Run on Ammonia: Shale Gas Drives Fertilizer Projects in the US
In addition to declining support for biofuels production, the IHS report noted that lower farm prices for cash crops may also slow ammonia demand. Prices for corn and wheat have fallen to multi-year lows, albeit they remain at historically healthy levels. Keel added that IHS believes the downward pressure on global crop prices could persist in coming months if the current Latin American crop continues to do well.
China – Growth Driver Number One for Ammonia
Although, according to Ramsey, the real determinant relative to crop prices and ultimately fertilizer and ammonia demand, is the world’s largest consumer — China. “China is a giant pendulum for both agricultural supply and demand, and its influence on the global market cannot be overstated,” said Ramsey. ”If China has a strong crop, then demands for imports drop; if they don’t, then demand for imports increase, and with that, global prices hang in the balance. There is a reason that China is the single largest consumer and producer of ammonia. Fertilizer is essential to increase their food crop production, which is necessary to feed their expanding population.”
In terms of population, China is the world’s largest country with more than 1.3 billion people (approximately 19 percent of the world’s population), and as such, has a very large demand for fertilizer for food production. China is the world’s largest consumer and producer of ammonia by far, with 2013 production totaling an estimated 72 MMT, which represents slightly more than one-third of total global ammonia production.
Ammonia Production for Local Markets
Many Chinese production facilities are coal-based and designed to serve local markets. Production and logistics costs at these plants vary widely, with many sourcing higher-cost coal. However, excluding China, more than 90 percent of global ammonia capacity is based on natural gas, and feedstock and fuel gas typically account for 70 percent or more of total plant-gate production costs.