“We delivered another strong improvement in operational and financial performance this quarter, as our volumes continue to ramp up and we benefited from higher prices compared to a year ago. We remain committed to our financial policy to prioritise the expected strong free cash flows towards deleveraging. We expect to approach 2.5x net debt / EBITDA at the end of 2019, absent any material change in market conditions, at which point we expect to start the process of returning cash to shareholders in a combination of dividends and share buybacks.
We entered the fourth quarter with an optimal inventory position and forward book and expect a significant step-up in performance from the third to the fourth quarter, ending the year on a strong note due to capturing higher prices through our commercial strategy as well as an additional boost to our production volumes.
Firstly, our strategy of limiting forward sales is paying off. We limited sales when prices were at trough levels in the seasonally low summer months and we can therefore capitalize on the higher pricing environment later in the third quarter, with revenues materializing in the fourth. This strategy has helped us in both the United States and in Europe. US Midwest UAN prices are up almost 50% since the beginning of July and CAN prices in Europe almost 30%. Going forward we will continue to limit forward sales.
Secondly, we expect to benefit from higher volumes in the United States in particular. We expect a first full quarter from Natgasoline, which already made a positive impact in the third quarter and has been achieving capacity utilization rates of 103-104% in the past weeks. We also expect IFCo to improve materially quarter on quarter. In July, IFCo took a shutdown opportunity to optimize production to reach higher rates and reduce the scope, cost and time of a planned turnaround in October. This has enabled us to delay the turnaround to 2019 and has accelerated the ramp-up of the ammonia and urea plants, which have now reached unprecedented production levels.
In October, IFCo also received a temporary permit to take its maximum allowable front-end gas feed rate from the previous permit of 110% to 118% of nameplate capacity. The operating team has done an excellent job increasing production rates of the ammonia plant to above 114% in the past weeks. We expect to get the permanent permit amendment by year-end and a further increase to close to 120% in 2019. We expect these higher run-rates to filter through into all downstream units and result in higher cash returns for the plant, including our fast-growing diesel exhaust fluid (DEF) business. We expanded our logistical capabilities for this high-margin product significantly during the quarter by adding new railcars and a newly constructed storage tank, which will enable us to continue to ramp up production rapidly in a market that is growing in excess of 15% per annum in North America.
Our cost position is looking favourable with a low blended average natural gas cost. We have a mix of long-term contracts with fixed gas prices in Egypt and Algeria, and spot prices in Europe and the Unites States. For our spot prices in the US we have hedged, primarily via collars, for more than 50% of our natural gas requirement to offset the risk of potential increases in natural gas prices over the period between now and 2021. The collars have a bandwidth of c.$2.45/mmBtu floors on average and $3.50/mmBtu caps. In addition to those commitments, we selectively do forward fixed price purchases within that bandwidth. For the near term, we have hedged for approximately 70% of our natural gas requirements over the next 12 months. Specifically, we are pleased that IFCo has over 70% of its requirements hedged via fixed price purchases at a price of around $2.40/mmBtu.”
We expect a step-up in EBITDA in the fourth quarter of 2018 compared to both the third quarter of 2018 and the same period last year, based on our forward book at the end of the third quarter, a further ramp-up of our sales volumes, a first full quarter for Natgasoline and no major turnarounds scheduled for the remainder of the year.
The outlook for our end markets, both nitrogen fertilizers and methanol, is also positive for 2019. We expect nitrogen fertilizer markets to benefit from limited new capacity additions, low exports from China, low inventory levels across the system and a favourable demand outlook, with additional support from an expected increase in corn acreage in the United States. Methanol markets are also expected to remain underpinned by limited capacity additions and robust demand. These balances for both nitrogen fertilizers and methanol do not yet reflect a potential impact of the recently imposed sanctions by the United States on Iran, with an estimated 4 million tons or more of exports each one of the largest exporters of both these products globally.