US demand for ethanol seen raising gas use in fertilizer industry
Knoxville, Tennessee (Platts)--1Dec2006
platts.com
Even with natural gas prices expected to remain high, the US ammonia
fertilizer industry is likely to increase its demand for the feedstock by
100,000 to 200,000 Mcf/d in 2007, an analyst said.
Fertilizer production has been historically variable with the cost of
gas, since the feedstock makes up some 70-90% of the total cost of
manufacturing anhydrous ammonia. Several plants in North America have been
idled either seasonally or permanently as a result of rising gas prices since
the early 2000s.
The Fertilizer Institute has said 17 US ammonia plants have shut down
since 1999 because of high gas prices.
What is different now is that demand for corn-based ethanol has risen
dramatically, notes Bank of America analyst Robert Morris.
"In fact, we expect ammonia demand to increase 5-10% next year due to
increased fertilizer usage resulting from higher demand for corn as a result
of increased ethanol demand as a blending component in gasoline replacing
MTBE," Morris said in a report Thursday. Corn is the key ingredient in ethanol
production, and is also one of the most fertilizer-intensive crops in the
country, he added.
Also spurring US fertilizer production is the trend of decreased imports
of ammonia, Morris said. Although imports of the product rose about 65%
between 1999 and 2004, imports next year are expected to be flat, he said.
US fertilizer plants will likely continue to run even though ammonia
product prices are currently flat while gas prices are high, a situation that
has created a negative margin, Morris said. He said, however, that he expects
ammonia prices to rise in the first quarter as plants ramp up production in
anticipation of the spring planting season.
Acreage dedicated to corn is expected to increase roughly 6% to 84
million acres in 2007 versus a 3% decrease this year. As a result, Morris said
he expects North American ammonia capacity utilization to increase to 90% next
year from an estimated 85% this year, resulting in increased natural gas
demand. When operating at full capacity, he estimates that the ammonia
industry would represent about 2.5% of annual domestic gas consumption.
--Stephanie Seay, stephanie_seay@platts.com |
