As of 2015, ammonia was produced by 13 companies at 29 plants in 15 states; however, about 60 percent of total U.S. ammonia production capacity was located in Louisiana, Oklahoma and Texas thanks in large part to each of these states’ natural gas supplies.
The U.S. was one of the world’s biggest producers and consumers of ammonia, even though existing facilities were operating at only about 80 percent of rated production capacity. Over the course of the past 10 years, our net import reliance as a percentage of apparent consumption has declined from 41 percent to 29 percent. This decline in reliance on imports highlights increases in domestic production from 7.9 million metric tons (Mt) per year in 2006 to 9.4 Mt per year in 2015. During the next four years, an estimated 5 Mt per year in additional production capacity is expected to come on line in the U.S. However, the U.S. will likely still be importing additional ammonia from foreign markets such as Trinidad and Tobago, Canada, Russia and Ukraine.
New construction
Five new world-scale ammonia plants will start-up this year or next in the U.S., with construction progressing for CF Industries in Donaldsonville, Louisiana, and Port Neal, Iowa; Dyno Nobel in Waggaman, Louisiana; OCI’s Iowa Fertilizer Co. in Wever, Iowa; and Yara’s joint venture with BASF in Freeport, Texas. The BASF project is worth noting, as BASF will upgrade its current terminal and pipeline assets on behalf of Yara for the export of ammonia from the new plant to other (likely domestic) locations. This is noteworthy because it becomes the only export terminal in Texas capable of handling ammonia.
Infrastructure cost is the primary impediment to the U.S. becoming a bigger player in the global ammonia market, where China, India and Russia dominate. A marine liquids terminal would need to be exporting from 50,000 Mt to 100,000 Mt of ammonia per month to create favorable enough profit conditions to justify the expense of additional infra-structure required to accommodate ammonia, which is highly volatile and requires special storage tanks and handling processes.
The facilities listed above are part of a growing list of domestic plants under construction. Some, like the Agrifos/Borealis joint venture going by the moniker Gulf Coast Ammonia LLC, have been announced but are still in the site selection process.
Implications
The domestic market for ammonia is stable and growing due to the prominence of the U.S. in the global agriculture market both as producers of fertilizers and of food. As of 2013, ammonia production in the U.S. represented 10 percent of the 144-Mt global production.
The facilities coming on line will not make the U.S. a net-zero importer of ammonia even if they operate at full capacity. Thus, there is still opportunity for additional domestic production capacity to meet domestic needs. If natural gas prices remain low, there is also opportunity for the U.S. to become an exporter on the global market in a much bigger way than we have in the past. In the past four years, the U.S. has seen a 24-fold increase in exports of ammonia, yet export numbers are still marginal.
Because ammonia production profitability is tied directly to natural gas feedstock, the flurry of new ammonia production facilities suggests the market anticipates low natural gas prices for the midterm and perhaps even the long term. The challenge for the U.S. in taking advantage of this market to become a leading exporter goes back to infrastructure cost, but it is a challenge that can be overcome with a broad, market-based consensus to bet on domestic natural gas supply maintaining its effect on global natural gas prices.
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