UPDATE 1-Agrium suspends nitrogen projects as rivals race to build

Mon Jun 3, 2013 12:02pm EDT
 
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By Rod Nickel

June 3 (Reuters) - Canadian fertilizer company Agrium Inc stepped back from two projects that would have expanded its capacity to make nitrogen-based fertilizer, partly because numerous competitors are pursuing similar plans.

Agrium, the world's third-largest nitrogen producer, said on Monday that it would suspend engineering work on a proposed $3 billion plant in the U.S. Midwest. Instead, it will focus on finding a partner to share the capital cost and securing a long-term natural gas contract for the project.

The news came as many rivals said they planned to add nitrogen capacity in the United States, where a greater supply of natural gas - a key ingredient in nitrogen fertilizer - makes production more profitable.

The other projects include expansion in Louisiana and Iowa by CF Industries Holdings Inc and a new plant in Iowa planned by Orascom Construction Industries SAE.

Fertilizer company executives and analysts have long said that they do not expect all of the projects to proceed.

Agrium investor relations director Todd Coakwell said the many similar projects in the works and the uncertainty of long-term natural gas costs caused the company to pull back from plans for the new plant, which would have produced up to 1.8 million tonnes annually.

He said Agrium was also suspending expansion plans for its Redwater, Alberta, nitrogen plant, and the company continues to aim for a final decision on the expansion of its Borger, Texas, plant in the second half of 2013.

The company will focus on completing expansion of its Vanscoy, Saskatchewan, potash mine through 2014, Coakwell said.

Calgary, Alberta-based Agrium's shares dropped 2 percent in Toronto and 1.2 percent in New York in midday trading, while CF Industries was 0.5 percent higher in New York.