OSHA revision threatens ammonia retailers
The change, which was announced in July, would keep fertilizer dealers from claiming the previous "retail" exception, making them comply with stricter ammonia storage standards.
Agriculture groups, which widely oppose the measure, said about 3,800 agricultural ammonia retailers would be affected by the rule change at an estimated cost in the "tens of millions of dollars," according to an October letter co-signed by the Fertilizer Institute and Agricultural Retailers Association, among others. The groups have asked OSHA to withdraw the rule change and begin a formal review period for the proposal.
If the revision does go into effect in 2016, the impact on the US direct-application ammonia market could be immediate and sweeping, according to market participants.
To avoid costs, some retailers could simply choose to stop selling ammonia in favor of other nitrogen products, particularly with granular urea and UAN prices at multi-year lows.
"It could drive a lot of ammonia out of the market, especially with cheap urea out there," an ammonium sulfate producer said.
Ammonia's loss could be urea's gain, particularly with the latter product's market facing an outlook for a period of prolonged weaker prices because of new domestic and global capacity coming online.
The US consumes around 4mn-4.5mn st/yr of direct-application ammonia, compared to around 12mn st/yr of UAN and 6mn st/yr of urea, according to statistics from the AAPFCO.
If a substantial number of retailers do drop ammonia, it would likely force more US tons into Canada, particularly from producers in the Northern Plains and northern Corn Belt. The US has historically exported small volumes of ammonia — less than 50,000t in each year from 2009 to 2012, before rising to 241,000t in 2013 and 135,000t in 2014. Exports to Canada have steadily increased over that span, rising from 15,000t in 2009 to 84,000t in 2014.
The potential situation has been compared to what happened to the US ammonium nitrate market in the wake of the deadly 2013 explosion at a fertilizer retail facility in West, Texas. Following the blast, new storage standards and regulations were proposed for the explosive fertilizer. Even with few firm new regulations enacted to-date, insurance companies responded by hiking rates for facilities that carry ammonium nitrate, causing many cost-conscious retailers to simply drop the product and switch to alternatives like ammonium sulfate or slow-release granular urea.
The result has been a shrinking ammonium nitrate market, which fell from 824,000t of imports in 2012 to 598,000t in 2014. Through the first eight months of 2015, imports are down 14pc year-over-year to 374,000t.