Fertiliser prices boom following closure of Gibson Island plant

With fertiliser prices soaring all around the world, it seemed strange when Incitec Pivot announced plans to close one of Australia`s largest fertilizer plants this week. This decision was likely linked to the price soar of another commodity, natural gas, which has caused Incitec to claim that they are “unable to secure an economically viable long-term gas supply”. The facility uses this natural gas as a key feed input to the manufacturing of fertiliser.

This huge decision to close a facility which has been thriving for more than 50 years is expected to affect up to 170 employees. The company claims that by the end of 2022, their manufacturing via natural gas will be shutdown, however, they do suggest that operations may continue – with green ammonia being the potential feed replacement.

Incitec Pivot`s decision to stop production on Gibson Island is part of a long list of fertilizer news which has been causing distress to Australian farmers. This facility shutdown news, along with China and Russia both restricting their exportation of fertiliser, has caused farmers to be uncertain toward their ability to secure the amount of fertiliser required. This uncertainty is likely indicative of rising costs for these farmers, which throws their ability to generate profits into questions. The chair of GrainGrowers exclaims:

“So to hear reports [Incitec] has thrown another spanner into the works and that little bit of extra complexity in a grower’s mind around how do I make sure I’m covered and how do I make sure I’ve got product?”

Paul McLaughlin, a farmer in Central Australia says:

“It’s looking like it’s going to be a 40 to 50 per cent increase on most fertiliser [prices] going forward, and that’s if you can get them,”

Central Petroleum signed a short term deal in 2018 to supply gas from the Norther Territory to Gibson island. However, after their deal was done in 2019, Incitec moved to another supplier for a cheaper gas supply. Ultimately, the main factor suppressing fertiliser manufacturing and causing distress in farmers in the cost of natural gas. To attempt to combat this, Central Petroleum has entered into agreement with Incitec Pivot to develop the Range gas field in Queensland’s Surat Basin.

Reference:

Fertiliser prices are soaring, so why is one of Australia’s largest factories closing? (2021). ABC News. [online] 12 Nov. Available at: https://www.abc.net.au/news/rural/2021-11-13/incitec-pivot-shut-brisbane-plant-amidst-fertiliser-price-boom/100610750 [Accessed 14 Nov. 2021].