Fertilizer International 505 Nov-Dec 2021
30 November 2021
Fertilizer Industry News
Fertilizer Industry News
SPECIAL REPORT
European energy crunch triggers ammonia production chaos and collapse
Like the vital nitrogen fertilizer they handle, seasonal cheer will be in short supply for Europe’s ammonia producers and buyers this festive season, after many difficult months in which upward price trajectories showed no sign of slowing.
The spike in European natural gas prices accelerated rapidly during the second half of the year – eventually triggering a series of capacity curtailments. Major plants across the continent then fell like dominoes, as producers struggled to cope with the painful price volatility of natural gas, their principal feedstock.
With European natural gas prices hitting record highs in early October, ammonia production costs became unsustainable for most players. One by one, units across the region stopped production and were idled indefinitely. The economics behind this were simple: with modern ammonia units requiring at least 33MMBtu (Metric Million British thermal unit) to produce one tonne of ammonia, gas prices of over $35/MMBtu made ammonia production prohibitive at nearly $1,200/tonne.
The ever-lengthening roll call of European producers who responded to the deteriorating situation by confirming plant shutdowns and/or capacity curtailments of indeterminate length included:
- Achema’s Lithuania plant
- Several Yara plants in northwest Europe and Italy
- BASF’s Antwerp, Belgium and Ludwigshafen, Germany plants
- CF Fertilisers UK’s Billingham (later restarted) and Ince plants
- One of OCI’s two Geleen plants, the Netherlands
- Grupa Azoty, Poland
- Odessa Port Plant (OPZ), Ukraine
- Fertiberia Palos de la Frontera and Puertellano plants in Spain.
At the same time, industry giants like Yara and BASF slashed their output substantially and switched, wherever possible, to imported volumes instead.
For larger players like Norway’s Yara, this was a relatively stress-free process as they utilised their fleet of specialised tankers to lift ammonia from lower-cost countries like Trinidad – where they access output from two plants – and from Russia, where longterm contracts ensure a steady flow of ammonia from two Baltic ports. Russian gas costs in October were around a third of those in Western Europe and the energy-rich federation was criticised by some observers for aggravating the natural gas crisis by lowering gas flows to Europe, thus reducing storage volumes ahead of winter.
Despite the additional freight costs for the Caribbean cargoes, Yara’s ammonia was still priced at an attractive discount when compared to European production costs. Government support was thin on the ground too, although the UK government agreed to help CF Fertilisers UK with the running costs of its Billingham unit. The important CO2 by-product of ammonia production threatened to become scarce in Britain at one point. This triggered fears of UK nationwide shortages from sectors heavily reliant on CO2 – notably the poultry, beverage and health segments.
The unprecedented gas price situation did, nevertheless, still create the odd headache for Oslo-headquartered Yara by necessitating the purchase of third-party spot volumes. These could only be secured at relatively high prices from suppliers in the Black Sea and Saudi Arabia on an f.o.b. (free on board) basis. Smaller players were even less fortunate. They had no option but to cast their nets far and wide, eventually paying hefty premiums to secure precious spot tonnages.
Austrian chemicals group Borealis dipped its toes into the cfr (cost and freight) spot market several times during the third and fourth quarters to acquire volumes for its Rouen operations in France. Poland’s Grupa Azoty did likewise, buying cargoes for downstream operations at its Police site. Companies with their own plants in north Africa and the US fared better. This was especially true of Dutch major OCI which loaded Texan material for Rotterdam, and also lifted group product from Algeria (Sorfert) and Egypt (EBIC).
Such was the speed of Europe’s natural gas nightmare, Yara introduced surcharges to industrial customers of up to 200/t on the sales prices of ammonia, urea and nitric acid from 1st October. It also moved to temporarily suspend all minimum takeor-pay and exclusive supply obligations due to runaway feedstock costs.
Key industry executives had plenty to say on the worrying situation. Svein Tore Holsether, Yara’s president and CEO, expressed his concern and frustration at his company having to curtail around 40 percent of its European ammonia production.
“European nitrogen production is essential to global food security, and we are therefore concerned about the impact current European natural gas prices will have, especially for the world’s poorest regions,” Holsether said in late October. “The current situation clearly demonstrates the need for more resilient food supply chains, and I call on authorities, international organisations and food value chain players to work together to secure global food supply.”
How did Europe reach this point? Well, the long 2020-2021 European winter certainly depleted gas supplies, so leaving the region in a precarious position, noted Tom Marzec-Manser, lead European gas analyst at ICIS. Europe’s difficult situation was then compounded by strong competition for stocks on the open market, making inventory-replenishment more difficult.
“The previous winter was longer than usual, and we were still withdrawing storage gas in April and even into May this year, when normally that would finish by the end of March,” Marzec-Manser said. “So, essentially, the market has been on the backfoot from the word go in terms of building up stocks for this winter.”
He continued: “Demand for LNG globally at the moment has rebounded at an unprecedented rate since the worst of Covid-19 last year. Principally, demand for gas in Asia – mainly due to their economic bounce back – but also in places like South America for entirely different reasons. At the same time, there have been a number of LNG production problems, which is making the global LNG market very tight.”
So, what about the next few months and the prospects for the European ammonia market going into 2022? From a feedstock perspective, a normalisation for European energy pricing will depend on a mild winter. There would be scope for national gas inventories to normalise going into the 2022 phase of this winter – but only if heating demand was below-average,
“It will depend on the weather,” said Marzec-Manser. “The amount of gas that gets withdrawn from storage during Q4-Q1 of any given year can be quite a large range, and that is entirely driven by how cold it is. So, it is plausible that if it’s a very mild Q4 the dependence on storage gas across the continent is relatively little. This would mean the amount of gas left in storage for Q1 is brought effectively back into line with seasonal norms. The market tightness could dissipate in this situation.”
While record high natural gas costs in Europe capped a miserable year for ammonia buyers, 2021 turned into a highly profitable period for producers – thanks to robust demand from industrial customers and scheduled and unscheduled capacity cuts around the world. The price upswing started in the first-quarter of the year with upwards momentum then increasing as the months rolled on (Figure 1). Between January and November, benchmarks like the Tampa cfr and Yuzhny f.o.b. price rocketed from around $255/t and $220/t, respectively, to $825/t and almost $800/t on strong market fundamentals.
Supply restrictions were a key factor – especially the unplanned capacity cuts in early 2021 (Figure 2) which created fairly-low inventories at some producers – as was healthy downstream demand. The soaring prices of popular commodity fertilizers that require ammonia for their manufacture, such as urea and MAP/DAP, also kept margins decent for many producers. Favourable weather, good yields and bumper crop prices also meant farmers in many key demand markets could afford to spend more on fertilizers too.
Demand destruction was a term heard increasingly during 2021. But, to date, the threat of orders falling off a cliff has not really materialised. The seaborne ammonia market remains healthy as we head towards the new year, with surplus fundamental capacity of previous years having been absorbed in the main. That said, Ma’aden’s new 1.1 million t/a ammonia plant in Saudi Arabia will churn out substantial export volumes from early 2022.
Exactly where all that ammonia will end up remains a mystery for now. But the Saudi major has more than doubled its fleet of tankers (from three to seven) and is expected to target long-term supply agreements both sides of the Suez, rather than rely on its well-established markets of India, China, Korea and Taiwan. Assuming European ammonia production costs remain uncompetitive until spring, it would not be a surprise to see suppliers take full advantage of attractive arbitrage opportunities and send spot volumes from the Kingdom or north Africa to buyers in Europe.
Additional reporting by Tom Brown, chief news correspondent at ICIS.
RUSSIA
Casale helps KuibyshevAzot expand Togliatti complex
KuibyshevAzot has contracted Casale to build a new 1,575 t/d nitric acid plant and 2,000 t/d ammonium nitrate solutions plant at its Togliatti site. Casale had previously completed front-end engineering design (FEED) work for this project prior to the Covid-19 pandemic.
The new complex is scheduled for completion in the last quarter of 2024. It will incorporate Casale’s NA2000™ dual pressure process for nitric acid and AN2000™ technology for AN solutions. These are designed to ensure low energy consumption and reduced emissions. Casale will be responsible for turnkey execution while its Czech subsidiary Casale Project will handle the construction phase.
Federico Zardi, Casale’s CEO said: “We are particularly proud of this new win for our company which, in addition to strengthening the cooperation between Casale and KuibyshevAzot, comes in the wake of the successful completion of another nitric acid plant in Uzbekistan of very similar capacity. This confirms both our commitment in pursuing large EPC projects as well as the importance of the Russian and CIS markets for the development of our business.
“In addition, we strongly believe that the consistent use of highly qualified local resources in different phases of the construction – as planned for this project – besides bringing clear benefits in terms of speed and efficiency of execution – also generates positive effects on the local economy and employment. This creates the conditions for further collaborations as well ensuring a prosperous future for all stakeholders.”
Stamicarbon to build second granulation plant for Acron
Maire Tecnimont subsidiary Stamicarbon has secured a contract for a 2,000 t/d urea granulation plant at Acron’s Veliky Novgorod site. The company will supply the proprietary technology and equipment for the plant. This is second of two almost identical contracts awarded to Stamicarbon by Acron. A previous granulation plant with the same capacity was completed in 2020.
The new plant will be based on the same design as the first and will incorporate Stamicarbon’s proprietary film spraying nozzles. Stamicarbon says these nozzles result in a better quality end-product by building up granules layer-by-layer. This process design, by reducing both dust formation and the formaldehyde content of the final product, also lowers operating expenditure, compared to other fluidised bed granulation processes. On average, the granulation plant will be able to operate continuously for three months without any interruptions for cleaning, according to Stamicarbon.
“Since the start of its operation in the summer 2020, the first granulation unit has demonstrated excellent performance, both in terms of process reliability and equipment,” said Sergey Abramov, licensing manager at Stamicarbon. “Acron appreciated our technology and as a result chose Stamicarbon for the second unit of the same design and capacity.”
CANADA
New Ontario fertilizer coating plant
Sollio Agriculture and Pursell Agri-Tech have formed a joint venture to build and operate a fertilizer coating plant in St Thomas, Ontario.
The new CAD 20 million ($11.9 million) plant will be dedicated to the production of controlled-release fertilizers (CRFs). Construction will commence this autumn with the plant expected to become operational in August next year.
Sollio Agriculture is the agribusiness arm of Canada’s 100-year-old Sollio Cooperative Group, while US-based Pursell Agri-Tech is a leading coated fertilizer manufacturer and technology provider headquartered in Sylacauga, Alabama. The new coating plant will “open untapped markets for the many economic and environmental benefits offered by controlled-release fertilizers”, Sollio said in a statement.
The new plant will produce CRFs using Pursell’s innovative and proprietary coating materials and techniques. It will also make use of the company’s patented technology. This allows micronutrients and temperature-sensitive additives – such as biologicals, growth enhancers and soil health promoters – to be incorporated within fertilizers.
CRFs offer a number of advantages. By improving the uptake of nutrients by plants, they have the potential to significantly improve crop yield and quality, while at the same time helping prevent ammonia volatilisation and nutrient leaching and runoff.
Historically, CRFs are used primarily in turf and ornamental markets and speciality agriculture in North America. In contrast, they have been applied much less frequently to commodity agricultural crops grown in the region, such as corn, wheat, canola and potatoes, due to cost and availability. However, the combination of Pursell’s innovative coating technology and a local manufacturing capability should make the widespread adoption of CRFs in commodity agriculture more attractive and economically feasible.
“We are delighted to be joining forces with Pursell to make the numerous economic and environmental benefits of its CRF technology available to Canadian farmers,” said Casper Kaastra, Sollio Agriculture’s CEO. “Local manufacturing reduces logistics expense to customers, provides ability to offer previously unavailable CRF products to this market and supports nutrient stewardship initiatives associated with the use of fertilizer products.”
“Partnering with members of Sollio Cooperative Group to build a plant in St Thomas is ideal,” said Nick Adamchak, Pursell’s CEO. “The plant gives growers in eastern Canada and the northeastern US access to controlled-release nitrogen, phosphate and potash fertilizers, as well as customized plant nutrition options.”
He added: “This first license of the Pursell Technology outside of the US also enables us to move forward in further international licensing opportunities with our partners at Stamicarbon.”
Pursell, which opened its flagship fertilizer coating plant in Sylacauga, Alabama in early 2018, also plans to open an additional plant in Savannah, Georgia.
Eirich Machines will supply equipment for the new 100,000 tonne capacity St Thomas coating plant. The company has been working closely with Pursell on the complete fertilizer production system. This includes material handling, liquid delivery, batch control, the use of Eirich intensive mixers and the overall process control system.
“We are extremely pleased to partner with industry leading companies such as Pursell and Sollio Agriculture, and we look forward to continuing our strong commitment and tradition of providing state of the art processing technology,” said Matthias Erdmannsdoerfer, managing director of Eirich Machines. “This partnership shows our capabilities to provide the process knowledge and unparalleled support required to deliver complex processing plants in North America and around the globe.”
Joe Brady, Pursell’s CFO and sustainability lead, said: “Partnerships with leading innovators like Eirich Machines allow us to implement unique process advantages in our fertilizer plants. These include faster curing and batch times than traditional controlled-release technology and lower operating temperatures that allow temperature-sensitive additives to survive.
“We look forward to continuing our partnership with Eirich as we begin work with Stamicarbon in licensing our technology globally.”
UNITED STATES
Green ammonia plant for Iowa
Maire Tecnimont has secured a contract to develop the first dedicated green ammonia plant in the US Midwest for Greenfield Nitrogen LLC. This will be delivered by three Tecnimont subsidiary companies, NextChem, MET Development and Stamicarbon.
The pioneering 83,000 t/a capacity ammonia plant will combine the best available technologies for green hydrogen production with Stami Green Ammonia technology. The latter was launched by Stamicarbon over the summer and is being used to build a renewable power-to-fertilizer plant in Kenya (Fertilizer International 503, p8; Fertilizer International 504, p20).
Under the agreement, NextChem will initially embark on a feasibility study for a 240 t/d green ammonia plant able to consume hydrogen generated by renewable energy. MET Development will assist Greenfield Nitrogen in the overall development of the project.
The green ammonia plant and associated storage unit will be located near Garner, Iowa, and will therefore be well placed to supply ammonia to a large local agricultural market. It will be powered from local renewable sources and will strengthen the development of the region’s low carbon industry, according to the project partners.
The new plant – compared to the conventional ‘grey’ ammonia production route – is expected to save more than 166,000 tonnes of CO2 emissions annually. Its output should also reduce the region’s dependency on ammonia imports. The Garner, Iowa project is the first of a series of green ammonia plants that Greenfield Nitrogen wishes to develop across the US Corn Belt.
Pierroberto Folgiero, Maire Tecnimont’s CEO, said: “We are very pleased that Greenfield Nitrogen has chosen Maire Tecnimont as their partner of choice for this exciting project. The combination of co-developer, technology provider and EPC contractor makes Maire Tecnimont a unique player in the green ammonia market, an area that will be vital to industrialize the on-going energy transition through green hydrogen.”
New St Louis production plant
Ostara Nutrient Recovery Technologies is investing $25 million in a new Crystal Green® fertilizer production plant in St Louis City. The plant was officially approved by the St Louis Port Authority in August.
Ostara is renovating an existing St Louis plant located on the north Mississippi riverfront. This has been purchased from the trading, distribution and transportation company Bruce Oakley, who will also act as Ostara’s long-term partner. The land for the new plant is being leased via a longterm agreement with Bruce Oakley and the Terminal Railroad Association of St Louis.
Vancouver-headquartered Ostara produces struvite-based fertilizers using technologies that recover phosphorous and nitrogen from wastewater streams. The company currently operates a fertilizer plant in Florida – but has been actively looking for an additional Midwestern production location for some time.
“We’re excited to welcome another agtech company to Missouri, where agriculture remains our number one economic driver,” Missouri governor Mike Parson said. “Ostara’s investment in St Louis will create more career opportunities for Missourians, build on its mission to help farmers improve crop yields across North America, and protect water and soil quality around the globe.”
“St Louis was a natural choice for Ostara to construct its newest and largest manufacturing facility that will produce our environmentally friendly Crystal Green ® fertilizer,” said Dan Parmar, the CEO of Ostara Nutrient Recovery Technologies. “As we gear up production over the next year, we’re partnering with the St. Louis community and Missouri businesses to continue our mission to produce a sustainable phosphorus soil health solution that will enhance crop yields while protecting water sources across the globe.”
Ostara’s Crystal Green ® and Crystal Green Pearl ® fertilizers are granular slow-release phosphorus fertilizers able to release nutrients in response to plant demand. These products contain Root-Activated ™ granules designed to increase yield, enhance soil health and significantly reduce phosphorus tie-up and runoff.
“Fertilizer produced at our St Louis facility will impact acres across the US by substantially improving crop yields and by keeping nutrients in the soil instead of leaching into our precious water bodies,” said Parmar.
OMAN
Green ammonia projects gather pace
Another green ammonia project has been announced, this time in Oman. A consortium comprising Omani state oil and gas company OQ, Japan’s Marubeni, Linde and UAE-based Dutco has initiated a feasibility study for a 330,000 t/a capacity green ammonia plant. This is just one of a raft of recent green and blue ammonia project announcements in Australia, Egypt, Malaysia, Norway and Saudi Arabia (Nitrogen+Syngas 374, p8).
If given the go ahead, the project, SalalaH2, would be sited in the Salalah Free Zone in the south of Oman. The partners are planning to produce green hydrogen from a 400 MW electrolyser. This will be powered from existing and new solar and wind parks with a total capacity of one gigawatt.
The overall aim is to make Salalah a hub for the production and export of green hydrogen and ammonia by capitalising on the potential for solar and wind capacity in the region and the infrastructure at the Port of Salalah.
The consortium will study various offtake options for the project, including fertilizer plants in Europe, the global shipping industry and coal-fired power plants in Asia.
FINLAND
Yara acquires Ecolan
Norway’s Yara International has expanded into organic fertilizers by buying Finland’s Ecolan Oy.
The purchase, announced at the start of September, is Yara’ first acquisition in the organic fertilizer segment. The move reflects the company’s “commitment to play a bigger role in organic farming and in contributing to the circular economy”, Yara said in a statement.
“By expanding our offerings into the growing organic farming segment in Europe, we can help improve nutrient use efficiency in this segment by capitalizing on our deep crop nutrition knowledge,” said Mónica Andrés, executive vice president for Yara Europe.
“Our core competence lies in managing nutrients in the most sustainable and efficient way, whether this is for organic farming or conventional farming. We want to be the leading partner for all farmers, regardless of which farming system they use,” she added.
Ecolan produces high quality fertilizers for agriculture and forestry from industrial side streams. These products help reduce CO2 emissions and function as natural carbon sinks. The company has 21 employees and operates two production plants in Finland.
Yara and Ecolan have an established history of collaboration. Following several years of research and development, Yara introduced a new organic fertilizer line with a high nitrogen content to the Finnish market in 2019. This was produced on its behalf by Ecolan.
“Ecolan is a Finnish front-runner in the circular economy. We have had good cooperation during the past years and now we are able to combine Yara’s and Ecolan’s knowledge and expertise to develop recycled fertilizers even further. With this acquisition, we will be able to offer organic fertilizers also to markets outside Finland,” said Timo Räsänen, director for specialty products for the Nordic and Baltic countries at Yara.
Ecolan has invested heavily in product development and expanding its production capacity. This has resulted in significant revenue growth and a strong market position. The company has been able to grow thanks to investor support from the Korona Invest. This Finnish private equity firm acquired a majority stake in Ecolan in 2015.
“Starting from small-scale production, Ecolan has with the support of Korona Invest grown into one of Finland’s leading circular economy industrial companies. Through Yara’s ownership, Ecolan’s know-how can be utilized also internationally,” said Vesa Lehtomäki, the chairman of Korona Invest.
Yara says it is working to find the best way to recycle nutrients that would otherwise end up as waste and then process these to produce organic fertilizers. The company is pursuing this through strategic partnerships with waste management and food companies, such as Veolia. “The circular economy has an important role to play in improving nutrient use efficiency, which is one of Yara’s core areas of expertise,” Yara said.
