Houston, 15 November (Argus) — Potash Corp Saskatchewan (PCS) expects nitrogen imported into the US to decline by as much as 68pc by 2017 if currently planned debottlenecking and expansion projects and at least planned three greenfield projects come on stream.
The US is at a competitive advantage to other parts of the world thanks to relatively low natural gas prices – a trend driving the incentive for nitrogen capacity additions. Robust North American demand – which relies heavily on imports – also supports the drive to boost domestic production. In 2011, the US imported 6.8mn t of ammonia, 5.8mn t of urea, 3.4mn t of urea ammonium nitrate (UAN) and 80,000t of ammonium nitrate (AN).
The economics of the expansions look good on paper but “the timing of projects is optimistic,” Arvin Pirness, manager of PCS's market research, said.
PCS estimates that while completion of nitrogen capacity addition projects has historically been around three years, the process could take up to six years. This is partially because of the permitting process, which tends to be easier for expansions at existing sites rather than new-build facilities.
Recent major announcements include capacity expansions at two of CF Industries' existing plant sites in Iowa and Louisiana, as well as Orascom Construction Industries' (OCI) greenfield project in Iowa and CHS's nitrogen project in North Dakota. The OCI project's groundbreaking ceremony is 19 November in Wever, Iowa.
Shorter-term, PCS sees agricultural fundamentals providing an optimistic backdrop for the upcoming fertilizer year, especially for nitrogen demand in North America. Corn yields for 2012 are projected to be the lowest since 1995 and PCS's analysis of the market indicates fertilizer use increases in most years following a major yield decline. That means going into 2013 the company expects demand to be strong, citing nitrogen prices lagging crop prices on a comparative basis as a driver in keeping the market firm.
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