Nutrien Ltd., Saskatoon, said on June 9 that it plans to increase fertilizer production capability in response to structural changes in global energy, agriculture, and fertilizer markets.
It plans to ramp up potash production capability to 18 million mt by 2025 and continue earlier plans to advance nitrogen capacity. The company also plans approximately $2 billion in additional share repurchases in 2022.
“The challenge of feeding a growing world has never been clearer as global supply constraints have contributed to higher commodity prices and escalated concerns for global food security,” said Nutrien Interim President and CEO Ken Seitz. “There is no simple or fast solution to overcome this challenge, and we see potential for multi-year strength in agriculture and crop input market fundamentals.
“Nutrien’s integrated business is best positioned to respond to these supply challenges and help sustainably feed a growing world,” he added. “We are safely bringing on additional low-cost potash and nitrogen production from our existing facilities, while delivering the products, services, and solutions growers need through our leading global Retail network.”
Nutrien is accelerating the ramp-up of its annual potash production capability to 18 million mt by 2025 in response to the uncertainty of supply from Eastern Europe. This represents an increase of more than 5 million mt, or 40%, compared to 2020 production.
Nutrien said the acceleration pathway is through existing low-cost capacity that is unmatched in the industry and supported by world-class global logistics infrastructure. The incremental production capability is expected to be added at a similar annual pace to the additions over the past two years.
Nutrien said the move to boost production will pay for itself within a year, even if the turmoil in global supply resolves sooner than expected. With potash prices surging, it won’t take long for the company to recoup the $150-$200/mt in capital to bring the additional capacity on earlier, Seitz said in an interview with Bloomberg. “We can be wrong, but we only really need to be right for six months or a year in order to pay for these investments.”
He said fertilizer prices have been soaring after Russia’s invasion of Ukraine. Volumes out of Russia and Belarus – who are among the biggest global producers – are constrained, and “we don’t think that there’s much” moving and “if there is, we’re not sure how,” Seitz said.
In March, Nutrien announced its intention to move from 14 million mt of production in 2021 to 15 million mt in 2022 (GM March 18, p. 28).
Nutrien Head Economist Jason Newton said on June 8 in a 2002 Market Outlook Session that the company expects Russian potash production to be off 2-6 million mt in 2022 from 2021, and that from Belarus to be down 6-8 million mt.
He said Russian fertilizer is not currently sanctioned directly, but is being constrained by financial sanctions that create challenges to trade, while Belarusian tons are being blocked for export through Lithuania. He said Canadian production is expected to be approximately 2.5 million mt higher, a large year-over-year increase, but only partially offsetting the lost supply in Eastern Europe.
Going forward into 2023-24, Newton expects Russian tons to increase, but an increase in Belarus exports will still be dependent on Lithuania.
To boost production, Nutrien will hire and train approximately 350 people and invest in underground mining equipment, mine development, storage, and loadout capacity. Nutrien continues to evaluate additional low-cost brownfield expansion opportunities beyond 18 million mt at its Saskatchewan mines that would supply longer-term market demand growth.
Nutrien is advancing previously announced nitrogen brownfield expansion projects that are expected to add approximately 500,000 mt of capacity by the end of 2025 and further enhance the energy efficiency and product mix of its plants. It is also evaluating the potential for additional low-cost brownfield expansion and emissions reduction projects, with a final investment decision expected over the next 12 months.
Last month, Nutrien announced that it is evaluating its existing site at Geismar, La., to build the world’s largest clean ammonia facility (GM May 20, p. 1). The project would leverage low-cost natural gas, tidewater access to world markets, and high-quality carbon capture and sequestration infrastructure to serve growing demand in agricultural, industrial, and emerging energy markets.
The plant would have an annual production capacity of 1.2 million mt of clean ammonia and capture at least 90% of carbon dioxide (CO2) emissions, providing a meaningful step towards achieving the 2030 commitments set out in Nutrien’s Feeding the Future Plan.
Nutrien’s annual nitrogen sales volumes could increase to approximately 13.5 million mt by 2027 through the completion of inflight brownfield projects and additional growth projects under evaluation.
Nutrien is also planning to repurchase an additional $2 billion of shares, for a total of approximately $4 billion of repurchases in 2022, under its existing normal course issuer bid. This is expected to increase the company’s total return of capital to shareholders through dividends and share repurchases to approximately $5 billion in 2022.