Ammonia Perspective Run on Ammonia: Shale Gas Drives Fertilizer Projects in the US

Editor: Dominik Stephan

Ammonia is in demand: The boom of biofuels, emerging economies, a growing population and dietary improvements in many regions drive the demand for this raw material. With this perspective and the abundance of cheap shale gas, fertilizer Projects boom in the US a new study says.

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(Quelle: WEG Wirtschaftsverband Erdöl- und Erdgasgewinnung e.V.)

According to a new IHS special market study, growing incomes and improving diets in developing countries such as Brazil, India and China, combined with significant biofuels production in the U.S. and Brazil, are driving global demand growth for ammonia, a key component in fertilizer and agricultural products essential to expanding food crop production. However, ammonia demand growth in the next few years could be threatened by decreasing corn-based biofuels production in the U.S.

During the past five years, demand for ammonia grew at a healthy pace averaging almost 2.5 percent annually after rebounding from 153 million metric tons (MMT) in 2009 following the global economic recession, said the report by IHS Chemical, a unit of IHS, the global leader in critical insight and analysis. Global demand for ammonia, the report said, exceeded 170 MMT in 2013. IHS estimates ammonia consumption will continue to grow at more than 2 percent per year through the end of the decade, followed by a more modest growth as the high-growth markets reach maturity.

Ammonia – Looking Back on Years of Growth

“Ammonia has enjoyed several years of demand-driven strength typified by tight global grain supplies, strong crop prices and surging biofuels production,” said Tison Keel Jr., director, ethylene oxide and derivatives at IHS Chemical and lead author of the IHS Chemical 2014 Ammonia Value Chain Special Study. “However, at IHS, we believe a shift is underway and supply considerations will dominate as new, low-cost capacity additions accelerate, outpacing demand growth and altering global trade patterns.”

Starting in the 1990s, household incomes in the emerging markets rose, which enabled families to expand their diets, noted the IHS report. As such, they increased consumption of grain-intensive dairy and animal protein, such as poultry, pork and beef, in addition to their largely vegetable, rice and grain diets. The consequent rise in demand for corn, wheat and other feed grains, in turn, drove up nitrogen fertilizer demand, which is ammonia based.

The Importance of Fertilizer for Feeding the World

“Farmers around the world spend considerable amounts of their operating budgets on nitrogen fertilizer — it is the single most expensive line item for crop production,” said Stewart Ramsey, agricultural economist for the IHS Agricultural Forecasting Service. “To produce the 2013 corn and wheat crops, U.S. farmers spent roughly $15 billion and nearly $3 billion, respectively, on fertilizer, which is produced using ammonia. At IHS, we expect fertilizer costs to subside in the next several years, due to a number of factors, including the increased ammonia production capacity in North America, which will reduce, but will not eliminate the need for imports. After decades of production decline, U.S. fertilizer producers are experiencing a production renaissance, which is directly related to the availability of low-cost natural gas as feedstock.”

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