Ammonia demand growth in the next few years could be threatened by decreasing corn-based biofuels production in the U.S., a new special market study has found.
Growing incomes and improving diets in developing countries such as Brazil, India and China, combined with significant biofuels production in the U.S. and Brazil, are driving global demand growth for ammonia, a key component in fertilizer and agricultural products essential to expanding food crop production.
Global demand for ammonia, the report said, exceeded 170 million metric tonnes in 2013.
“Ammonia has enjoyed several years of demand-driven strength typified by tight global grain supplies, strong crop prices and surging biofuels production,” said Tison Keel Jr., director, ethylene oxide and derivatives at IHS Chemical and lead author of the IHS Chemical 2014 Ammonia Value Chain Special Study. “However, at IHS, we believe a shift is underway and supply considerations will dominate as new, low-cost capacity additions accelerate, outpacing demand growth and altering global trade patterns,” added Keel Jr.
Starting in the 1990s, household incomes in the emerging markets rose, which enabled families to expand their diets, noted the IHS report. As such, they increased consumption of grain-intensive dairy and animal protein, such as poultry, pork and beef, in addition to their largely vegetable, rice and grain diets. The consequent rise in demand for corn, wheat and other feed grains, in turn, drove up nitrogen fertilizer demand, which is ammonia based.
U.S. fertilizer producers are experiencing a production renaissance, which is directly related to the availability of low-cost natural gas as feedstock.
According to the IHS report, two priorities guide the location of most ammonia production—production of ammonia is generally either sited close to its end market, either industrial or agricultural, or else it is located close to a source of abundant, low-cost feedstock.
The sharp rise in North American ammonia capacity based on shale-based energy resources, noted the IHS report, will drive considerable multi-year increases in regional ammonia production and cause a sizable shift in global ammonia trade. The U.S. is currently the largest ammonia importing country by a wide margin, though sizeable changes are underway as shale-based capacity is being developed.
New, world-scale capacity projects plus restarts and debottlenecks already under way in states such as Kansas, Oklahoma, Iowa and Nebraska, will sharply reduce U.S. imports of ammonia and other derivatives, especially from producers in more distant regions. Knock-on effects, said IHS, will drive production cut-backs and plant closures of higher-cost units in multiple regions.
The IHS report covers historical developments and future projections for supply, demand, capacity and trade in the global ammonia markets for 2008 to 2023.