Jordanian potash producer APC and Norwegian fertilizer firm Yara have signed an initial agreement that aims to explore doubling capacity at a potassium nitrate (NOP) plant in Aqaba, Jordan.
APC subsidiary Kemapco operates a 135,000 t/yr capacity plant that produced 130,000t last year. NOP production would double to 350,000 t/yr under the agreement between APC and Yara, as Kemapco will raise capacity to 175,000 t/yr upon completion of a recent expansion project that began two years ago. No target date has been set for first production from the new capacity initiative.
Yara said it is targeting a 30pc stake in Kemapco, with a 100pc distribution and marketing agreement for the NOP.
Should any transaction go ahead, it will still be subject to regulatory and corporate approvals.
The announcement today for increased NOP capacity follows on from a similar announcement from SQM in October last year. SQM, the world's biggest NOP producer, said it is ready to supply all of global demand. SQM's current production capacity is 1.1mn t, but it is on track to reach 1.5mn t by the second half of this year.
Israel's Haifa is the second biggest NOP producer, with capacity of 530,000 t/yr, although it is heard operating at reduced rates after the Haifa Municipal Court ordered the country's only ammonia tank to be taken out of operation. It was set to be empty by the end of July last year, and Haifa has been importing ammonia since.
Today's announcement means that Kemapco would become the third largest NOP producer in the world, and if Haifa is producing less NOP, demand might support the capacity increase.
Both SQM and Haifa have built extra capacity in the past five years, as demand grows for NOP co-products iodine and phosphates, and substantial capacity additions are under way in China.
Whether or not this rush of new capacity will equate to a drop in NOP prices, as suppliers maintain or attempt to gain new market share, remains to be seen.
Argus estimates total demand for NOP at around 1.4mn t/yr, of which 80pc is consumed as fertilizer, with the remainder used in other industry sectors. NOP capacity could be as high as 3.2mn t/yr by the end of this year, assuming China still has NOP capacity of 950,000 t/yr. But while that sounds high, 2014 capacity was 2.8mn t and production was just half that.
Kemapco sold $105mn of NOP in the period. If Kemapco sold all of its produced NOP in the period, the average selling price would be just over $800/t. NOP producer SQM's October 2017 prices were €800/t ddp in Europe, and $870-900/t cif in the Americas, both in 25kg bags.
