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Ammonia Production Facilities Shut Down Due to High Gas Prices

January 9, 2006
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Three more ammonia production companies announced just before the start of the year they would close down for the month of January and possibly longer due to the high price of natural gas.

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.

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.

And leading fertilizer producer Terra Industries said effective Jan. 1, it will suspend ammonia production at its Yazoo City, MS, facility because of high natural gas costs. The closure is the second U.S. closure by Terra recently. In late November, it suspended all production at its Woodward, OK, facility for the same reason (see Daily GPI, Nov. 22).

The Sioux City, IA-based manufacturer said it was beginning a maintenance turnaround in January that it had originally scheduled for February. It expects to resume ammonia production at the Yazoo City plant after the turnaround is completed, "and when natural gas costs decrease to a level that will allow the plant to operate with positive cash flow." Terra plans to fulfill its Yazoo City sales commitments during the production suspension using imported ammonia to operate its upgrading plants.

In November, Terra said it would suspend production at its Woodward facility as well as ammonia production at its Billingham, UK, plant. Terra continues to produce ammonia in Courtright, ON; Port Neal, IA; Verdigris, OK; and Severnside, UK, at reduced rates. Point Lisas Nitrogen Ltd. in Trinidad, in which Terra owns a 50% stake, continues to operate at full rates.

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