Tony Will: Well, Andrew, as you know, once we make an investment decision, if we decide to move forward with it, it’s going to be approximately four years between when that decision is made and when production commences. So, what’s happening in the very near-term ammonia market from a pricing perspective, is an important starting point. But what you really need to do is project where we are for years going forward and take a look at where we think the S&D balance will be at that time. We do expect the S&D balance to tighten as I talked about earlier, both in terms of existing production capacity that will not be running at historic utilization rates, principally in Europe and some in Asia and Latin America. But also because the new capacity that is currently under construction doesn’t meet traditional growth of, call it, 1.5% to 2% within the nitrogen markets, let alone any new applications for clean ammonia going into either electricity generation or into marine fuels or some of the other applications that are beginning to develop.
So, as we look forward, the development of those new markets is an important input as well as just our assessment of where the S&D balance is going to be on a global basis. And so again, where we are today is a starting point, but it’s not really that useful in determining what the future is going to look like four to five years out.
Andrew Wong: Okay, that’s fair. And maybe just going on to clean ammonia market and demand. It’s been a few years here now since you started to talk about it and feels like things have started to develop over the past couple of years. So, as we get closer and closer to some of these use cases that are maybe later 2020 into 2030, do you have a sense on to quantify that demand, let’s say, by the time we get to 2030. And what would be the primary use cases by then? Would that still be co-firing in power generation, maybe marine is coming up a little bit faster? Just curious.
Tony Will: Yes. So, there have been — I believe it’s five power stations in Japan that have been kind of approved for conversion to be co-firing ammonia. Those include two from JERA and three others. And so the assessment of the volume of ammonia that would go into those applications, assuming only a 20% dosage rate is about 2 million tons a year. So, that’s a pretty sizable increase in terms of demand, and that would be expected to be online by, call it, 2030, if not before. Additionally, we see demand beginning to develop, both in terms of marine, but also Bert can talk about some of the things that we’re seeing in the way of using a decarbonized fertilizer product for certain applications in ag, not only for CPG companies but also to develop a traceable sustainable aviation fuel as well as ethanol that will meet the California low carbon fuel standard.
Bert Frost: That’s exactly that, Tony. In terms of the low carbon value chain we see developing for ag and the pull-through that will take place from the CPGs and consumers. But when you look at whether that be corn or wheat the principal consuming crops for nitrogen, as a low or no carbon ammonia is passed through corn to the ethanol plant, which is decarbonized. You have a very good upside for a decarbonized product coming from that corn value chain of starch, ethanol, fructose and the same thing with the wheat value chain. So, we’re working on that with several players and more to come.
Andrew Wong: That’s great. Thank you very much.
Operator: Thank you. We have the next question from Adam Samuel — sorry, that’s Adam Samuelson with Goldman Sachs. Please go ahead.
Adam Samuelson: Yes, thank you. Good morning, everyone.
Tony Will: Good morning Adam.
Adam Samuelson: Maybe picking up on that last topic, Bert, there was earlier this week that the treasury department issued kind of the rules for the new 40B tax credit for sustainable aviation fuel, that tax rate will change next year, but the rules that would presumably be somewhat applicable. And one of those requirements for ethanol to Jet was the requirement to use climate smart agriculture, of which one of the requirements was the use of enhanced efficiency nitrogen fertilizer by corn growers. And I would just love to hear your perspective on kind of how kind of disruptive that could be to the existing domestic nitrogen market and how available enhanced efficiency nitrogen fertilizer. I know there’s a bunch of things that fall under that. But how — what is that — what could that do to domestic demand by product or form both opportunity and risk as you think about the CF network?
Bert Frost: I don’t view it as a threat. I view as an opportunity because of the first mover with low-carbon ammonia as the largest ammonia supplier to corn production in North America, that’s just right up our wheelhouse. And so working with the co-ops, CHS and Land O’Lakes and others as well as the ethanol producers, [Indiscernible], ADM, CHS. Those are the people that will drive through their management area in our area, the responsibility is as we started with decarbonized product. But we have the pipeline through a terminal, it’s traceable, it’s producible, it’s manageable. And so each of these steps were getting tighter and better and that time frame that I would have thought was longer dated is, I would think being pulled closer.
And so there is some more development. We’ll be communicating this over the next quarters and years. But that’s where I see this going. And climate smart agriculture, regenerative agriculture, precision agriculture. There’s a lot of names for this. A lot of this is already being utilized. Some of it incorporating obviously, the seed companies and the crop protection. So, our whole industry is working towards this future that’s coming, and we’re going to play a vital part of it.
Adam Samuelson: That’s helpful. And if I could just ask a follow-up on the spring demand here. Obviously, the ammonia side of things is more complete. Can you talk about kind of where we are on UAN from side dress and top-dress perspective and kind of when you start to think that in-season pull will really start to materialize?
Bert Frost: So, we’re just getting started as we talked about planting and product movement and field work did start early. It was a surprise in February and early March, and then the rainy cold weather came through in March, delaying again. field work and applications and planting. And now I would say we are on a normal — a good pace with very good soil moisture from the Texas Panhandle up through into Canada. So, the UAN season really hasn’t started and where we’ve been positioning product, utilizing our logistics team with additional toes of UAN through our terminals and our customers’ terminals, and we expect that, and I would say, now going forward. And it should be fairly heavy because the opportunity, the upside, the pricing structure of where UAN is today, compared against the price of corn on the forward for December, let’s say, 460, 470. It’s attractive. And we would expect with the lower volume of spring ammonia applied, that will then move to UAN.
