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Released January 04, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--With the completion of two major fertilizer projects in recent months, CF Industries Holdings Incorporated (NYSE:CF) (Deerfield, Illinois) has boosted its annual ammonia production capacity by more than 2 million tons.
In December, the company announced the commissioning and start-up of its Port Neal Fertilizer Complex expansion, located at Sergeant Bluff, Iowa. With the installation of the second ammonia unit at the complex, total annual gross ammonia capacity at Port Neal is now 1.2 million tons, up from 380,000 tons previously. A new urea plant was also commissioned at the complex, increasing urea capacity to 1.4 million tons from 50,000 tons previously. When the expansion project kicked off in 2013, it was the largest single private capital investment in Iowa history, according to the Sioux City Journal.
In September, CF Industries started up a new ammonia plant at its Donaldsonville complex in Louisiana. Total annual gross ammonia capacity at Donaldsonville is now 4.3 million tons, up from 3.1 million tons before the expansion, making the complex the largest nitrogen facility in the world, according to the company. The Donaldsonville complex has flexibility to switch production from merchant ammonia to upgraded products, so the mix of net ammonia and upgraded products for sale varies based on market conditions.
Chief Executive Officer Tony Will said during the company's third-quarter earnings conference call that the new plants at Donaldsonville and Port Neal "have an effective capital cost per ton of production that is among the lowest of all the observable plants built recently in North America." For the Port Neal project, the farmer cooperative CHS (Inver Grove Heights, Minnesota) paid $2.8 billion to have the rights to 1.7 million tons per year of production, he noted.
CF executives said the new projects came online during a supply-driven market, leading to multi-year price lows in the third quarter for ammonia, urea and urea ammonium nitrate (UAN).
"The global oversupply of nitrogen and its pressure on prices is not a new story. As we have said before, we believe 2016 represents the high watermark for urea capacity additions globally with capacity additions projected to drop off sharply after mid-2017," said Bert Frost, CF's senior vice president of sales, market development and supply chain. "As an industry, we have yet to see the full impact of the new North American production capacity, but that which has come online has begun to displace imports."
At the same time, Frost continued; "We are forecasting 88 million acres of corn and for wheat acres to remain flat at 50 million acres [in 2017]. Assuming that the weather cooperates, when demand for fall application season begins, we expect it to be strong. We believe that North American downstream inventory of ammonia, urea and UAN is low following the spring application season. Urea imports were down 55% year-over-year in the third quarter as well, suggesting that purchasing activity will have to accelerate to be ready for spring."
For 2017, CF expects capital expenditures to be in the range of $400 million to $450 million, as it returns to "maintenance levels." Capital expenditures for 2016 were expected to total $2.3 billion in 2016, including $1.8 billion for capacity expansions.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
In December, the company announced the commissioning and start-up of its Port Neal Fertilizer Complex expansion, located at Sergeant Bluff, Iowa. With the installation of the second ammonia unit at the complex, total annual gross ammonia capacity at Port Neal is now 1.2 million tons, up from 380,000 tons previously. A new urea plant was also commissioned at the complex, increasing urea capacity to 1.4 million tons from 50,000 tons previously. When the expansion project kicked off in 2013, it was the largest single private capital investment in Iowa history, according to the Sioux City Journal.
In September, CF Industries started up a new ammonia plant at its Donaldsonville complex in Louisiana. Total annual gross ammonia capacity at Donaldsonville is now 4.3 million tons, up from 3.1 million tons before the expansion, making the complex the largest nitrogen facility in the world, according to the company. The Donaldsonville complex has flexibility to switch production from merchant ammonia to upgraded products, so the mix of net ammonia and upgraded products for sale varies based on market conditions.
Chief Executive Officer Tony Will said during the company's third-quarter earnings conference call that the new plants at Donaldsonville and Port Neal "have an effective capital cost per ton of production that is among the lowest of all the observable plants built recently in North America." For the Port Neal project, the farmer cooperative CHS (Inver Grove Heights, Minnesota) paid $2.8 billion to have the rights to 1.7 million tons per year of production, he noted.
CF executives said the new projects came online during a supply-driven market, leading to multi-year price lows in the third quarter for ammonia, urea and urea ammonium nitrate (UAN).
"The global oversupply of nitrogen and its pressure on prices is not a new story. As we have said before, we believe 2016 represents the high watermark for urea capacity additions globally with capacity additions projected to drop off sharply after mid-2017," said Bert Frost, CF's senior vice president of sales, market development and supply chain. "As an industry, we have yet to see the full impact of the new North American production capacity, but that which has come online has begun to displace imports."
At the same time, Frost continued; "We are forecasting 88 million acres of corn and for wheat acres to remain flat at 50 million acres [in 2017]. Assuming that the weather cooperates, when demand for fall application season begins, we expect it to be strong. We believe that North American downstream inventory of ammonia, urea and UAN is low following the spring application season. Urea imports were down 55% year-over-year in the third quarter as well, suggesting that purchasing activity will have to accelerate to be ready for spring."
For 2017, CF expects capital expenditures to be in the range of $400 million to $450 million, as it returns to "maintenance levels." Capital expenditures for 2016 were expected to total $2.3 billion in 2016, including $1.8 billion for capacity expansions.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
