TSX tick higher after index ends prior session near two-week high
Investing.com -- Jefferies has double-upgraded Norwegian fertilizer producer Yara International ASA (OL:YAR) to "buy," raising its price target to NOK 440 from NOK 320, citing a tightening nitrogen market, easing gas costs and a favorable shift in European climate policy, sending shares up over 2% on Tuesday.
The brokerage said the move reflects “a constructive pivot in European fundamentals and a cleaner strategic story.”
Lead analyst Marcus Dunford-Castro, who now heads coverage, said that “the liability of Yara’s heavy European exposure flips in 2026 as EU policy shifts from headwind to tailwind.”
Under the European Union’s Carbon Border Adjustment Mechanism (CBAM), importers will pay for embedded emissions from January 2026, leveling the carbon cost field.
Jefferies estimates that Yara’s €30/t carbon-cost disadvantage flips to a €20/t advantage, as higher-emission imports from Russia, North Africa and China face full CBAM levies.
The analysts also pointed to improving margins from lower energy input costs. “Every $1/MMBtu decline in gas translates to roughly a $37/t reduction in ammonia production cost,” the brokerage said, adding that this equates to a $120 million EBITDA tailwind per $1 change in TTF price, with an 80 % margin drop-through.
Jefferies expects European gas to average $10/mmbtu in 2026 and $8/mmbtu in 2027, which should expand Yara’s spreads in a demand-driven nitrogen market.
The brokerage forecasts nitrogen prices will tighten further into 2026 amid “persistent outages in Saudi Arabia and Trinidad” that keep ammonia benchmarks elevated. It also cited “China’s fourth export quota of 600 kt,” offering limited relief as India and Europe increase purchases ahead of CBAM.
Stronger farm economics, with average crop prices up about 7 % and record nitrogen-intensive Brazilian corn acreage, should support application rates.
Jefferies acknowledged remaining risks tied to Yara’s U.S. blue-ammonia investment with Enbridge (YaREN) but said “the discontinuation of the BASF JV materially reduces overhang.”
It estimated a 35 % CapEx overrun on the YaREN project, implying a $3.9 billion total cost (around $2 billion for Yara on a 50/50 split) that could lift leverage by about 0.7x net debt/EBITDA if fully funded internally.
Management reiterated leverage targets of 1.5-2x and a focus on shareholder returns ahead of a final investment decision expected in the first half of 2026.
In contrast, Jefferies reiterated an Underperform rating on German fertiliser maker K+S AG, cutting its price target to €9 from €11.50.
The brokerage noted that “potash lacks the same policy support” and remains “fully exposed to supply-demand and buyer pushback.” Elevated capital spending of about €550 million in 2025 and limited dividend capacity, projected at €0.06 per share, constrain shareholder returns.
Jefferies added that “European policy support (CBAM) and lower gas costs reduce the disadvantage of an overweight Europe position,” strengthening Yara’s investment case as nitrogen markets tighten.