Ammonia capacity in North America is not likely to double in the next five years – but it will if every new plant and expansion project being pursued today goes into production.
Much more likely is that 6.65 million tons of annual ammonia capacity will come online between 2014 and 2018, based on the information available in January 2014.
Including the 840,000 tons per year that already came online in 2012 and 2013, North American ammonia capacity will have increased by more than 42%, from 17.7 million tons per year in 2011, to 25.2 million tons per year in 2018.
Almost all of this growth will take place in the US.
Note that, invariably, some of the likely projects will not happen. Equally, some of the unlikely projects will happen. Also note that “capacity” is not “production” (annual production might be something like 80-90% of capacity).
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Nice work Trevor. Note a lot of GOM mega-methanol plants are also planned. They like ammonia, need/use natural gas. Then there is the LPG export contingent.
So the cost side, not only ammonia oversupply, could make those plans vulnerable.
Thanks Chris, I’m glad you like the site. Sorry it took a few days for me to respond – I wanted to get the charts functioning first, so that I could mention …
I agree with your point about the “cost side” making some of these plans vulnerable – by which I assume you mean that the cost of natural gas could increase if too many people try to take advantage of the shale boom. Demand outstrips supply, the price of natural gas goes up, and these projects face the risk that they might be less profitable in the future than they seem today.
Likewise “oversupply” – meaning that so much ammonia is produced that there’s a buyers’ market, the sale price of ammonia falls, and that puts another potential dent in the profit margins of these new ammonia plants.
There are two points I’d add:
First, feedstock is diversifying, away from natural gas. I know it sounds ridiculous, given that this whole ammonia boom is driven by cheap natural gas but, looking at the projects I think are likely today, more than 20% of the new ammonia will not use any natural gas. See the charts here.
Second, ownership is diversifying, from producers to consumers. Whatever the future price of natural gas, ammonia consumers will pay it plus a margin on top. It strikes me as a reasonable risk management plan for consumers to invest in their own plants. I’m talking about the farmers’ co-operatives as well as those fertilizer and explosives makers who traditionally purchase ammonia at spot prices. The economics of those projects are (or, perhaps, should be) different because their owners are already exposed to the risk of rising natural gas prices. I think there’s an element of hedging to be had there.
All that said, I totally agree that some of these projects seem vulnerable, and I admit that I’m surprised each time someone announces another new plant. I had imagined that we’d reached “Peak Ammonia” last summer, when Agrium and Yara both cancelled big projects in the space of 10 days … but the new projects just keep coming.