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. 18, 2000).
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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