OUTLOOK '13: US ammonia demand will be robust

26 December 2012 19:00  [Source: ICIS news]

HOUSTON (ICIS)--Strong agricultural fundamentals and an improving US economy are expected to drive robust demand for ammonia in 2013.

The US market for ammonia used for agricultural and industrial purposes is projected to reach about 21.5m tonnes in 2013, up from about 21m tonnes in 2011, according to ICIS pricing.

Of the total consumed in the US, approximately 8.5m tonnes, roughly 40% is used in industrial applications such as commercial cleaning products, refrigeration and the synthesis of pharmaceuticals.

Ammonia for agricultural use accounted for about 12.5m tonnes or 60% of total US consumption in 2012.

US ammonia production, at 13.4m tonnes in 2012, is expected to remain at that level in 2013.

US production could climb to more than 16m tonnes by 2016 if the construction of proposed new plants occurs as planned.

The rapidly growing supply of natural gas in the US resulting from the boom in resource extraction from the nation's shale deposits has propelled a lengthy list of companies to announce plans for the new or expanded production of nitrogen fertilizers.

“The abundant supply of shale gas here in the US has changed the game for many companies in the nitrogen market,” said Kathy Mathers, The Fertilizer Institute (TFI) vice president of public affairs.

Among the interests planning to take advantage of the newly available gas supplies are North America's largest fertilizer producers and several farmer-funded organizations.

Illinois-based CF Industries announced on 1 November that it plans to spend $3.8bn (€3.0bn) on new ammonia and urea/urea ammonium nitrate (UAN) units at locations in Louisiana and Iowa.

Illinois-based CF said its board has approved budgeting $2.1bn for building new ammonia, urea and UAN plants in Donaldsonville, Louisiana, and $1.7bn for new ammonia and urea plants in Port Neal, Iowa.

The company expects the plants to start production in 2015 and 2016.

The two projects will produce 2.1m tonnes/year of ammonia, 2.0m-2.6m tonnes of granular urea and up to 1.8m tonnes of UAN solutions, CF said.

CF said the expansion will allow it to capitalise further on the global cost advantage of North American natural gas.

Abundant natural gas from North Dakota's Bakken shale formation also prompted a consortium of commodity groups in the northern plains, including the North Dakota Grain Growers Association, to announce plans for the construction of a $1.5bn nitrogen fertilizer plant to be located in the Williston Basin.

Canada-based Agrium said on 7 November that it is close to naming a location in the Corn Belt for a proposed new nitrogen fertilizer plant.

Agrium's board of directors is expected to approve budgeting for the greenfield project sometime prior to June.

Missouri and Kentucky are rumoured to be likely candidates.

Norway-based Yara has said it will build a nitrogen fertilizer plant in Belle Plaine, Saskatchewan, to produce Urea, urea ammonium nitrate (UAN) and diesel exhaust fluid (DEF).

North America's largest agricultural cooperative, Minnesota-based CHS said it is taking steps toward construction of a more than $1bn nitrogen fertilizer manufacturing plant to be located at Spiritwood, North Dakota.

The CHS plant would be designed to produce 800,000 tonnes/year of ammonia.

The Egyptian group Orascom Construction Industries (OCI) is building a new nitrogen fertilizer complex in Weaver, Iowa.

The new complex will be run by Iowa Fertilizer Company, a wholly owned subsidiary of OCI.

The $1.4bn project will have a 1.5m-2.0m tonnes/year capacity to produce ammonia, urea and UAN.

Construction work is scheduled to begin before the end of 2012 and the complex will
open in mid-2015.

US engineering firm KBR has been retained by Ohio Valley Resources to design a fertilizer complex to be sited in Spencer County, Indiana.

"If all of the proposed new nitrogen fertilizer plants are built, they would represent more than 10m new tonnes of urea, a 50% increase in the production of UAN, and a 50% increase in the domestic supply of ammonia available for direct soil application," said Glen Buckley, consultant with NPK Fertilizer Advisory Service.

To meet the current market demand for more than 20m tonnes of ammonia, the US is reliant on imports.

In 2012, the US is estimated to have imported about 6.3m tonnes of ammonia from various sources including Trinidad & Tobago, and Ukraine.

Imports in 2012 were down about 500,000 tonnes from 2011 mainly because or reduced production in Trinidad.

For 2013, US imports are projected to increase to 7.5m tonnes, primarily to meet additional demand from the agricultural sector.

Ammonia is the major source of the plant nutrient nitrogen, which is critical for the production of major crops such as corn and wheat.

Compelling economic incentives for US farmers to plant corn in 2013 provide a favourable outlook for the fertilizer industry, US ammonia maker CF Industries (CF) said in a November statement.

Market sources project that US farmers will plant about 97m acres (39.0m hectares) of corn in 2013, up from 96.4m acres in 2012.

About 4.5m tonnes of ammonia were applied to US corn plantings in 2012.

Ammonia is a primary ingredient in other fertilizers such as urea, urea ammonium nitrate (UAN) and diammonium phosphate (DAP) which are used on a variety of crops.

In 2012, the benchmark US Gulf price for ammonia was at a low of $555/tonne (€422/tonne) CFR Tampa in January, increasing to a high of $720/tonne CFR Tampa in November.

Ammonia is expected to begin 2013 at a slightly lower level as the January price is expected to retreat because of a seasonal dip in demand.

($1 = €0.76)

By: Frank Zaworski
+1 713 525 2653

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