Bleak outlook sparks frenzied dealmaking in nitrogen fertilizer market
By Rod Nickel
Aug 13 (Reuters) - Sinking crop prices and frenzied output growth by producers have sparked a flurry of dealmaking worth nearly $10 billion in the fragmented nitrogen fertilizer sector that may kick off consolidation in the largest of the three nutrient markets.
Illinois-based CF Industries Holdings Inc, the world's third-largest nitrogen fertilizer producer, was involved in three of four deals in the past month, taking out two potential competitors in its backyard and locking up sales volumes in the United States, the world's No. 1 corn-producing country.
"What CF is doing is classic corporate self-preservation in a world where there are well-financed people trying to get in to their core Midwest and U.S. Gulf Coast nitrogen market," said Chris Damas, editor of the BCMI Report on markets.
Unlike in the potash and phosphate industries dominated by a few players, the top 20 nitrogen companies account for just over one-third of global supply, according to consultancy CRU Group. CF's share is less than 4 percent, it said.
On Wednesday farmer co-operative CHS Inc ditched plans to spend $3 billion building a plant in North Dakota and agreed instead to pay $2.8 billion for a stake in CF's nitrogen fertilizer unit, while securing a supply deal.
It follows last Thursday's announcement CF would buy Netherlands-based rival OCI NV's North American and European plants for $6 billion, to become the biggest publicly traded nitrogen player.
The deals increase CF's market clout by removing two potential U.S. rival plants, just as Agrium Inc, Yara International, Koch Industries and others build North American capacity.
CVR Partners LP said on Monday it would buy Rentech Nitrogen Partners LP for $533 million, creating North America's fifth-largest nitrogen maker. Continued...