U.S. Nitrogen Production -- Time to Play Catch-up

April 4, 2013 08:53 AM

Domestic nitrogen production is a hot topic in the United States right now...and for good reason. U.S. import demand for nitrogen has been on the rise since the year 2000 when natural gas pricing drove producers out of the market. Prior to that, the U.S. had been largely self-sufficient and a return to that model of independence would go a long way to stabilizing nitrogen prices on the farm.piechartnitrogen

Trinidad and Canada supplied 58% of nitrogen imports in 2011/12 with Trinidad topping the list at 37.7%. After the Middle East adds its 12.6% the remaining four suppliers fall to single digit percentages.

But as U.S. natural gas seeks a purpose, investment in nitrogen production has responded and according to CHS, 20 projects -- including greenfield and expansions -- have been proposed. Some have gotten farther along than others, and it is likely less than half of these proposals will ever make it to construction. Currently, the price tag for building a nitrogen producing facility is right around $1.3 billion.

I asked Iowa Secretary of Agriculture Bill Northey what it was going to take to get some more nitrogen produced in the Corn Belt. Northey said, "Part of the problem is that it costs over a billion dollars to build one of these things. If it cost one million, we would not be having this conversation, but it doesn't -- it takes a company with very specialized resources and a lot of cash to make a fertilizer plant happen."

A new CHS production complex in Spiritwood, ND is expected to produce roughly 2,200 metric tons of ammonia daily beginning in 2016. The Iowa Fertilizer Company has recently gotten the 'all-clear' from state archaeologists that their project near Burlington, Iowa may proceed. Output is expected to run around 2 million metric tons annually beginning in early 2015. CF is currently expanding in Donaldsonville, LA and at its Port Neal facility in northwest Iowa.

The rise in natural gas production suggests continued low nattie prices for the foreseeable future and the right kind of company would stand to profit handily. Nitrogen demand is a sure bet and with imports climbing during the 2011/12 fertilizer year amounting to 15 million metric tons, startups beginning in 2015 cannot come soon enough.

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