Terra Cuts Purchases, Idles Plants
With winter setting in for the long haul, two indicators have become
a constant. Natural gas prices continue to stay pegged in the upper echelon,
and fertilizer producing companies continue to scale back their natural
gas-intensive process of producing items such as ammonia and methanol.
Upon the evaluation of the current economics at work, leading fertilizer
producer Terra Industries, which reported last month that it was selling
off a portion of its December gas contracts, announced last week that in
light of current gas prices, it has not committed to purchase January gas
for a number of its facilities (see NGI, Dec.
In fact, the company said most of its North American facilities have
been idled, including: Blytheville, AR; Beaumont, TX; Woodward, OK; and
Port Neal, IA. Terra also idled one of two sets of ammonia and upgrading
plants at its Verdigris, OK facility. In total, Terra said these cutbacks
equate to 66%, 60%, 76% and 100% of Terra's North American ammonia, UAN,
urea and methanol manufacturing capacity, respectively.
"While nitrogen fertilizer and methanol prices have increased significantly,
we cannot generate positive cash flow from most of our North American plants
at current natural gas prices of nearly $10 per million British thermal
unit," said Michael L. Bennett, Terra's executive vice president.
"We are keeping all of our facilities staffed so that we can resume
production quickly as we believe warmer weather will likely cause a significant
natural gas price decrease."
The company added that it will resume operation at the facilities when
the natural gas prices, or the fertilizer prices reach levels that would
allow for positive cash flows from the facilities.
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