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I also noticed that POT does a lot of their nitrogen production in Trinidad. I see you mentioned it too. What makes Trinidad so attractive? Are gas prices as low as they are in the states? POT did not quote prices. Just said its linked to ammonia prices. Trinidad produces a lot of ammonia and not so much urea.


Trinidad has an execess amount of natural gas. I think they have worked hard to convert it either to nitrogen fertilizer and lately to Liquified Natural Gas. I don't know for sure but the price is whatever it takes to get it out of the ground, which is probably significantly lower than what is in the U.S.(expcept we have really low gas prices now) They are a low cost producer and I remember seeing that 45% of the nitrogen imports for the U.S. come from Trinidad. Part of the reason is that have good close access to the mouth of the Mississippi and also to the Florida phosphate plants which are also large users of ammonia.

I think a key element to understanding why we are where we are is to look at the testimony of Bob West of the Fertilizer Institute to the Senate Interior subcommittee in regards to the high natural gas prices in 2005.

As a result of the ongoing natural gas crisis in America, 21 nitrogen fertilizer (ammonia) production facilities have closed since FY1998/99 (July 1998-June 1999). Sixteen of those plants have closed permanently, representing a 20 percent drop in total production capacity, while five plants remain idle. Operating rates for the U.S. ammonia industry have also declined significantly from historical levels. The permanent and temporary closures in combination with the drop in operating rates have resulted in a 35 percent decline in U.S. ammonia production from 17.85 million tons of material in FY1998/99 to 11.70 million tons in FY2003/04. U.S. nitrogen imports have increased from 6.11 million tons in FY98/99 to 10.36 million tons in FY2003/04. As a result, U.S. ammonia production fell by over six million tons or 34 percent in only five years. Consequently, the U.S. fertilizer industry, which typically supplied 85 percent of its domestic needs from U.S. based production during the 1990s, now relies on imports for nearly 45 percent of nitrogen supplies.

In the past few weeks alone, three of the largest remaining U.S. nitrogen fertilizer producers have announced they are again shutting in or idling a significant portion of their facilities and reducing production by as much as 50 percent or more.


The full article:
http://www.fossil.energy.gov/epact/Section_1818/The_Fertiliz...

The diminished capacity of the system and supply coupled with rising commodity prices along with a shift to more corn acres has really put the fertilizer companies in driver seat. The things to watch for are, falling commodity prices(decreased demand), political instability(supply disruption), credit crunch(lack of capital), and greed (over build capacity). If none of those things happen, I think fertilizer companies will have these wide margins for a long time. ;-)



C2H5SH
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