Two more ammonia production companies announced last week they would close down for the month of January and possibly longer due to the high price of natural gas. This follows on the earlier closing by Terra Industries of two of its fertilizer plants.
LSB Industries Inc. said subsidiary Cherokee Nitrogen Co. in Cherokee, AL, which produces ammonium nitrates, was shutting down and would resume operations when gas prices fell to a level that would allow economical operation of the plant.
And J.R. Simplot announced its ammonia fertilizer plant in Brandon, Manitoba has suspended production due to high natural gas costs. “The plan now is to reopen in February but that depends entirely on the price of gas. If it doesn’t come down, we won’t reopen,” said spokesman Fred Zerza.
Simplot had been paying in the area of $7 earlier in the year, and it would “need something lower than $10 to continue to operate,” Zerza said. North American ammonia product producers are not able to compete with products from offshore, which, even with the transportation costs, appear to be offering lower prices.
LSB executives said its Cherokee plant, which normally uses 500 MMcf/month, would fulfill its sales commitments during the ammonia suspension period using purchased ammonia and inventory on hand. In a third quarter conference call earlier in the month company leaders said they were losing customers and were considering closing on a daily basis. The company has about 80% of its sales on formula pricing which transfers the gas cost risk to customers, and those customers were dropping off.
Earlier in the week leading fertilizer producer Terra Industries said effective Jan. 1, it was suspending ammonia production at its Yazoo City, MS, facility because of high natural gas costs. In late November, Terra shut down production at its Woodward, OK, facility (see Daily GPI, Dec. 28).
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