Agricultural Chemical Companies Remain Focused on Growth and Demand

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Researched by Industrial Info Resources (Sugar Land, Texas)--One of the few segments of the Chemical Processing Industry (CPI) that consistently seems to buck the current economic trend is agricultural chemicals, mainly fertilizers. CF Industries (NYSE:CF) (Deerfield, Illinois) extended its offer deadline for all outstanding shares of Terra Industries Incorporated (NYSE:TRA) (Sioux City, Iowa), which is set to expire this week. This extension and other pending transactions in this segment underline the short- and long-term confidence by most majors in this market. Industrial Info is currently tracking more than $900 million in future capital and maintenance spending in this segment as part of its North American Project Database.

What makes the future spending in this segment different than other CPI segments is the type of spending. The current market has many CPI plant owners focusing on reliability or efficiency gains, along with increased maintenance activities to ensure the long-term health of existing manufacturing assets. While plant owners in the agricultural chemical sector are exercising the same efforts, they are also planning a significant number of unit additions, expansions and several grassroot plants.

SynGest Incorporated (San Francisco, California) is planning to construct possibly two new ammonia plants that will employ advanced technology allowing them to use corn stover as feedstock in place of traditional feedstock such as natural gas. SynGest has secured engineering and design resources to develop these plants, and current plans indicate construction could begin during the summer of 2010 for at least one of the plant locations. Agrium Advanced Technologies, a subsidiary of Agrium Incorporated (NYSE:AGU) (Calgary, Alberta), is also planning two grassroot plants in the coming year. These new plants will likely be located in the United States' Midwest region and produce coated fertilizer products.

In addition to these grassroot plants, several major capacity projects are planned during the next year that total more then $50 million each. These projects include industry majors such as Canadian Fertilizers Limited (Medicine Hat, Alberta), PCS Nitrogen Incorporated (Northbrook, Illinois), JR Simplot Company (Boise, Idaho) and others. Energy feedstock prices for these plants remain low and are anticipated to remain low for the foreseeable future. Additionally, demand from farmers and the food industry has not been crippled nearly as badly as many other industrial sectors, and these factors, along with future growth potential, will seemingly keep this segment among the top performers of the CPI for the next couple of years.

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