Video: New U.S. fertilizer plants may spark cheaper prices in Canada

CHICAGO, Ill. — New nitrogen fertilizer plants will put a dent in North American imports starting next year, says one of the companies building a facility.

A dozen plants either under construction or nearing the construction phase will add six million tonnes to North America’s annual nitrogen fertilizer production from 2015-18.

That should put downward pressure on fertilizer prices because of cheap North American natural gas and reduced transportation fees.

Brian Schouvieller, senior vice-president for ag business with CHS Inc., said the United States imports seven million tonnes of urea annually. Half of that total is imported from the Middle East-North Africa (MENA) region. It takes 70 days to get that product into farmers’ hands, which adds significant costs to the product.

Schouvieller estimates that urea imports will drop to less than three million tonnes by 2017 once the new plants come online.

U.S. urea production is expected to soar to 8.5 million tonnes by 2017, up from slightly more than three million tonnes today.

The additional production in the U.S. will change urea trade flows, with not as much flowing south from Western Canada.

“The new equilibrium price should be pushed further up north than it is today,” he said.

The $3 billion CHS plant under construction in Spiritwood, North Dakota, is expected to be operational in the first half of 2018.

It will produce 150,000 tonnes of ammonia, 850,000 tonnes of urea and 500,000 tonnes of UAN per year. Some of that product could make its way into Western Canada.

Schouvieller said the facility will be able to supply area growers with urea that was produced at a cost of $139 per tonne versus product imported from China at a landed cost of $345 per tonne.

It will even be cheaper than urea imported from the MENA region at a landed cost of $179 per tonne in Spiritwood.

U.S. product has become far more competitive, thanks to the shale gas revolution that has driven down natural gas prices to less than a third of what they were in 2007.

Natural gas accounts for 85 percent of the cost of producing a tonne of ammonia.

Schouvieller said ammonia supply will remain restricted next year because of gas curtailments in Trinidad and political turmoil in Ukraine.

“We look for it to be a relatively tight market,” he said.

Fertilizer retailers in the U.S. are reluctant to place ammonia orders because of lacklustre corn prices.

“It’s just too big a risk at current prices levels for the system to really go one way or the other,” said Schouvieller.

There was a big summer fill of UAN. Suppliers sold forward and are still fulfilling those orders while buyers wait for the product they bought.

Demand is strong for the product because of the lack of fall applications of ammonia. Product may have to be allocated because of a lack of inventory. Logistics will play a big role in determining what happens to UAN supply and prices in spring.

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