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Non-Tech : UAN - The variable distribution MLP that could go a long way
UAN 78.940.0%Nov 26 12:00 AM EST

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To: Paul Senior who wrote (268)10/13/2021 5:07:52 PM
From: Elroy  Read Replies (2) of 309
 
UAN is in such a cyclical business though, I have to ask, do you really believe this is a type of stock you/we/they will still be in years from now until you/we/they kick-off?

I don't know the real evidence that selling fertilizer is so cyclical, as you claim.

The latest info on building new plants (which makes other capital intensive industries cyclical) is that there's probably no new US nitrogen fertilizer plants that are going to be built, ever. The CEO of CF said something to that extent recently.

So.....as prices go up, what's going to bring them back down? In other cyclical industries, when prices go up EVERY maker builds a new plant, prices collapse due to waaaaaay too much supply, and then the market has to grow to absorb this newly built supply. When the market grows enough that the existing supply is too little, prices go up, and EVERY maker again builds a new plant, producing excess supply, falling prices, and the cycle.

Have you heard any announcements by any fertilizer maker that they are going to build a new nitrogen fertilizer plant? I haven't. So again......where's the "cycle"?

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UAN runs two large fertilizer manufacturing plants, and distributes all the free cash from those operations to unit holders. I would guess that's a great thing to own forever. Maybe some year you receive $30, and in another year you receive $6, but with interest rates at something like 1% any distribution is pretty good.
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