Agricultural Chemical Producers Expect Another Year of Increased Spending in 2011

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Researched by Industrial Info Resources (Sugar Land, Texas)--For the past several years, agricultural chemical producers have enjoyed the very low price of natural gas, which is a primary feedstock or energy requirement for almost all producers in this segment of the Chemical Processing Industry (CPI). The original forecast for 2010 called for capital and maintenance project investments to reach $386 million in the United States and Canada. As we approach the end of the year, current expectations are that total spending will be much closer to $458 million for 2010, an increase of more than 16%. Attractive feedstock costs are just one part of the equation; demand for fertilizers also has remained strong, as farm plantings were up again in 2010 and export demand remained constant.

For 2011, there are expectations of yet another increase in overall spending, with capital and maintenance expenditures reaching a combined $524 million, another double-digit increase in overall spending of nearly 13% for next year. So far, a majority of the increase that is forecast for next year is from new capital projects. SynGest Incorporated (San Francisco, California) is hopeful it will begin construction for a planned grassroot ammonia fertilizer plant in Menlo, Iowa, in the second quarter of 2011. This more than $100 million project originally was planned to begin construction during the summer of 2010 and was ultimately delayed due to general market constraints. Another grassroot fertilizer plant is being planned for Sutton, Massachusetts, next year by Highland Project Capital Group LLC (New York, New York). This new organic fertilizer plant originally was expected to begin construction during the summer of 2010 and is expected to begin during the second quarter of 2011.

With profits high across most of this industry segment, many producers are electing to tackle environmental compliance and remediation projects while times are good. The focus here is largely on soil and groundwater contamination, along with continued upgrades of scrubbers. Some producers continue to operate demonstration or pilot-scale units, trying to secure market share for bio-based materials. Others are focusing on efficiency gains through control upgrades and automations. Koch Nitrogen Company (Wichita, Kansas) is planning control system replacements or upgrades for at least eight different plant sites in 2011.

Maintenance is a must in this segment of the CPI. Planned and scheduled maintenance turnarounds are a part of life for these producers, which operate in an extremely caustic and often explosive environment. With operating rates expected to remain high in the coming year, spending for maintenance turnarounds is expected to again remain strong, reaching or exceeding $180 million for the year.

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