Lift in fertiliser output unlikely to cut prices

Liz Wells April 13, 2022

The NeuRizer project in South Australia is one of three large-scale developments which looks set to reduce Australia’s reliance on imported urea. It is expected to be operational by 2025. Artist’s image: NeuRizer

AS GLOBAL fertiliser prices hover around record levels, a raft of developments aimed at increasing Australia’s domestic supply of product are under way.

Will that bring down prices?

Overall, probably not, because Australia is both a net exporter and importer, and domestic pricing will therefore, as always, be set by global parity.

However, increased domestic production is expected to improve surety of supply, which has been affected during the COVID-19 pandemic.

Map 1: The production of fertiliser in Australia is changing. Click on icons, including the two near Karratha in WA, to find out what is occurring.

Three-plant promise

Two Western Australian urea plants, the Perdaman Urea Project and Strike Energy’s Project Haber, and NeuRizer at Leigh Creek in South Australia, head up the list of developments.

Based on current estimates, their production is expected to total 5.4 million tonnes(Mt) per annum, which would easily exceed Australian demand.

“There’s a potential for them to produce 4-6Mt of fertiliser if they can get their plants off the ground,” Fertilizer Australia executive manager Stephen Annells said.

On the back of good rainfall, Australia chewed through a record amount of more than 7Mt of fertiliser in the 2020-21 winter-cropping season.

Of that, 4.5Mt was imported, and included 2.2Mt of urea and 925,000t of MAP.

“If all these projects were to come off, the level that will need to be brought into Australia will be significantly affected.”

However, he said sometimes they hit stumbling blocks, often because of constraints beyond their control.

“Australia has high gas prices, high expectations on how they run their businesses, and high wages as well.”

They can also be reliant on other projects, and the Santos and Perdaman Narrabri Gas Project announced in 2019 is a case in point.

Beyond dollar value

Mr Annells said two phosphate projects in north-west Queensland, and ventures looking to value-add organic matter for the fertiliser market were also in the pipeline.

Collectively, he said they had potential to significantly minimise biosecurity as well as supply-chain risks.

“We deal with a lot of biosecurity issues with fertiliser imports; insects, grains and seeds from other countries.”

He said those can be expensive and time-consuming, and increased onshore production would also bring a welcome improvement in sovereign capability as well as jobs growth.

Greener products on horizon

Mr Annells said several Fertilizer Australia members are already involved in producing biological fertiliser which can supplement inorganic inputs.

“We have the view the market is going to go that way eventually,” Mr Annells said.

“Some companies are getting right into it already.”

They include Incitec Pivot Limited (IPL), which in December announced it was investing in a new plant in Victoria to value-add organic waste material, predominantly from the poultry industry.

Investment in green hydrogen projects is also on the rise in Australia, and could provide a way forward for the IPL facility at Gibson Island in Brisbane, where production of urea made from Australian natural gas will cease this year.

“There are techniques to produce green ammonia, and if synthetic nitrogen and urea prices keep going up, and renewable energy costs are coming down all the time, we might see them being used,” University of Adelaide Professor Mike McLaughlin said.

A number of plants in Australia, including the Grassdale facility associated with Mort & Co’s feedlot operation, are producing pelletised manure, and Prof McLaughlin said its efficacy depended on its quality, and its profile.

“If it will go through an air seeder, that will make it more appealing.”

“There’s just not enough of that to fill Australia’s needs.”

Synthetic inputs unavoidable

Prof McLaughlin said nutrients pulled out of the soil by cash cropping leave a deficit that cannot be filled organically.

“With phosphorus and trace elements, you can get away with reduced rates for a few years, but eventually you have to replace them.

“We’re still going to have to mine potash, sulphur and phosphate, and make nitrogen.”

“With nitrogen, we do have biological options, and we’ve had those for centuries.”

They include pasture legumes such as sub-clover, serradella and medics in mixed-farming systems, and pulses in cropping rotations.

However, the biological nitrogen-building process is slow, and cannot replace inputs needed to hit production targets set by most cash croppers.

“When (fertiliser) prices get high, there will be all sorts of products that say you can reduce inputs…but there’s no substitute for potassium, phosphorus and nitrogen.”

Prof McLaughlin also pointed out that manure being used by value adders has a nitrogen component that comes from the grain and other feedstuffs eaten by intensively farmed animals.

“Much of the nitrogen in manure came from fertiliser originally.”

“There’s no such thing as magic.”

How attractive biological fertiliser becomes depends on input and output prices for cropping and livestock, and sustainability goals within farms, companies and economies.

It also depends on geopolitical factors, namely sanctions and export bans on Russian fertiliser, and disruptions to Ukraine’s fertiliser exports as caused by the Russian invasion.

Prof McLaughlin said the longer the war and sanctions go on, the more feasible increased Australian fertiliser production of any kind will look.

Correction expected

Mr Annells said the long-term experience was that fertiliser prices rose when high grain prices encouraged more area to be planted.

“Fertiliser prices follow grain prices, not the other way around.”

Prior to the impact of the Ukraine-Russian war on global gas and fertiliser supplies, fertiliser prices had already rallied.

“Fertiliser prices were very low for a long time; it’ll adjust back.”

To what level depends on the Ukraine-Russian situation, and upcoming seasons for major grain producers including Australia.

Mr Annells said the last big fertiliser price hike occurred in 2008-09, and it prompted an Australian Competition and Consumer Commission investigation into pricing of Australian fertiliser.

It found a surge in global demand was behind the hike, and observed that prices fell much slower than they rose.

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  1. stephen Powles, April 13, 2022

    Surprising that this article was completely silent on the potassium fertilizer plants nearing completion in WA (eg Kalium Lakes) and other states.

    • Liz Wells, April 14, 2022

      Hello Stephen. Thanks for your comment. I’ve added Kalium Lakes into the map. I got the N and the P but not the K first time around. Regards, Liz

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