Australia's largest ammonia plant will be shut for two months to repair damage caused by a power outage, amidst a global supply crunch for the vital fertiliser and explosives ingredient.
To say that the shutdown comes at the worst possible time for the global fertilizer market would be an understatement: more than a quarter of the world's traded ammonia flows through the Strait of Hormuz, as do 43% of urea shipments, the fertilizer made from ammonia. As we discussed in recent days, that flow has been cut to a trickle as Iran blockaded the SoH, as have vital gas supplies, causing fertilizer plants in India to shut.
Adding insult to injury, last week Yara's Pilbara plant, which uses gas to produce 850,000 tonnes of ammonia a year, suffered a power outage, damaging equipment, BoilingCold reports.
A spokesman for the Norwegian company said workers and the environment were unaffected, and initial assessments indicated repairs could take about two months.
"Yara well understands the importance of its products to customers and will work to bring the operations back online as soon as practical," he said.
An adjacent plant, half-owned by Australia's Orica, uses 140,000 tonnes of the ammonia to make the explosive technical ammonium nitrate (TAN) for WA's mining sector. The remaining ammonia is shipped to Australian and international customers, and much of it is used to make urea fertilizer.
The shutdown could not have come at a worse time for Australia's farmers, who last year imported 1.2 million tonnes of urea in April and May for use before or shortly after seeding. Three-quarters came from the Gulf nations, where shipping is now severely curtailed after the United States and Israel attacked Iran.
Australia's largest export could also be affected. For the next two months, WA's iron ore miners no longer have 330,000 tonnes a year of TAN produced on their doorstep. The explosive is used in vast quantities to blast rock so it can be collected, crushed and shipped to port.
The degree of disruption to production, if any, will depend on the stocks of TAN the miners hold and whether they can source other supplies at short notice.
Wesfarmers subsidiary CSBP runs WA's second-largest ammonia plant in Kwinana near Perth. CSBP uses Kwinana's 255,000 tonnes a year output and additional imported ammonia to make ammonium nitrate for fertilisers and explosives.
CSBP would not say if any of its imported ammonia came from Yara.
"It is standard business practice for us to continually monitor and manage our supply chain to ensure we meet customer demand," a company spokeswoman said.