SURVIVAL IN THE GLOBAL AMMONIA MARKET

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					F E R T E C O N
                  SURVIVAL IN THE
                  GLOBAL AMMONIA
                      MARKET


                        Threats and opportunities
                       for a changing US industry




                   A FERTECON study in association with
                                Ken Nyiri




                        AVAILABLE NOW
                          Published May 2003
                  “It is a truth universally acknowledged, that an energy
F E R T E C O N   company in possession of a good fortune is in want of an
                  ammonia plant”
                  (after   Jane Austen, Pride and Prejudice)


                  The US gas price peak of 2000/01 is history and it’s time to assess the
                  damage and look to the future. At first glance, the damage doesn’t
                  appear too severe. US operating rates were cut in response to high gas
                  costs and negative margins. Only a few ammonia producers decided to
                  throw in the towel and close permanently. Imports of ammonia and other
                  nitrogen products into the US market surged temporarily and then fell
                  back, although ammonia imports remain higher than before the gas spike.
                  The brief love affair of energy companies with the ammonia industry
                  ended. Not many are enamoured with the ammonia industry now, and
                  those that married into the nitrogen industry are looking for a divorce.

                                 “Reports of my death are greatly exaggerated”
                  US nitrogen producer (after Mark Twain)


                  As gas prices crashed from the peak level of $10/mmBtu down to a more
                  acceptable $2 to $3 range, it looked like the US ammonia industry had
                  survived and was again competitive. However, the fight was not over, as
                  the sharp run up in gas prices in early 2003, coupled with forecasts of
                  tight US gas markets in the future, once again casts doubt on the viability
                  of a significant portion of the US ammonia industry.

                  Who will survive this next round? Certainly competitive costs are
                  important, but other factors must also be considered. Every plant is
                  unique - it is not enough just to generalise on the future for the industry.

                              “If it were done….then well it were done quickly”
                  Ken Nyiri (after William Shakespeare, Macbeth)


                  Every ammonia producer in the US needs to develop strategies to deal
                  with an uncertain future on energy costs, end-product prices and a
                  changing international market structure. Producers outside the US also
                  need to review their strategies and consider the threats and opportunities
                  presented by the changing and uncertain US market.

                  This new report, produced by FERTECON in association with Ken Nyiri,
                  brings together an unrivalled team of ammonia analysts with both detailed
                  understanding of the data and hands-on experience in this unique market.
                  This report will identify the challenges facing the US industry and examine
                  the possible strategies for survival for producers, as well as opportunities
                  for offshore suppliers.
                  The inter-relationship between the gas
F E R T E C O N   price and the ammonia price

                           NYMEX Gas Futures vs NOLA Ammonia
                                         Prices
                  $12                                                                             $300

                  $10                                                                             $250
                                                               NOLA Ammonia
                   $8                                              Price                          $200

                   $6                                                                             $150

                   $4                    Henry Hub
                                                                                                  $100
                                          Futures
                   $2                                                                             $50

                   $-                                                                             $-
                                                                     Calculated
                  $(2)                                               Ammonia                      $(50)
                                                                      Margin
                  $(4)                                                                            $(100)
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                  The plants..

                         North American Ammonia Plants
                  REPORT OUTLINE
F E R T E C O N   The report will examine recent developments in the North American
                  ammonia market within the context of the World market and the outlook
                  over the next 10 years. A review of North American and World feedstock
                  developments provides the background for a scenario analysis of the
                  outlook for North American gas prices and worldwide feedstock costs.
                  This analysis then feeds into an identification of the At Risk Plants in
                  North America and looks at the
                  Optionality for these plants.      At Risk Plants – plants that are most at
                                                       risk of closure.
                  The benefits of the alternatives to Optionality – reducing risk by providing
                  closure are analysed and the options.
                  opportunities for ammonia suppliers to the North American market
                  reviewed.




                  World Market Overview
                    •   Review of Recent Developments in the World Ammonia Market
                    •   The World Market Outlook to 2012

                  The North American Ammonia Market
                    •   Review of Recent Developments in the North American Ammonia
                        Market
                    •   The Outlook for North America
                    •   The Impact on World Markets

                  Feedstocks
                    •   Review of Recent Developments Worldwide
                    •   The Outlook for the North American Natural Gas Market and the
                        impact of:
                        • GDP
                        • Industrial Recovery
                        • Power Demand
                        • Drilling activity
                        • Oil Prices
                        • Volatility
                    •   Scenario Analysis for North American Natural Gas Prices and
                        Comparison with the Outlook for Feedstock Costs Worldwide
                  Identification of Survivors & At Risk Plants (ARPs) in North
                  America
F E R T E C O N     •   Methodology to Determine Candidates for Survival/Closure (At Risk
                        Plants) under Different Gas Price Scenarios
                    •   Production Cost Comparison
                    •   Additional Factors to be Taken into Account – Vessels, Terminals,
                        Storage, Pipelines, Infrastructure Tariffs/Subsidies, Ownership,
                        Long-term Supply Agreements etc.
                    •   Summary of Findings

                  Alternatives to Closure for North American At Risk Plants
                    •   Operating rates and gas costs
                    •   Hedging Gas/Ammonia
                    •   Importing Ammonia
                    •   Capturing the Spread
                    •   Upgrades
                    •   Niche Markets
                    •   Alliances
                                         Peaking Plant – plant suitable for flexible
                    •   Peaking Plant    operation to match market requirements.
                    •   Asset Swaps
                    •   Tolling
                    •   Sale
                    •   Closure

                  Ammonia Price Outlook
                    •   Factors Affecting Price
                    •   Production Costs
                    •   North American Import Potential
                    •   Price Projections

                  Opportunities for         Ammonia        Suppliers      to    the    North
                  American Market
                    •   Potential for Increased Sales to North America
                    •   Opportunities for Joint Ventures in North American Ammonia Import
                        Terminals and Distribution
                    •   Identification and Evaluation of Suppliers Most Likely to Benefit
                        from Developments in North American Ammonia Industry

                  Conclusions/Recommendations

                  If you require further information on the report, please contact:
                  Terry Phillips (phone +44 1892 701710, email terry.phillips@fertecon.com) or
                  Ken Nyiri (phone 1 281 213 9020, email kennyiri@yahoo.com)
                  FERTECON
F E R T E C O N   an independent group of professionals dedicated to
                  serving the world fertilizer and related industries
                  FERTECON Limited comprises the World's most experienced team of fertilizer industry
                  consultants. No other independent consultancy company can match the depth of
                  knowledge and expertise of FERTECON's fertilizer industry analysts.

                  FERTECON Limited was formed in 1978 by a group of respected industry analysts who
                  specialised in fertilizers and related products including ammonia. The company grew rapidly
                  and is held in the highest regard throughout the world.

                  FERTECON Limited’s services to the fertilizer industry fall into five main categories:

                      CONFIDENTIAL CONSULTANCY SERVICES
                      REGULAR MARKET ANALYSIS
                      MULTI-CLIENT ECONOMIC, TECHNICAL AND INDUSTRY STUDIES
                      CURRENT INFORMATION
                      DATA SERVICES

                  FERTECON Limited’s weekly current information services are generally acknowledged
                  as the most accurate, comprehensive and authoritative. Its monthly, quarterly and other
                  market analysis reports provide timely, detailed foresight into developments in the World
                  fertilizer and related industries. The company’s extensive list of clients for ad-hoc
                  confidential consultancy studies testifies to the depth and range of its industry
                  knowledge and the quality of its analysis and forecasts. FERTECON’s data services
                  represent a unique resource for the fertilizer industry, unmatched by any other independent
                  organisation.

                  FERTECON's services on fertilizers are subscribed to by virtually all companies and
                  government agencies involved in the World fertilizer and related industries.


                  FERTECON’s Ammonia Team
                  Terry Phillips (joint project leader) is a director of FERTECON Limited and is
                  responsible for its consultancy services. He has had over 25 years’ experience in
                  the fertilizer industry and has extensive experience of managing study work,
                  mostly relating to the market for ammonia and downstream nitrogen fertilizers. He
                  is experienced in all aspects of study work, including the provision of market
                  studies, technical evaluations and financial analyses required by financial
                  institutions and international funding agencies.
                  Terry has extensive experience of working on fertilizer industry projects in all areas
                  of the world and specialises in the development of natural gas resources. He has
                  made presentations to the senior management of many major industry players on
                  general industry developments and more specific project related work and
                  acquisitions.
                  Contact details: Phone: +44 1892 701710, Email: terry.phillips@fertecon.com

                  Vivien Bright, a director of FERTECON Limited, has over 25 years of experience
                  in the fertilizer industry. She has managed FERTECON’s ammonia services since
                  1979, and has been responsible for producing the weekly FERTECON AMMONIA
                  FAX report, the monthly AMMONIA FUTURES and the quarterly AMMONIA
                  OUTLOOK reports. She has also contributed to consultancy services.
F E R T E C O N   Ken Nyiri

                  Ken Nyiri (joint project leader) has more than 30 years of experience in fertilizers
                  with extensive experience in marketing, market analysis and strategic planning in
                  the fertilizer industry and more recently in the energy industry. He has worked for a
                  number of international fertilizer companies (Duke, Texasgulf, Mississippi Chemical,
                  Freeport Minerals, Amax Inc.), in a variety of different commercial positions. Most
                  recently, he has focused primarily on the ammonia market in North America.
                  Ken is recognized globally as an industry expert who has published extensively and
                  presented at international symposia.

                  •   Participated in two anti-dumping investigations before US International Trade
                      Commission (ITC); prepared and testified in formal hearings before ITC in
                      Washington, D.C.

                  •   Uncovered financial and operational problems with joint venture partner that
                      saved a projected $100 million in future capital investments.

                  •   Provided research and analysis for Initial Public Offerings, Leveraged Buy Outs,
                      antidumping investigations, acquisitions, joint ventures and mergers in the
                      fertilizer industry.

                  •   Past Chairperson of:
                         •   The Fertilizer Institute’s Economics & Information Committee
                         •   The Phosphate Working Party of The International Fertilizer Industry
                             Association
                         •   The Fertilizer Industry Round Table
                         •   Fertilizer & Agricultural Advisory Group, The Potash & Phosphate
                             Institute.

                  •   Some of Ken Nyiri’s presentations concerning the ammonia markets:
                         •   “Survival” - Gulf Coast Ammonia Producers
                                                             st
                         •   “The Fertilizer Industry in the 21 Century” – WEFA Spring Agricultural
                             Outlook Conference
                         •   “The U.S. Fertilizer Manufacturer, An Endangered Species?” – Society of
                             Mining Engineers
                         •   “The Nitrogen Outlook” – TFI Outlook Conference
                         •   “Outlook for Nitrogen” – The Fertilizer Industry Round Table
                         •   “The Fertilizer Demand Situation & Outlook” – IFA

                  Contact details: Phone: 1 281 213 9020, email: kennyiri@ yahoo.com
                                          ORDER FORM

                              FERTECON
                               L      I   M     I     T    E    D
   Royal Victoria House ● The Pantiles ● TUNBRIDGE WELLS ● Kent ● TN2 5TE
              Telephone: + 44 1892 701710 ● Fax: + 44 20 7681 1359
                            Email: info@fertecon.com

         Please invoice my company/I enclose a cheque* for $11,000 (eleven thousand US
         dollars) confirming my order for Survival in the Global Ammonia Market. I accept the
         conditions set out below. I understand that this price is only valid for orders made prior
         to 31 May 2003. Thereafter the full price of $12,000 applies.

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TERMS AND CONDITIONS
The report is being prepared by FERTECON Limited in association with Ken Nyiri. All
sections of the report are for the exclusive use of the purchaser and must not be lent,
hired, sold or reproduced in any way without written permission from FERTECON Limited.
Circulation of the reports by subscribers is strictly limited to affiliated companies in which
they have more than 50% ownership.

Subscribers will receive an electronic version of the report and also two printed copies.
Additional printed copies are available by arrangement. Should subscribers require a
presentation or additional consulting on aspects of the report on a confidential basis, this
will be available by negotiation with the authors.

The early purchase price of $11,000 is only valid until 31 May 2003. Thereafter the full
price of $12,000 applies.

				
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