TWO newly announced fertilizer production projects highlight the strong global appetite for crop nutrients: A new sulfur plant in Alberta and a phosphate production operation in Saudi Arabia aim to capture increasing demand for fertilizers needed to grow feed grains and oilseeds.
Earlier this month, Minnesota-based Mosaic Co. announced an agreement with two Saudi companies to develop integrated phosphate production facilities in Saudi Arabia. The joint venture with mining and metals company Ma'aden and petrochemical firm Saudi Basic Industries Corp. involves plans for a $7 billion greenfield project incorporating mining, production and further processing.
Operations are slated to start in late 2016 and are expected to produce 3.5 million metric tons of finished product per year. The project is slated to include a mine and chemical complexes capable of producing phosphate fertilizers as well as animal feed and food-grade, purified, phosphorous-based ingredients.
Mosaic, which will own 25% of the joint venture, will contribute expertise in design, construction and operation of the facilities. The company will market roughly 25% of the venture's production and will invest as much as $1 billion over a four-year period.
"We expect it to be an excellent complement to our phosphate business in Florida and Louisiana," Mosaic president and chief executive officer Jim Prokopanko said. "This cost-effective phosphate project would enable Mosaic to further diversify our sources of phosphates and gives us improved access to key agricultural countries."
In 2011, environmental groups convinced a federal court to halt a planned expansion of Mosaic's mining operations in Florida. Although the litigation was settled last year, production was delayed significantly because of the legal wrangling.
Final agreements for the Saudi venture are expected during the first half of 2013, but the companies said the plan benefits from abundant raw material availability within Saudi Arabia and offers ample geographic benefits to Mosaic's fertilizer marketing strategies in the region.
Meanwhile, in the Western Hemisphere, Calgary, Alb.-based Sulvaris announced a definitive agreement with one of the largest midstream natural gas operations in Canada for the construction of a new sulfur fertilizer production plant in central Alberta. The new facility, built on the site of the Keyera Partnership's existing Strachan Gas Plant, will convert elemental sulfur into Vitasul, Sulvaris' proprietary plant fertilizer.
The new plant, a 50/50 joint venture between the two firms, will be operated by Keyera, and Sulvaris will market and distribute the finished fertilizer product. The plant will have an annual production capacity of 217,000 mt, and the product will be sold in U.S., Canadian and Asian markets.
Engineering work on the plant is underway, and construction is set to begin early this year. Production could commence in early 2014, according to the companies.
The economics of fertilizer production have been very strong in recent years as higher crop prices have created an incentive for farmers to apply increasing amounts of yield-enhancing nutrients.
A recent report from Rabobank, for example, notes that countries with potash-deficient soils, including major feed and food importers China and India, will require increased applications of potash in order to ensure long-term food security.
As such, demand for potash and other crop nutrients is expected to continue growing along with the global population.
Three major players in the global nutrient trade reported increased or record earnings for 2012, highlighting the strength in the sector and potentially foreshadowing further investment in developing additional production and distribution opportunities.
Terra Nitrogen Co., headquartered in Deerfield, Ill., reported fiscal 2012 net earnings of $560.8 million on sales of $780.1 million, an increase of 10.4% over fiscal 2011 earnings. The company said ammonia prices were up an average of 16% last year.
Canadian fertilizer producer Agrium, meanwhile, reported record fourth-quarter earnings of $354 million, leading to record fiscal 2012 earnings of $1.5 billion, up from $1.4 billion in 2011.
"The unrelenting global demand for food has continued to pressure global grain supplies, leading to continued strength in crop prices," Agrium president and CEO Mike Wilson said. "We believe there is a compelling economic incentive for growers across the world to plant record acreage in 2013 and to optimize their use of crop inputs."
Similarly, Illinois-based CF Industries reported record fourth-quarter net earnings of $470.7 million, based partly on record ammonia shipments from several of its terminals. The company recorded record full-year earnings of $1.8 billion, up from $1.5 billion in 2011.
CF announced plans during the fourth quarter to commit $3.8 billion toward expansion of its nitrogen production capacity.