Nitrogen is an important nutrient for crop development and growth. It’s also the most important input that allows farmers to feed billions of people in the world. Fertilizers—which include potassium, phosphate, and nitrogen—are depleted upon harvesting crops. But unlike potassium and phosphate, farmers must reapply nitrogen every year. This is because the soil isn’t capable of absorbing and storing nitrogen for long periods, according to Yara International.
There are many types of fertilizers that farmers can purchase for agricultural use: ammonia, ammonium nitrate, UAN, and urea. But the basis for all nitrogen-based fertilizers is ammonia. To create ammonia, the most common industrial method used is the Haber process, which combines hydrogen in natural gas with nitrogen in the air. The method was first used on an industrial scale in Germany in 1913. In China, coal (thermal coal and anthracite types) is largely used to produce ammonia and nitrogen fertilizers.
Potash Corp.’s nitrogen overview slides show that it requires about 32.5 MMBtu/ton (million British thermal units per ton) to produce a ton of anhydrous ammonia. (“Anhydrous” means “without water.”) From there, anhydrous ammonia can be converted into nitric acid, liquid ammonium nitrate, or liquid urea. As a whole, urea is the most widely consumed fertilizer, making up about 57% of the world’s nitrogen fertilizers. To produce a ton of urea, 0.58 tons of ammonia and 0.78 tons of carbon dioxide (roughly another 4.72 MMBtu of natural gas) is needed. Some producers do make UAN (urea-ammonium-nitrate), which is a liquid form of urea and ammonium nitrate mixed together.
Since urea has high nitrogen content (46%) and is less corrosive, it’s easier and cheaper to transport. This makes urea the most widely traded product in the fertilizer world, and a price reference for other fertilizer products. Due to wide transportability, urea prices are mostly driven by global supply-and-demand dynamics rather than regional drivers after factoring in transportation costs.
© 2013 Market Realist, Inc.
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