High natural gas prices are forcing nitrogen fertilizer manufacturers to think about reducing production this summer.
Natural gas plays a large role in nitrogen fertilizer production. Natural gas prices were strong this spring, and some analysts suspect prices could remain high for much of 2003.
Simplot Canada plans to close its Brandon fertilizer plant for at least an extra month this summer in response to what it calls an unanticipated rise in natural gas prices.
The Simplot plant usually closes for three weeks every other year for scheduled maintenance and construction work. The decision to extend that shutdown by a month is unprecedented in the facility’s history.
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“High gas prices this summer make it impossible for the Brandon facility to continue as normal,” said Hani Riad, the plant’s general manager.
Simplot Canada, a subsidiary of the J.R. Simplot Co. headquartered in Boise, Idaho, is one of the largest manufacturers and distributors of nitrogen fertilizer in Canada. In a News release
news, the company said it will strive to meet customers’ needs this fall, despite the extended shutdown.
Agrium, another major fertilizer maker, might also extend maintenance closures at some plants this summer.
Natural gas prices will influence that decision, along with the company’s inventories of nitrogen fertilizers once spring seeding is complete, said company spokesperson Jim Pendergast.
Among Agrium’s holdings are four fertilizer plants in Alberta and one in Texas. Pendergast said the Alberta plants are the most efficient the company has in North America, meaning they would likely be the last affected if a decision is made to idle plants longer than normal.
Brian Prokop, an oil and gas analyst with Calgary-based Peters and Co. Ltd., said natural gas prices have been on a roller-coaster ride for the past few years. Prices were so high at the end of 2000 that some major users, including fertilizer manufacturers and steel makers, closed plants permanently in favour of offshore countries with more affordable energy.
While prices were more moderate in 2001, they started rising again last year and peaked this winter, sending nitrogen fertilizer prices rocketing higher this spring.
Prokop said the development of natural gas supplies in North America has not kept pace with demand.
He said it’s impossible to predict where natural gas prices will be by the end of this year because of all the things that influence those prices. However, current circumstances indicate higher prices this year, although they could take a temporary lull in late summer and in fall.
