Fertilizer Demand Remains Strong, Prompting the Construction for New Capacity

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Researched by Industrial Info Resources (Sugar Land, Texas)--Agricultural spending for fertilizers, pesticides, herbicides and related products remains what the Chemical Processing Industry (CPI) is counting on for growth this year. Current project activity in this segment planned for 2009 in North America suggests that spending for could increase by one-third or more, reaching $500 million or more this year. The demand for fertilizers has continued to grow as food crop plantings and the planting of corn for ethanol continued to break records in recent years. These increases in planting seasons, combined with a very attractively priced feedstock, primarily natural gas, are some of the factors contributing to this increase in spending.

Terra Industries Incorporated (NYSE:TRA) (Sioux City, Iowa) recently began construction of a $180 million expansion of its Woodward, Oklahoma, fertilizer complex. This project will consist of a new 1,500-ton-per-day urea ammonium nitrate (UAN) unit, increasing the plant's overall UAN production to an estimated 825,000 tons per year. Terra is getting under way with this huge project at a time when CF Industries Holdings Incorporated (NYSE:CF) (Deerfield, Illinois) is attempting to acquire them through a share exchange offering.

Elsewhere in the chemical sector, Agrium Advanced Technologies (Sylacauga, Alabama), a division of Agrium Incorporated (NYSE:AGU) (Calgary, Alberta), is planning to begin construction soon for a grassroot fertilizer coating plant in Mount Vernon, Indiana. This plant will occupy a nearly 90,000-square-foot building and support the mixing, blending and coating of fertilizer products. In a strange triangle of financial events, Agrium is in the process of attempting to acquire CF Industries.

The growth in this segment isn't limited to just fertilizers; the demand for herbicides, pesticides and related products has increased, as well. Syngenta AG (NYSE:SYT) (Basel, Switzerland) has begun construction to expand its herbicide and pesticide plant in Omaha, Nebraska, at a cost of nearly $10 million. These expansions and potential acquisitions, combined with the very strong level of proposed spending over the next year, reinforce the industry's confidence that demand will remain strong.

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