't know exactly where the number will end, but there is -- there has been a deteriorating outlook for European yields, clearly, over the last couple of months. In other parts of the world, North America for instance they have a very poor winter wheat, although they have very good condition for a, spring wheat and so far, it looks also good for corn, even the [ legal target late ] And so you can probably see that the prices for grains have -- our rice is fairly stable, have been older through this crisis, but both corn and wheat prices have dropped quite a bit recently, and it's 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 their -- what they were sitting on of loan positions just a few months ago. So there's definitely a negative sentiment in the financial markets concerning this. And then you can, of course, speculate -- we can both speculate how much of that is due to a strong dollar, how much is to macroeconomic uncertainty and recession fares and these kind of things also because it's hard to see some demand to factors in the food or grain market that are suddenly much denser now than they were a couple of months ago. Although these discussions are ongoing, whether to allow Ukraine and grain exports or not on these kind of issues. But I don't know what the right price is, but I guess as you were alluding to, it's a little bit hard to understand the recent price development in view of fundamental news at the start. And on the curtailments on others, not everybody announced a lot of people do the adjustment. So, let's say, from a urea perspective in Europe, [ Portuaria ] 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 I'm not selling urea to agriculture in Europe these days right because that doesn't make sense. So and there is not much export out of Europe either. So I think you can say we assume that it's a fairly market-wide reaction to this, both from ammonia and urea side.

And sorry, just to follow up on the first -- third question. And any comment or news on the China grain, it was the corn demand there. The urea [indiscernible] being significantly lower than it has been in the prior years. Any comment on that?

I don't have any particular insights. I [ serve ] at USDA is now we're going assumption that it will drop soon if they import it just 62 million, 63 million tonnes of grain last year or something and I think USDA is working on an estimate of 57 million, 58 million at the moment for the coming year, they have recently bought quite a bit. But -- but I've also seen stories as you are probably hinting at that they should be -- that will be a little on we are a reduction in Chinese import demand of grain, and it so that's, of course, one factor that we make it a little bit more available for others. So yes, it's certainly an important point because one of key drivers for this shortage we are having is clearly an increased appetite from China and actually importing grains went from 20-some million tonnes to 60 million tonnes in a year.

We will now take our next question from Chetan Udeshi from JPMorgan.

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. So 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 warehouses flushed with fertilizers in Brazil, et cetera. And I don't know how much -- how to keep a track of it, but I'm sure you guys have a better pulse of the market in the key regions globally. So any color there would be useful. And -- just on cash return, 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 if we sort of pushed out for the future quarters. I'm just wondering if is there 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're not seeing the cash return already in today, for instance.

Yes, I can start with the last one. I mean, as we touched on in the presentation, we certainly recognize unpaved a strong dividend capacity given the earnings we have. And 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. And of course, we have only just paid a record annual dividend in May. So -- and we'll consider this for the third quarter. Your -- 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, quite volatile markets. So -- but with all those comments in mind, I think that's really how we view the situation. And as we say, we'll consider this specifically in connection with third quarter. I guess on the stocks question, Dag Tore you can give it a try?

I can have a maybe. China is, of course, did disconnected itself from the market by introducing or what is [indiscernible] -- not only our constraints on exports like so far, but the full stop of urea exports until April is the kind of latest information. And other phosphate exports that are well below normal levels. So 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 new trends and I think, pretty much final last minutes. In Europe, it's not -- we don't think it's only the industry stocks that are lower. I suspect that will hardly mention farmers sitting on with a lot of inventories. They are probably trying to buy a [ free lot ] as possible, basically. So then in Africa are also struggling with the financing issues, working capital, high prices having to kind of cancel or postpone and so on. So then you're kind of left with Americas, which is a little bit more of a question mark. U.S., you probably seen that U.S. have been seeking to export some urea now -- so it actually looks like it's worth a little bit too much for the season and maybe underestimated a little bit the farmer response to the high prices. So right now, there is a little bit weaker sentiment in the U.S. Gulf, you can probably observe them, for instance, a year ago when stocks were extremely low and you got the hurricanes and so forth later on. So for U.S. year-on-year, a little bit weaker. And in Brazil, it's a little bit hard to know because it's off season. So what we often see if it's very optimistic and agricultural farmers are very keen to buy forward and now I think they are a little bit less keen to buy forward because of the high prices. But the value chain is still having to make sure that the product is entering Brazil. So they have imported quite a bit of product. So there is probably some unsold inventories in Brazil, but there is a question -- 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. So Chetan, I hope that's helpful.

We will now take our next question from Andrew Stott from UBS.

Yes. And again, apologies if this has been asked, I also struggled to get on. The comment -- so 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 for the seamlessly sourcing potash elsewhere away from Russia and Belarus. So maybe I'm mixing up 2 separate issues. So if you can help me there, that would be great. I've got another question in a second as well, but I'll start with that.

Yes. Thanks, Andrew. I appreciate one question at a time. It's probably [indiscernible]. Yes. But no, that's -- these are not unrelated, and it's a good question. I think that -- the key thing is that we have been able to operate our NPK plants. 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, but overall, we have not had to, in a way, reduce NPK production despite source. When it comes to Brazil, the main sourcing we do there is straight TMK imports and a lot of them were from Russia and Belarus. And so what we've done there is quite significantly reduced our sourcing and where -- that doesn't hit our compound NPK production, but that's linked to the comment we're making both Americas there is that we're selling, we have significantly lower deliveries of blend NPKs in particular. So hopefully, that clarifies.

Yes, that does. Yes, the second question, apologies, it's a bit picky. But it's just so I understand the math, comment you made, I think, Silje, you said that the basis for the gas guidance was on Q3 production levels last year. So if I take 410, which I think was the year-on-year headwind -- maybe this is the one way of looking at it. And then I look at your chart in your slide deck, Slide 21, it's roughly a threefold increase year-on-year. So on my math, that sort of somewhere well north of 1.1, which is your guidance. I just wondered if you could help me what I'm doing wrong. I can't get to 4.1 billion.

Sounds like maybe something we need to follow up.

I can take it off-line if it's easier absolutely.

So Andrew, could you just send me that calculation in an e-mail would be happy to solve the problem.

I'll do that.

We will now take our next question from Joel Jackson from BMO Capital Markets.

I have to ask one by one. Maybe you guys can provide a bit of color on the demand disruption that you're seeing in Europe, Brazil and elsewhere for the different fertilizers? And what among nitrogen, phosphate and potash as most at risk for demand disruption?

Yes. I think Brazil is difficult, right, because this hit after the -- after the peak season happened in Brazil. So we haven't -- I don't think we have really seen yet what the farmers' action will be in Brazil or [indiscernible] what oriented on and have a growing a lot of crops that have a very favorable pricing. So that should have helped quite a lot and actually possibly expanding their margins. So -- but it's a different seasonality. In Brazil, but what we've seen in Europe is that there is demand disruption of all nutrients and NPK 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 more risk than a quarter relative pricing been the inputs and outputs. So yes, but I don't think we know yet exactly hope Brazil will play out. And on the risks, I think you clearly need the most demand -- I mean you have demand disruption in the sense that you have a drop in consumption right or lower consumption that people would like. If not but, it's not a demand that is dropping as such as they are kind of supply. There are supply limitations. And so if you look at available supply, you will see that you will -- you can measure what kind of volume effects you can expect. And 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%. And Russia is coming back closer to normal recently, but they had also a significant drop. On phosphate, the factors are lowering. Exports from China, Morocco, et cetera, not so much the Russian situation, really which also leads to demand disruption there. And on the nitrogen side, you have export reductions from China, you have lack of Ukrainian production, and you have also now curtailments in Europe. So it's basically the supply side that is making this demand disruption dynamic necessary -- potash the most.

Perfect. Appreciate that. And the second question I have is in regards to sourcing potash, as you are currently sourcing from [ Eurokali ] and [indiscernible]? And if not, maybe why not? And whether or not Yara is having any difficulty sourcing potash in general?

Yes. I mean I'll refrain from commenting on specific suppliers. But in general, we have reduced sourcing where we see -- as you probably know, in some cases, it's not 100% clear what the -- let's say, in many cases, there are functioned individuals where it can be open for a discussion to what extent they are linked to some of the companies. But we -- as you can imagine, have a very low risk appetite for doing any trade that could be exposed to sanctions. But as we stated in the presentation, we have -- 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. But where we have reduced the significant flow is our -- is to Brazil, in particular, which has led to a reduction in blend NPK deliveries for us.

We will now take our next question from Lisa De Neve from Morgan Stanley.

Thank you for taking my 2 extra questions. So the first one, and I'll put them one for one. Bit of a weird one maybe. So you've announced some curtailments and the curtailment situation going forward clearly hinges on the number of dynamics, which are beyond your control. But 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 ramps, small curtailments very limited. So 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.

Yes. I think it's important to say that we need to manage risk as well. So part of this is, as we've mentioned, that -- but for the Northern Hemisphere, this is off season, farmers tend to be more preoccupied with harvest. And so it's not the time of the year where you normally have a lot of order taking or deliveries for that matter. But as you are now that well aware, I mean the gas prices are high now, particularly relative to the urea price, but also so volatile that we are 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. So that's really the key dynamic. And so another way of putting that is that we don't have particularly high stocks and most of our stocks are sold.

And then just another follow-up on the raw material procurement. Can you just -- we talked about the quarter and the fact that your compound NPK production was not affected in the second quarter. How should we think about the second half? And secondly, because you're supplying less blended NPKs to Brazil, have you seen demand switching to other nitrogen products?

Could you repeat the first question, please? I didn't quite catch it.

Yes. So my first question is on second half compound NPK production. And then because you're supplying less blended NPK to Brazil, do you see farmer switching the demand that normally would be there for blended NPK towards other nitrogen fertilizers?

Yes. No, the -- so the NPK part is I think in 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. So assuming that is a temporary situation. There isn't any reason to believe that we should have major NPK curtailments. As for -- as for Brazil, I maybe look to Dag Tore here that there are I think that partly some of this product that we are not sourcing and is making its way into Brazil and through other channels. So that would be my -- it's not obvious that this change is a big -- creates a big shift in the market. But having said that, our premium product deliveries are almost in line with a year ago for Americas as a whole. So...

Okay. That's very helpful. And just one small follow-up. Of course, we have some temporary NPK curtailments right now, but is this blended or compounds?

Yes, that's -- yes, I mean, our curtailments are all compounds. We don't really -- I mean for blended NPKs, we don't include that in our guidance. It's a more should we say, at any given time, the operating rates of blend NPK vary quite a lot. But also, it doesn't have the same kind of earnings impact as if we have curtailments for compound NPK.

We will now take our next question from Andrew Noel from ChemicalESG.

The first one is just on M&A. There's a fair amount of specialist nutrient assets on the market currently. And given you sort of said you are fairly cautious around an extra dividend. Is that the same for you in M&A? Or -- and it would be interesting to know what might be on your wish list in terms of technology in that direction? That's the first question.

Yes. 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. But secondly, to the extent we are looking at NPK -- sorry, at M&A opportunities, we will not be very transparent on the upfront. Tenth to a ninth, and we've done them, not before.

Okay. And just a second -- again, a short one. Just following on from the previous question about gas rationing and you prioritizing supplies if that eventuality comes to pass. You've mentioned you've got contingency plans. Is there anything in the industry is being 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. So any color you can provide on that would be interesting just how the dynamics are playing out perhaps politically.

Well, it's an I can a -- few things around this topic. First of all, we had a very good dialogue both nationally and within. I think you being in terms of the importance of our industry and the impact to farm yields, we do know the impact is on for plant on crops. We're talking about a 50% yield reduction in the first harvest, that's one part of it. So it's an important product to be produced. And -- and then we have all the other implications and the industry that we also serve to encash some -- several of them within the industrial segment with a [indiscernible] the biggest, and that's a vital component of infrastructure as the trucks will not be able to run unless they have access to [indiscernible] And then there are all the other industries that also depend on ammonia and supplier production in Europe, whether it's for food production, food preparation, water cleaning and so on. And we saw some of the impact of that already before the war, the curtailments back in fall of last year, and it was really rationalize farming industries depend on our industry for impact. That said, we're also part of the of a solution in order to reduce gas consumption in Europe as well for urea in particular as we have flexibility in our operating model. And 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 different [indiscernible] can help to reduce the gas consumption in Europe, and then it's important to have a dialogue around that how we can contribute with our flexibility to reduce gas assumption to see how that could potentially be compensated as part of the solution. But this is changing every day, and we see now in recent months that gas prices have doubled. We're 5x we were at last year. And projects, 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, and we feel that we have a good dialogue around that.

[Operator Instructions] Will now take our next question from [ Benjamin Benhamou ] from [indiscernible]

Yes. I was just wondering whether you could clarify your outlook on the Chinese supply and Chinese exports?

Yes. They have curtailed export significantly from that -- they introduced in October 15 last year, these new inspection routines in the ports, et cetera. So both nitrogen and phosphates exports are down sharply. And now the recent information now suggest that they are maybe not issue any official statement but that they have basically except for some government to government deals and maybe those smaller cargoes to neighboring countries of which allude [indiscernible] one element that they are pretty much banning urea exports through March next year, is the latest information we have. And that on phosphates, they have because of a larger domestic surplus that they are doing it a little bit differently, but that they have actually given allocations -- quarterly allocations to the major phosphate exporters. On [indiscernible] they are allowed to exports -- export. And at these levels are sharply down from what the usual exports have been. So overall, both on nitrogen and phosphorates a significant reduction in Chinese exports.

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. So just a practical information 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. And if you don't find it, you can just reach out to the Investor Relations team, and we will help you. And that will be available from this afternoon at 4 p.m. Oslo time. So with that, thank you for listening and dialing into today's telephone conference, and we wish you a nice summer. Thank you.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.