Uncertain Times

North America has been hit with a broad spectrum of challenges over the last year, from devastating floods to trade wars and competition from low-cost jurisdictions. Despite the recent complications, however, the long-term future looks bright.

Potash

Potash stocks rose in 2019 as inclement weather prevented planting and fertilizer application. At the beginning of 2019, freight on board (FOB) New Orleans potash prices stood at US$290/t, but dropped to under US$230/t by December 2019. Through early 2020, they drifted into the US$210 – US$215 range prior to spring planting. Manufacturers have taken steps to reduce supply. In March 2020, Mosaic announced that its 2.1 million tpy Colonsay potash mine in Saskatchewan, Canada, would remain closed for the foreseeable future. The decision was based partly on the weakness of North American demand as well as the ramping up of their lower-cost Esterhazy K3 facility in Saskatchewan.

Others are entering the market. In mid-2019, Western Resources Corp. announced that it had begun drilling its Milestone Phase 1 potash project, located southeast of Regina, Saskatchewan. The mine will use advanced horizontal drilling techniques to target a potash bed containing measured resources of 154.5 million t, grading 29% potassium chloride (KCl). The project will use a leaching process to mine the potash. The plan is to create three caverns, each with an injection well and a production well. Brine will be injected into the caverns in order to selectively dissolve the KCl and transport it to a surface crystal pond. Starting in mid-2020, a process plant will then de-brine, dry and compact the potash, ready for distribution. The company notes that this will be the first potash mine in the world that will leave no salt tailings on the surface.

Nitrogen

Inclement weather in North America during the spring planting season of 2019 and the fall of 2019 hindered fertilizer application in major growing regions. Stocks piled up, causing prices to fall.

Starting in 2020, however, prospects have started to improve. During the doldrums of January 2020, urea prices for New Orleans, Louisiana (NOLA) FOB were under US$210/t, but began to rise sharply to over US$250/t in March. While upturns in spring are expected, the rise is also being fuelled by international delivery delays. Ammonia input prices have also remained low. Record volumes of gas are being produced in North America, with the Energy Information Administration (EIA) predicting that the US will average 94.6 billion ft³/d in 2020, and the Canadian Energy Regulator (CER) expects marketable dry natural gas production to average 16 billion ft³/d for 2020. The EIA predicts that the Henry Hub natural gas spot price will average US$2.12/million Btu in 2020, and the CER reported that spot prices for natural gas in Alberta were CAN$2.20/GJ (US$1.80/million Btu) in February 2020. Although dry natural gas production is expected to decline as drillers pull back from shale oil plays in the Permian Basin, the EIA predicts it will decrease to 92.6 billion ft³/d in 2021.

This bodes well for North American producers, as natural gas is both a feedstock and energy source.

New capacity is under construction. Gulf Coast Ammonia (GCA) is building an anhydrous ammonia plant in Texas City, Texas, US. Construction began in 2020 and completion of the 1.3 million tpy plant and adjacent deepwater port is expected by mid-2023. “This new world-class facility will meet domestic and global demands for nitrogen-based fertilizers to improve crop production and yields to feed the world’s growing population, as well as specialty chemical production on the Texas Gulf Coast," noted Ken Koye, GCA’s newly appointed CEO.

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