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The Indian Farmers Fertilizer Co-operative (IFFCO), one of India’s largest fertilizer makers, plans to build a $1.2 billion nitrogen fertilizer plant with a partner in Quebec to cash in on strong North American demand.
IFFCO and La Coop federee said Tuesday they plan to begin construction at Becancour, Que., across the St. Lawrence River from Trois-Rivieres, in two years.
That target depends on the partners raising the remaining 45 per cent of the capital cost of the plant, and on a feasibility study. The partners hope to start producing urea, a nitrogen-based fertilizer for crops, in 2017.
The project is the latest in a series of announced plans for additional nitrogen capacity in North America, as high crop prices support demand and with new technology unlocking the key ingredient, natural gas, from shale rock.
IFFCO and La Coop will face stiff competition from Norway’s Yara International and Calgary-based Agrium, both of which plan to expand their nitrogen output.
In the near term, a surplus of nitrogen production is unlikely, considering that the United States is a net importer of the fertilizer, said Claude Lafleur, CEO of La Coop, in an interview.
"The (crop) production in North America is increasing also, and corn needs a lot of nitrogen," he said. "At the end of the day, if everybody goes and builds new facilities, it could lead to a glut, but we don’t see that in the next 10 years."
The U.S. imports more than two-thirds of its urea production, but still, if all the rumoured projects became reality North America would quickly have a surplus, said David Asbridge, president of NPK Fertilizer Advisory Services.
"Even if we have three, possibly four new plants in North America in the next five years, that’s going to be a little price-depressing," Asbridge said.
IFFCO operates five fertilizer production plants in India and holds interests in plants in Oman, Jordan and Senegal. It chose the Becancour site for its access to a port, railway and pipeline for natural gas, IFFCO said.
Urea is the most widely used fertilizer in India, especially for growing its rice, wheat, sugar cane and cotton. In 2011-12, urea consumption in India stood at 29 million tonnes compared to 28.2 million tonnnes a year earlier. India imported 7.83 million tonnes of urea in 2011-12 compared to 6.6 million the previous year.
The plant would produce up to 1.2 million tonnes annually of urea, to be split evenly between IFFCO and La Coop. IFFCO will hold about one-quarter of the equity, with La Co-op holding 12 per cent and the Quebec government investing 18 per cent, Lafleur said.
The remaining 45 per cent equity has yet to be raised, he said.
Quebec’s provincial Banque de developpement economique on Tuesday announced its own equity participation in the plant, pledging $5 million.
Becancour was reported to be facing an uncertain economic future as Hydro-Quebec moves to shut its Gentilly-2 nuclear power plant based there.
A Saskatchewan-based group of farmers and other investors, FNA Fertilizer Limited Partnership, is also raising capital for a proposed nitrogen fertilizer plant it’s dubbed "ProjectN."
La Coop federee, a agriculture-based co-operative dating back 90 years and based in Montreal, also has investments in livestock production, meat processing and grain marketing. It plans to sell its share of urea production from the plant to farmers in Quebec and the northeastern U.S. through its 175 stores.
Quebec’s recently-elected natural resources minister has said she wants a permanent ban on shale gas exploration and production in the province, but that won’t affect the project, Lafleur said.
The partners plan to draw natural gas by established pipeline from Western Canada to supply the plant.
A Quebec site still makes the most sense because IFFCO can easily export urea via the St. Lawrence Seaway and La Coop can sell the fertilizer to eastern farmers, Lafleur said.
— Rod Nickel writes for Reuters from Winnipeg. Includes files from AGCanada.com Network staff.
FNA seeks farmer investment for N fertilizer plant, Sept. 27, 2012
Quebec’s ag co-ops buy up Agrico Canada, Sept. 6, 2011