Nutrien eyeing expansion of nitrogen plants

CEO Chuck Magro says building up existing assets is the most cost-effective way to capitalize on rising prices

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Reuters – Nutrien, the world’s biggest crop nutrient producer by capacity, is looking at expanding several nitrogen fertilizer plants in North America due to rising prices, chief executive officer Chuck Magro said last month.

Nitrogen prices have climbed as China’s shutdown of coal-fired plants and rising European costs of natural gas, a key ingredient in fertilizer production, have curbed capacity outside North America.

“Nutrien is looking at several brownfields in our network, primarily in North America, but it’s too early to talk specifically about that,” Magro said on a quarterly conference call, using the industry term for expanding existing plants.

Magro said prices are not high enough to justify building new plants and that high North American labour costs add risk.

Why it matters: Expansion of North American nitrogen locations could increase supply and help ease pricing pressures. It may also provide rural jobs.

In an interview, Magro added that some plant expansions may be “very minor,” and serve to adjust the mix of nitrogen products produced.

He said opportunities to acquire nitrogen plants from other companies are “fully priced,” and don’t represent ways to create value.

Nitrogen is the most widely used fertilizer to accelerate growth of crops such as corn. Prices look to remain high around US$300 per tonne at the Port of New Orleans through early 2019, RBC analyst Andrew Wong said in a note in early November.

Prices are also likely to increase in 2019 for certain crop protection products that are imported from China, due to a 10 per cent U.S. tariff applied to Chinese products, said Mike Frank, president of Nutrien’s retail business.

Nutrien reported late Nov. 5 a bigger-than-expected quarterly profit and raised its full-year adjusted profit forecast, driven by strong demand for its potash fertilizer.

Shares jumped the following day by nearly five per cent in Toronto to $74.84.

The company said it would permanently close its idled potash mine in New Brunswick and take a US$1.8 billion impairment charge.

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