HOUSTON (ICIS)--Fertilizer producer CF Industries announced on Thursday that it has entered into a long-term ammonium nitrate (AN) supply agreement with Orica International and Nelson Brothers.
Under the agreement CF will supply between 700,000-800,000 tons (635,000-726,000 tonnes) of industrial grade ammonium nitrate and ammonium nitrate solution per year for a period of at least 10 years beginning on 1 January 2017. There is an option by which the deal can be extended five years to the end of 2031.
CF will become the primary supplier for Orica and Nelson Brothers of industrial grade ammonium nitrate and ammonium nitrate solution for the North American markets. Under the terms of the agreement, product pricing will be tied to the cost of natural gas, which CF officials said will provide the company a defined margin.
Australia-based Orica manufactures commercial explosives and blasting systems primarily used in the mining and infrastructure industries, while Alabama-based Nelson Brothers produces and distributes mining explosives.
Following the decision to sell its phosphate business to fertilizer producer Mosaic last year, CF has been focused on expanding its nitrogen business, and company president and CEO Tony Will said the agreement represent a significant move towards enhancing the value of the company for both shareholders and its customers.
“The agreements will provide CF Industries a steady base demand for a majority of the production capacity from our Yazoo City Nitrogen Complex at very attractive economics,” said Will.
CF officials said the volumes specified under the supply agreements will require the company to increase ammonium nitrate solution loading capacity and industrial grade ammonium nitrate production capacity at the site in Yazoo City, Mississippi. The producer will commence a plant reconfiguration sometime in 2014 at an estimated cost of $65m.