9 th Annual NH3 Fuel Conference

Transcription

1 9 th Annual NH3 Fuel Conference Current Challenges Facing the U.S. Ammonia Market and Implications for NH3 Fuel Glen Buckley NPK Fertilizer Advisory Service October 2, 2012

2 Ammonia market has shifted from a relatively stable to highly volatile market 2

3 U.S. Ammonia Prices ($/Ton) 1,200 1,000 Ammonia market has shifted from a relatively stable to highly volatile market Gulf Barge Midwest Wholesale J96 J98 J00 J02 J04 J06 J08 J10 J12 3

4 Fertilizer Stock Prices ($/share) CF Agrium $182 $215 $ $47 $ $47 $63 0 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 4

5 Presentation Outline Ammonia Fundamentals Supply/Demand Infrastructure Current Market Structure Challenges for NH3 Fuel 5

6 World Ammonia Capacity (MM Tons) Growth in World Capacity has been dominated by China and the Middle East Change % of Cap Europe (7.6) 20% 9% FSU (0.3) 19% 12% Africa % 5% North America (2.4) 14% 8% Latin America % 6% Middle East % 8% China % 39% India % 7% Rest of Asia % 6% Oceania % 1% World Total % 100% 6

7 World Ammonia Disappearance (MM Product Tons) Approximately 85% of World Ammonia production is upgraded, primarily into dry fertilizers Industrial DA Fert Upgrade

8 World Ammonia Exports by Source (MM Tonnes) Rest of World Middle East L. America 4 Russia/Ukraine

9 World Ammonia Imports by Source (MM Tonnes) Other 16 Asia ex India India U.S. W. Europe 9

10 U.S. Ammonia Capacity and Production (MM Product Tons) Approximately 40% of U.S. capacity has closed since 2000 with imports making up the difference Production Capacity Source: DOC, TFI Fertilizer Year 10

11 U.S. Gulf Producer Cash Cost vs. Gulf Barge Price ($/Ton) Low to non-existent cash margins forced permanent plant closures Cash Cost Gulf Barge $ 0 J96 J97 J98 J99 J00 J01 J02 J03 J04 J05 J06 11

12 World Natural Gas Prices (Prices Paid by NH3 Producers - $/MMBtu) Drop in NG prices has shifted the U.S. from a high cost to low cost NH3 producer 10 W. Europe 8 U.S Trinidad Russia Mideast 12

13 U.S. Ammonia Supply (MM Product Tons) Imports 10 5 Domestic Production

14 U.S. Ammonia Disappearance (MM Product Tons) Industrial DA Fert Upgrade Industrial Dir. App. Fertilizer Upgrade 14

15 U.S. Ammonia Imports (MM Tons) Most of the AG imports are sourced from Canada Markets (% of Total) Coastal DAP/MAP Port Location Volume Industrial AG Production East Coast UMW 1, Gulf Coast Tampa 1, New Orleans 1, Other GC 2, West Coast Total 7,

16 Limited Import Ability for U.S. Ag Markets Limit infrastructure to offload and move imports to the Midwest Ag markets mostly producer controlled Limited Offloading Limited distribution system - Port to MW Limited storage capabilities downstream U.S. MW Ammonia supply will continue to be domestically based 16

17 Top 5 North American Producers (MM Tons of Ammonia) Industry has become highly concentrated Cap % Cap % Cap % Total Capacity Company Agrium % % AMC 1.2 6% Arcadian 1.5 7% CF Industries 1.7 8% % % Farmland % % Koch Nitrogen % PCS 2.3 9% 1.5 8% Terra % Unocal 1.1 5% Yara 0.7 4% Top Five Producers % % % 17

18 Ammonia Demand and Production Facilities FY 2012 (MM Product Tons) < <1 1 2 > 100M TPY <1 4 Small Scale Plant 1 World Scale Plant Multiple WS Plant

19 Ammonia Transportation to Major Distribution Points 21.3% 27.7% 6.4% Rail Truck Pipeline Barge 44.7% 19

20 Ammonia Fertilizer Consumption FY (MM Product Tons) < < <1 4 1

21 Ammonia Fertilizer Storage Capacity (000 Tons) Most of the current ammonia storage distribution system controlled by existing producers Plant Site Distribution Site Total Vol. % Vol. % Vol. % CF % % 1,057 32% Agrium % % % Koch % % % Rest of Ind % % % Total 1, % 2, % 3, %

22 U.S. Ammonia Production Cost vs. Gulf Barge Price ($/ton) Other Cash NG Cost NOLA $

23 Proposed Ammonia Projects and Likely Output (000 Product Tons) How many actually move forward is still a major question mark Ammonia Potential Output NPKFAS Capacity Output Ugrade Likelihood Orascom IA /50 Less than NDFU/CHS ND % Yara Sask Probable OVR IN Unlikely FNA W. Can Unlikely CF Unknown Spec Agrium MO Spec Existing Capacity 13,338 4, ,795 % of Capacity 36% 23

24 What does this mean for NH3 Fuels? Ammonia for NH3 Fuel will have to start from scratch Current domestic production along with potential new capacity will continue to be mostly upgraded Existing distribution system fully utilized and highly concentrated Imports possible in coastal markets. However, market is highly volatile, unreliable and will be likely have to be sourced from new supply in the Middle East 24

25 What does this mean for NH3 Fuels? Domestic Production Alternatives New world scale, stand-alone ammonia facilities High capitol cost and will require significant investment in large distribution network Rail movement/cost could be a limiting factor Smaller distributed ammonia plants Slightly higher operating and CAPEX cost/ton Can be scaled to meet local demand Significantly lower distribution requirements Can be scaled to meet local demand New Technology (Not my area!) Wind Other new technologies 25

26 NH3 Fuel Economics Value Units U.S. Fuel Consumption 180,000 MM Gal NH3 1% 1,800 MM Gal 150 Gallons/Ton of NH3 150 NH3 Requirments 12 MM tons World Scale Plant Capacity MM tons # of New Plants 18 Capitol Requirements CAPEX per Plant 800 $MM Total CAPEX 14,545 $MM 26

27 Comparative Delivered Cost Distributed vs. World Scale Production Small Scale Distributed Typical Gulf Producer W Canadian Producer Nat Gas $ - 7/20/12 $2.34 $2.92 $2.63 Conversion Ratio Natural Gas Cost $75 $93 $84 Other Op Cost $64 $40 $40 Plant Gate Cost $139 $133 $124 Distribution Cost $15 $65 $120 Delivered Cost $154 $198 $244 Current Price (July-12) $740 $740 $740 Current Margin / Ton $586 $542 $496

28 What does this mean for NH3 Fuels? Imports May make sense in large coastal markets. However, Highly volatile market Likely dominated by low cost natural gas suppliers in the Middle East Will require significant investment in offloading and storage difficult in highly populated areas 28

29 What will NH3 Fuels Need? Significant Capitol Typical world scale plant 660,000 tpy plant ranges from $700MM to $1Billion Distribution system (?) but a lot! Low cost source of energy Advancements in technology Improved conversion factors New low cost, high volume source of ammonia 29

30 QUESTIONS? Glen Buckley Free trial at: