The Integer View 26 July 2017 – BioNitrogen ceases operations, Ma’aden’s Wa’ad al Shamal starts prouction, Uralkali/China sign potash contract, Chinese sulphur imports continue to fall year-on-yearPosted On: 26-07-2017 By: Ali Asaadi
Every little helps, but small-scale nitrogen plant developer BioNitrogen fails to make its mark
By Laura Cross – Nitrogen Research Manager
Look after the pennies and the pounds will look after themselves, goes the saying. But for a recent casualty of the nitrogen investment landscape, “penny-wise, pound-foolish” is perhaps a more fitting description.
The US-based small-scale nitrogen plant developer, BioNitrogen, confirmed on 27th June that it had been unable to reorganise under Chapter 11 proceedings which were initiated in 2015, and will cease operations.
The company had plans to produce urea using biomass gasification technology, starting with plants in Florida and Louisiana, followed by a nationwide roll-out. Small-scale alternative technologies for nitrogen production are often billed as being attractive options due to their geographic flexibility, eliminating hefty transport costs of finished product by building plants close to customers.
But these technologies are often expensive, which can be a barrier to entry even when market conditions are favourable. Integer has long-considered small-scale projects as being difficult to justify and that is reflected in our capacity projections.
The main disadvantage for small projects are diseconomies of scale on capital costs, which outweighs gains from being located close to the market. Capital costs per tonne increase exponentially at smaller scale for ammonia/urea plants. This is due to the high specifications on the equipment required to cope with the high process temperatures and pressures. The low probability of reaching commercial production with small scale units becomes clear when compared with the relatively low capex per tonne for expansions at existing facilities or very large-scale new facilities (of which the nitrogen market has plenty for now).
Ma’aden’s Wa’ad al Shamal commences production
By Ibi Idoniboye – Head of Phosphate and NPK Analysis
Ma’aden Phosphate Company (MPC) announced the commencement of phosphates production at it’s Wa’ad al Shamal project in Saudi Arabia on 8th July. The producer will gradually ramp up output towards nameplate capacity of 3 million tpy, which we expect to be reached in H1 2018. Once at full capacity, the complex will roughly double Ma’aden’s ammoniated phosphate production capacity to around 6 million tonnes a year, cementing the Kingdom’s position among the largest DAP/MAP producing countries, alongside China, Morocco and the USA. The fully integrated complex features a 1 million tpy ammonia facility and large scale sulphuric acid operations utilising relatively low cost domestically sourced sulphur. MPC will be among the world’s lowest cost phosphate producers.
DAP prices remain depressed and are currently trending around marginal cost for the highest cost producers, but it does mean lower cost producers have strong opportunities to gain market share from their peers. One of Ma’aden’s main competitors, Moroccan giant OCP, has added two new granulation units over the last two years with two more coming onstream in the next 12 months, (each with a production capacity of 1million tpy). China is the major phosphates swing producer, with total ammoniated phosphate production capacity of around 17 million tpy P2O5, including many marginal producers.
There are some industry stakeholders, such as North American producer Mosaic, that expect China to reduce finished capacity by up to 6 million tpy of granulation capacity by 2020. This would help boost the phosphates market in the mid-term. We, on the other hand, expect a slower rationalisation of Chinese capacity, which would likely lead to increased competitiveness in the finished phosphates export market, led by Saudi Arabia and Morocco, which would keep a lid on prices over the next few years.
Read more on Integer’s The Chinese Phosphate Industry, addressing the global impact, Phosphate Cost and Profit Margin Service, Phosphate Rock Outlook Report and watch our P webinars on Integer’s Phosphate Webinar Page
At last… Uralkali signs potash contract with China at US$230 per tonne CFR, others follow
By Rebecca Hayward – Lead Potash Analyst
After months of speculation, China and its potash suppliers have finally agreed contracts. Russian producer Uralkali was the first to settle potash contracts with Chinese buyers for 2017 deliveries. At US$230 per tonne CFR, the price is a US$11 per tonne increase compared to the agreement made in July last year. We understand the term of the contract is six months until the end of 2017, but a total volume agreed for Uralkali has not been disclosed. The new price level is a few dollars below our initial thinking but then again we had expected the contract to conclude sooner than July.
Compared to last year, buyers outside of China and India were engaging in purchasing in H1 2017 without having a contract in place to benchmark prices against. It might imply a diminishing importance of term contracts particularly, but then again, prices were widely anticipated to increase, which they did, meaning it would make sense for buyers to make purchases before a price hike. We estimate global imports in Q1 2017 reached record levels at 13.7 million tonnes with the major increases in China, Brazil, the USA and India.
Canpotex has also confirmed that it has concluded a new deal with Chinese customers at the same price level as Uralkali, for 1.4 million tonnes of MOP until the end of 2017.
Chinese sulphur imports continue to fall year-on-year, as import dynamics begin to shift
By Benjamin Treadwell – Analyst
Chinese sulphur imports for the first five months of 2017 have fallen by 10% year-on-year, down by 550,000 tonnes. The decrease comes as weak demand in the downstream phosphate market has limited buying interest for sulphur from the Chinese market. According to some reports, production rates at DAP and MAP plants in China averaged 55% and 45% respectively in June, though it depends on what capacity you assume is permanently or temporarily shut.
It is Integer’s view that China’s sulphur imports will be expected to continue to drop in the long term due to continued growth in refining and gas processing capacity. The domestic market will become increasingly competitive with China having increasing diversity of choice in supply sources.
April 2017 sulphur volumes were the lowest level in the year to date, at 800,000 tonnes, followed by February and May, whose levels were also both below 900,000 tonnes. January and March exceeded 1 million tonnes, and we expect to see June-August imports see some recovery as local stocks have recently eroded and the local sulphur market has been tight.
Despite the decrease there have been some significant changes in where the Chinese market is purchasing its sulphur from. Imports from Saudi Arabia continue to dominate in 2017, but imports from the UAE have gained ground, growing by 27% year on year. These two suppliers accounted for 38% of all imports in the first 5 months of 2017. Imports from Russia have continued to decrease, falling by 199,833 tonnes compared with 5M 2016. This is due to the increasing market share from the UAE, Qatar and the US.
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