It will take time for the buyer of the Simplot fertilizer plant in Brandon to decide what changes are in order, but the plant’s use of natural gas will come under the microscope.
Koch Nitrogen Fertilizer Holding, a company based in Wichita, Kansas, recently announced it is buying the nitrogen fertilizer business of Simplot Canada, a subsidiary of J. R. Simplot Co., the privately held American-based food processing multinational. The deal includes the Brandon plant and distribution terminals in Oak Bluff, Man., and Watson and Tuxford, Sask.
Koch Nitrogen manufactures, markets and distributes more than six million tonnes of fertilizer around the globe annually.
“Right now it’s more or less kicking the tires and seeing what we can and can’t do,” said Dave Rushforth, site services manager for the fertilizer plant at Brandon.
Rushforth said one of the aims will be to increase the plant’s fertilizer production efficiency. It will be able to draw on the expertise of people with Koch Nitrogen as it explores options.
One possible solution to high natural gas costs is to use other fuels, said Steve Seay, editorial director of Green Markets, an independent newsletter that has covered the fertilizer industry for 30 years.
“The trendy thing to do now is to convert nitrogen plants to run on coal or petroleum coke instead of natural gas,” he said in an e-mail interview with The Western Producer.
“High nitrogen gas prices have been the pivotal reason for much of the nitrogen industry consolidation, as it represents 70 to 90 percent of the cost of producing a ton of anhydrous ammonia.”
The deal is expected to close shortly. The fertilizer plant will be renamed Koch Fertilizer Canada Ltd. One goal will be to expand sales in Western Canada and in nearby U.S. states, Rushforth said.
“We’d like to get our product down in cost,” he said, noting that one of the challenges has been the rapid rise in natural gas prices over the past two years. That has invited more competition from offshore nitrogen fertilizer makers.
Seay said Koch has been moving northward, and that the purchase of the Brandon plant is part of that trend. Koch owns interests in nitrogen fertilizer plants in Venezuela and Trinidad and Tobago and bought nitrogen assets of bankrupt Farmland Industries Inc. in the U.S. Midwest, he said.
“On the surface, fertilizer buyers may see no big change as they may think they are simply replacing Simplot with Koch. However, the North American fertilizer industry has seen massive consolidation over the past 10 years,” Seay said.
“My sources tell me that they are saddened to see Simplot move out of Brandon, as overall it is one more major player leaving the nitrogen market.
“While Simplot will still have some smaller nitrogen plants in California, the Brandon exit is significant for Simplot as a nitrogen producer.”
The deal does not affect the Simplot potato processing plant in Portage la Prairie, Man.