UAN Q3 2025: UAN Prices Surge 52% on Tight Inventories, Capacity Expansion Plans Advance
UAN’s third quarter showcased a significant pricing tailwind, with UAN prices up 52% year-over-year on constrained inventories and robust demand, despite volume softness from low stocks. Management is leaning into a multi-year capacity expansion at Coffeyville, reserving capital and advancing engineering to unlock up to 8% more ammonia output. With a strong fall ammonia application season expected and global supply disruptions persisting, UAN is positioned for continued pricing strength into 2026, though operational headwinds and geopolitical risks remain top of mind.
Summary
- Pricing Power: UAN and ammonia prices surged as tight inventories and outages drove supply-demand imbalance.
- Capacity Expansion: Coffeyville project and debottlenecking investments signal a push for higher utilization and output.
- Forward Setup: Management expects strong market conditions and elevated pricing to persist into the first half of 2026.
Performance Analysis
UAN delivered a margin-driven quarter, as net sales reached $164 million with EBITDA of $71 million, propelled by a 52% jump in UAN pricing and a 33% increase in ammonia pricing versus the prior year. These price gains came despite slightly lower sales volumes, a direct result of depleted inventories following strong first-half demand. Ammonia plant utilization held at 95% despite planned and unplanned downtime, highlighting operational resilience amid logistical and supply chain challenges.
Cost pressures were evident, with direct operating expenses rising $7 million year-over-year, driven by higher natural gas and electricity prices and early spending for the Coffeyville turnaround. Capital expenditures totaled $13 million for the quarter, with a full-year projection of $58 to $65 million. Cash reserves and disciplined capital allocation remain central, as UAN prepares for major projects and ongoing turnarounds.
- Inventory-Driven Tightness: Low end-Q2 stocks and global outages limited Q3 volumes but underpinned price strength.
- Operating Cost Headwinds: Higher energy inputs and turnaround prep added to direct expenses.
- Distribution Commitment: $4.02 per unit payout reflects robust cash generation, balanced with strategic reserving.
Liquidity remains solid, with $206 million available, including $156 million in cash and $50 million in undrawn credit, supporting both near-term distributions and long-term investment initiatives.
Executive Commentary
"UAN and ammonia prices increased 52% and 33% respectively from the prior year period, driven by tight inventory levels across the system as a result of elevated demand and reduced supply associated with domestic and international production outages. Overall, we had a strong third quarter with UAN pricing above levels we saw in the spring, and we believe the setup is favorable for the remainder of the year and into the first half of 2026."
Mark Pytosh, Chief Executive Officer
"We estimate total capital spending for 2025 to be approximately $58 to $65 million, of which $39 to $42 million is expected to be made as capital. We anticipate a significant portion of the profit and growth capital spending plan for 2025 will be funded through cash reserves taken over the past two years."
Dane Newman, Chief Financial Officer
Strategic Positioning
1. Pricing Leverage from Industry Tightness
UAN’s business model, as a variable distribution MLP (master limited partnership), is highly sensitive to market pricing and supply-demand dynamics. With inventories tight domestically and globally, UAN captured outsized price increases, even as volumes slipped. Management expects this environment to persist, underpinned by ongoing global supply disruptions and slow inventory replenishment.
2. Multi-Year Capacity Expansion at Coffeyville
The Coffeyville natural gas and hydrogen feedstock project, now in detailed engineering, aims to replace pet coke and utilize additional hydrogen from the adjacent refinery. This would expand ammonia production capacity by up to 8%. Management is reserving capital for the project and expects to provide more specifics next quarter, with early engineering and construction plans tracking to initial expectations.
3. Reliability and Debottlenecking Initiatives
Operational reliability is a core focus, with ongoing debottlenecking projects, water quality upgrades, and DEF (diesel exhaust fluid) expansion at both plants. The goal is to consistently operate above 95% utilization, excluding turnaround periods, leveraging cash reserves to fund these reliability and growth investments over the next two to three years.
4. Marketing and Logistics Execution
Strong marketing and logistics execution, particularly in the northern plains, has enabled UAN to capitalize on favorable fall ammonia application conditions and support robust prepay and spot business, even as acreage uncertainty and trade friction create volatility in crop markets.
5. Prudent Capital Allocation and Reserving
Management is balancing generous distributions with the need to reserve for major capital projects and turnarounds. The Board continues to elect to reserve capital each quarter, maintaining higher cash balances to support execution of strategic initiatives.
Key Considerations
This quarter’s results underscore UAN’s ability to capture value in a volatile commodity environment, while investing for future growth and reliability. The business is executing on both near-term pricing opportunities and long-term capacity expansion, but faces ongoing cost and operational risks.
Key Considerations:
- Supply-Side Tailwinds: Tight global inventories and outages are driving pricing power, but may reverse if supply normalizes.
- Execution Risk on Projects: Coffeyville’s expansion and plant debottlenecking are critical for future growth but face typical engineering and operational risks.
- Distribution Flexibility: Variable MLP structure means payouts will fluctuate with market and operational conditions.
- Energy Cost Volatility: Rising natural gas and electricity prices are pressuring margins and could persist into 2026.
Risks
Geopolitical volatility, including potential tariffs on Russian fertilizer imports or further supply disruptions, could materially impact pricing and supply chains. Operational risk remains elevated with major turnarounds underway and planned, as evidenced by the ammonia release at Coffeyville. Input cost inflation, especially natural gas, is an ongoing margin threat and could worsen if European winter is colder than expected.
Forward Outlook
For Q4 2025, UAN guided to:
- Ammonia plant utilization of 80% to 85%, reflecting Coffeyville turnaround downtime
- Direct operating expenses (excluding inventory/turnaround) of $58 to $63 million
- Total capital spending of $30 to $35 million, with $15 to $20 million in turnaround expense
For full-year 2025, management maintained guidance:
- Total capital spending of $58 to $65 million; $39 to $42 million in maintenance capex
Management flagged continued market tightness, strong fall ammonia demand, and a favorable supply-demand setup for the first half of 2026, while cautioning on turnaround timing and the potential for geopolitical or tariff shocks.
- Fall ammonia application expected to be strong, with favorable soil and moisture conditions
- Ongoing capital reserving to support multi-year investment cycle
Takeaways
UAN’s Q3 demonstrated the power of pricing leverage in a supply-constrained environment, while underscoring the importance of disciplined capital allocation and operational execution as the company embarks on a multi-year capacity expansion.
- Margin Expansion: Price increases outpaced cost growth, supporting robust cash generation and distributions.
- Strategic Investment Cycle: Major projects at Coffeyville and across both plants are set to drive higher utilization and output, but require careful execution and capital management.
- Watch for Volatility: Geopolitical events, energy cost swings, and operational disruptions remain key variables for the next several quarters.
Conclusion
UAN enters the final quarter of 2025 with significant pricing momentum, a clear capital investment roadmap, and strong distribution capability, but must navigate execution and macro risks as it pursues higher utilization and output into 2026.
Industry Read-Through
The fertilizer sector continues to benefit from global supply tightness, with UAN’s results mirroring trends seen among other nitrogen producers. Persistent geopolitical disruptions, especially in Russia and Trinidad, are delaying inventory replenishment and supporting elevated prices. U.S. producers with export capability and flexible feedstock access, like UAN, are well positioned to capitalize on European supply constraints and natural gas price volatility. For industry peers, the focus will remain on reliability, cost control, and the ability to quickly adapt to shifting trade and regulatory regimes.