Mike Straumietis on Factors Affecting the Global Supply, Prices of Fertilizers
In this blog post, Mike Straumietis, Founder and CEO of Advanced Nutrients, shares his take on the factors affecting the prices and supply of fertilizers worldwide.
The U.S. is the world’s third biggest fertilizer producer. However, the U.S. still needs to import all three nutrients required for fertilizer, especially nitrogen and potassium (or potash), to meet the demand fully.
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Where Most Supplies Come From
In 2020, ammonia was produced in 36 domestic plants and transported around the U.S. through barges, trains, trucks, and pipelines. Meanwhile, the International Fertilizer Association noted that back in 2018, the U.S. was second in nitrogen production, representing 11.6 percent of global production. The leader in nitrogen production was China, which produced almost 25 percent of global nitrogen.
As for phosphate, the U.S. ranked second in global production with 9.9 percent. China topped the worldwide ranking, producing a staggering 37.7 percent. The U.S. was slightly ahead of India, which accounted for 9.8 percent of the global phosphate supply.
Canada leads all countries in producing potash, with 31.9 percent of global production. It was followed by Belarus, producing 16.5 percent of the world’s potash. Russia was third with 16.1 percent, and China ranked fourth. Around 80 percent of the world’s potash came from these four countries.
The U.S. produced only 0.8 percent.
More recent studies show that the U.S. is not a major fertilizer exporter on the global stage. The U.S. ranks seventh, with Russia, China, and Saudi Arabia being the top three in that order. As far as global phosphate exports are concerned, the U.S. is fourth with 11.8 percent, behind China’s 25.2 percent, Morocco’s 17.4 percent, and Russia’s 12.7 percent.
Mike Strauietis adds that the U.S. accounts for less than 1 percent of global potash exports and ranks 12th. Canada holds the largest share with 36.2 percent, followed by Belarus with 18.5 percent, and Russia with 16.5 percent.
The Closure of EU Factories
Mike Straumieties further explains that the creation of fertilizer requires a lot of energy from production facilities to convert the raw chemical materials into the final form which farmers and growers use. For instance, anhydrous ammonia is produced via the Haber-Bosch process, which combines nitrogen with hydrogen. This process synthesizes the ammonia, using natural gas as the source of hydrogen, combined with energy for synthesis.
Since natural gas is the main building block for almost all nitrogen fertilizers, it takes approximately 33 million metric British thermal units (MMBtu) per material ton of ammonia to achieve this conversion. Moreover, this accounts for 70 to 90 percent of the production variable expenses in the synthesis process.
With natural gas prices spiking in the past few months, especially in the European region, many EU nitrogen plants were forced to close.
More Production Disruptions
On average, plants built mainly for this process take around three to five years to fully construct and cost approximately $3 to $5 billion. Because of this, a demand surge occurs due to the significant long-term impacts. The response time to gather supply through another production facility will lag for another three to five years and cost another $3 to $5 billion.
In February 2021, a freeze in production happened in Texas when a huge portion of the natural gas production was either interrupted or redirected from the normal uses and pushed toward Texas because of a spike in demand. This freeze forced ammonia plants all over the states of Texas, Oklahoma, and Louisiana, which combined for about 60 percent of total ammonia production in the country, to shut down. This effectively cut about 250,000 tons of production. This was before Hurricane Ida hit, causing another halt in production.
In the middle of these disruptions in production, plant turnarounds during the COVID-19 pandemic, which were already delayed, were stopped again, keeping plants from catching up with their production backlogs. This, in turn, led to more production disruptions, either for regular maintenance or even the issues that have emerged because of delayed maintenance, Mike Straumieties adds.