Faustina Phosphate: Good News and Bad News

May 15, 2013 08:58 AM

Mosaic Co. plans to build an ammonia production facility adjacent to its existing Faustina phosphate complex in St. James Parish, Louisiana. But there is good news and bad news here as this project will take the place of another.

The ammonia produced at Faustina will largely be dedicated to phosphate production. In order to maintain favorable phosphate margins, Mosaic will need low priced ammonia. The new complex will help keep a lid on P production costs and create a market for U.S. shale gas. This, in turn, has the potential of offsetting the high cost of imported ammonia, and possibly include additions to the national supply, lowering ammonia prices for end-users in the United States.

The bad news is that Mosaic has passed on a potash expansion that has already cost the company in the neighborhood of $1 billion. Experts believe the expansion will merely be tabled rather than canceled outright as forward-thinkers foresee shortages of P&K in the soils of China and India. When those markets come around to P&K, foreign investment may pick up the tab for completion of the project. In the mean time, potash from Belaruskali and Uralkali will continue to service K demand in Indo-Asia.

The Faustina complex is expected to come online late this year, and will increase North American phosphate production while fattening ammonia production capacity. As other ammonia projects start-up in the next few years, pricing could move very low for N&P, and similar action is expected in the long-view for potash.

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