Around US $ 1,500 a tonne free on board (FOB) at Point Lisas, it’s the priciest it has ever been.
And it’s fueled, of course, by the Ukraine war.
Prices could further increase in the coming months as winter gives way to spring, which is the start of the planting season.
For a successful crop, soils need nurturing. So the global demand for fertiliser is high.
According to the International Food Policy Research Institute, Russia accounts for 15 per cent of global trade in nitrogenous fertilisers, 17 per cent of global potash fertilizer exports and 20 per cent of the global natural gas trade, a key component in manufacturing fertilisers.
And fertiliser, of course, is necessary for food production.
The United Nations Food and Agriculture Organization (FAO) projects that the price of fertilisers will increase by 13 per cent in 2023, which could cause food production costs to increase, while reducing yields and outputs for the 2022-2023 crop seasons.
As it stands, there are ten ammonia plants in T&T: two by Yara — Tringen 1 and 2, four by Nutrien Trinidad, one by N200, CNC, PLNL and one at MHTL’s AUM complex.
Nutrien Trinidad, a subsidiary of Nutrien, is T & T’s largest producer of ammonia and accounts for more than 35 per cent of its global production portfolio.
Its managing director, Ian Walcott, said in order to meet the high global demand for fertiliser, the company is trying to maximize its output.
In T&T, he observed that all Nutrien’s plants are operating at full capacity.
In an interview last week, Walcott told the Sunday Express the company is acutely aware of the impact that high fertiliser prices could have on food prices in the coming months.
“What we are seeing is unnaturally high prices in an unnatural market. It’s not sustainable for sure, ”said Walcott.
He observed that globally, Nutrien increased production of potash to fill the void in the market.
On March 16, Nutrien announced that in response to the uncertainty of potash supply from Eastern Europe, it plans to increase potash production capability to approximately 15 million tonnes in 2022 — an increase of nearly one million tonnes compared to previous expectations.
The majority of additional volume is expected to be produced in the second half of the year.
“The impacts of this conflict extend beyond Eastern Europe as a disruption in supply of key agriculture, fertiliser and energy commodities could have implications for global food security,” said Ken Seitz, Nutrien’s interim president and CEO.
“Nutrien is responding to this period of unprecedented market uncertainty by safely expanding potash production to help provide our customers with the crop inputs they need. We continue to closely monitor market conditions and will evolve our long-term plans to ensure we utilize our assets in a safe and sustainable manner that benefits all our stakeholders, ”added Seitz.
Walcott explained that for fertiliser producers, the journey is oft-times a cyclical one.
“In 2019-2020, there were very depressed prices, we lost money. We had to take loans to sustain our business, ”he told the Sunday Express.
At that time, Argus Media had reported: “One of the key factors weighing on Trinidad pricing over recent years has been the slowdown in US import demand, as the country installed its own capacity to take advantage of cheaper gas. This has, in turn, led to more Trinidadian ammonia being directed on longer-haul shipments to Morocco, France, Belgium, Turkey and Brazil.
“Overall, Trinidadian ammonia producers are having to compete more aggressively on pricing with each other, and with other producers in Russia and southeast Asia, to secure business for contract tonnes in 2021.
“The global market has been struggling with oversupply for nearly two years, and Trinidadian producers appear to have been suffering the most acutely with the lower-price environment. The timing of any potential price recovery and whether or not it can be sustained may prove pivotal to how much capacity producers plan to keep on line into 2021. “
In September 2020, Nutrien had announced the indefinite closure of one of its four ammonia plants in Trinidad.
“This suspension of operations is in response to market conditions and lower global prices for ammonia. Two of our ammonia plants and the associated urea facility will continue to operate at maximum capacity. Our other plant which was taken offline in May 2020 due to market conditions is expected to come back online as market conditions improve, “a company statement had said at the time.
Now, it’s quite the opposite.
Walcott described it as a windfall. (See table below.)
But the company is being careful about how it spends its extra cash.
“What we are trying to do is pay off our short-term loans and set ourselves up for the future,” he said.
As for the rest, Walcott said it would be spent to upgrade its equipment which he said would take care of things in the long term.
He observed that the steady supply of natural gas continues to be an issue.
Nutrien’s plants are contracted to a specific supply of natural gas from the State-owned National Gas Company (NGC) so it cannot simply scale up production.
“Its less than ideal, but we have a healthy supply,” he said.
Last week, Prime Minister Dr Keith Rowley met with the executive vice-president and CEO of Nitrogen and Phosphate at Nutrien, Raef Sully, at the Diplomatic Center in St Ann’s. In attendance were Energy Minister Stuart Young, senior vice-president of nitrogen operations at Nutrien Trevor Williams and Walcott.
Why ammonia matters
Former energy minister Kevin Ramnarine noted the price of ammonia is the highest its ever been and it keeps climbing higher.
“The price may go even higher in coming weeks as the onset of spring means the thawing of soils in places like the US, Canada and Russia. When that happens, farmers apply fertiliser and hence the demand for fertiliser rises. On top of that, Russian exports of ammonia have been disrupted due to the war with Ukraine and some ammonia plants around the world, including two in Trinidad, are down for turnarounds.
“Most of Trinidad’s ammonia goes to the Port of Tampa in Florida. This is optimal as there are huge potash mines in Florida. Potash is combined with ammonia to make MAP and DAP fertilisers. MAP is Mono Ammonium Phosphate and DAP is Diammonium Phosphate. However, we are also seeing our ammonia going to besiege Europe, ”he explained.
“To manufacture MAP and DAP, potash is needed. Russia’s main ally, Belarus accounts for 18 per cent of global potash production. Potash is potassium carbonate, ”he said.
He noted exports of potash have been impaired because of the sanctions from the EU related to its support for Russia.
“This means the prices of fertilisers whether it’s ammonia, MAP, DAP, Urea, Urea Ammonium Nitrate or Potassium Nitrate have all spiked. This will no doubt impact food prices on the shelves in T&T, ”he said.
He said the other factor driving the price escalation is logistics.
“Most of our food imports come out of ports in Florida such as Port Everglades and the Port of Miami. Getting food to these ports in Florida happens via haulage trucks and rail. The cost of road transport in the US has increased due to the high price of diesel.
“Then there is the cost of freight from Florida to Trinidad. This has increased by approximately 50 per cent in the last year. This all means that the inflation we are seeing is landing on our ports and there is very little control we have over that.
“It is a worldwide problem that started as the world economy rebounded in 2021 from Covid and was made worse by the Russia / Ukraine war. It may actually get a lot worse as the year progresses. What we should be discussing in Trinidad and Tobago is how to increase local agricultural production, ”he said.
What’s going on globally
The British commodity consultancy CRU reported a few days ago that prices for raw materials that constitute the fertiliser market— ammonia, nitrogen, nitrates, phosphates, potash and sulphates — are up 30 per cent since the turn of the year, and now exceed those seen during the food and energy crisis in 2008.
CRU head of fertilisers Chris Lawson told CNBC that trade between Russia and the rest of the world has not stopped, but has been severely disrupted as importers and vessel charterers steer clear of the country, in light of the invasion of Ukraine.
“Furthermore, gas is a key input for fertiliser production. High gas prices have resulted in a curtailing of production in regions such as Europe, further constricting an already tight market, ”Lawson told the American news organization last Tuesday.
Meanwhile, sanctions on Russian-ally Belarus have substantial implications for the potash market, with Russia and Belarus contributing a combined 40 per cent of annual traded volumes.
“Since the beginning of 2020, nitrogen fertilizer prices have increased fourfold, while phosphate and potash prices over threefold,” Lawson explained.
“While farmers in developed markets have benefited from high agricultural commodity prices, helping to partly offset high input prices, demand is increasingly likely due to high prices and supply shortfalls,” he said.
The UN Food and Agriculture Index shows food prices are at an all-time high, and Lawson suggested a prolonged period of fertilizer shortage will affect longer-term farming yields.
“Given the already tight grains and oilseeds market, and the importance of both Russia and Ukraine in those markets, food price inflation is an increasingly prominent risk,” he added.
Prior to the threat of reduced supplies from Russia and Belarus, fertiliser prices had already been facing upward pressure from global supply chain disruptions, a Chinese export ban and a Canadian rail strike.
Bloomberg reported last week that a gauge of prices for the nitrogen fertilizer ammonia in Tampa surged 43 per cent to US $ 1,625 per metric tonne on Friday — a record for the 29-year-old index.
“The war is pushing up the cost of natural gas, the main input for most nitrogen fertilizer, forcing some producers in Europe to cut output. Markets also worry that potential sanctions on Russia, a big low-cost shipper of every major kind of crop nutrient, could disrupt global trade, ”said the Bloomberg report.
“Russia has urged domestic fertiliser producers to reduce exports, further stoking fears of shortages. At the same time, prices for staple crops like wheat, corn and soy beans are soaring, with war in one of the world’s breadbaskets threatening to push millions more into hunger. Rising costs for farm inputs like fertiliser could further send the price of food skyrocketing, ”it added.