Farm week

SURGING global urea prices and rising shipping costs are strengthening the business case for a proposed 1.4 million tonnes per annum production plant at Geraldton.

Strike Energy pointed out recently its Project Haber, which proposes to use its own low-cost natural gas from promising gas wells near Arrowsmith 120 kilometres south, to produce ammonia, the main ingredient in urea, has the potential to help shield local farmers from such impacts in the future.


"A combination of unseasonal supply and demand factors" were driving a global surge in urea prices, Strike managing director Stuart Nicholls said.

European, United States and Chinese urea was being kept "at home" to meet local demand, with northern hemisphere farmers chasing yield because of higher grain prices, Strike claimed.

The cost of gas - the key to producing ammonia and then urea economically - has been rising, with Henry Hub gas prices in the US more than doubling in the past 12 months and global prices "cyclically strong", it said.

In China, the National Development and Reform Commission has announced an inquiry into urea prices, which may result in restriction of its coal-based urea exports, it claimed.

On top of these demand and supply issues, Mr Nicholls said, the rise in shipping rates, due mainly to the impact of the COVID-19 pandemic on international trade, has pushed urea shipping costs from about US$40 a tonne to about $US75/t.

While local farmers were used to urea price volatility and shielded to a degree from the immediate impact of the current price surge because they pre-ordered imported fertilisers - more than 90 per cent of Australia's urea requirements are imported - the global situation created "a compelling argument for Australia to build its own urea manufacturing capacity," he said.

"Our project will have access to some of the world's lowest-cost gas, meaning our urea production will be price competitive in almost any market situation," Mr Nicholls said.