RELIABLE and stable access to liquid fertiliser or Urea Ammonium Nitrate (UAN) has been secured for customers of Nutrien Ag Solutions after the launch of a new 50,000 tonne storage facility at Kwinana.
While the significant investment, which consists of two 25,000t tanks, has been operating since July, an official launch was held last Wednesday with Nutrien representatives and growers from around the State celebrating on what was coincidently Global Fertiliser Day.
Nutrien Ag Solutions region manager - west, Andrew Duperouzel, said the demand for the long-term, safe and secure supply of liquid fertiliser in WA has been steadily increasing over the past decade.
"As a business, we're now well positioned to supply WA growers as the sector continues to grow," Mr Duperouzel said.
"The biggest growing part of fertiliser use in WA is liquid fertiliser as farmers have adopted liquid nitrogen as one of their main tools for growing record crops, but the limiting factor for that business here in WA was the limited supply we had available.
"Farmers would say to us that they wanted more liquid fertiliser, but we didn't have the capability to supply them reliably - that's why we built the tanks, so we can have a steady supply for them."
The new infrastructure has been secured as a part of a long-term, off-take and lease agreement with Coogee Chemicals, but prior to its commissioning Nutrien had been leasing one 9500t tank across the road from its head office in North Fremantle.
Nutrien head of WA fertiliser operations Sam Hunt said the problem with that was that it gave them no economies of scale when it comes to shipping, which makes a significant difference to the way they import the product.
"We would have to get a vessel in every month during the busiest times of the year and we would have to line 20 trucks up while the boat was discharging to make enough room in the tanks," Mr Hunt said.
"This new facility now gives us the opportunity to bring in cargos that have 40,000t capacity as the two tanks are 19 million litres each."
The tanks themselves are 24.5 metres tall, with the bottom restraints around the tanks consisting of 32 millimetre thick carbon steel plates, the thickness of which decreases as the tank rises, while inside the tank there is a resin coating which protects the carbon steel from the UAN.
There is also a 1.4 kilometres long wharf that runs to the jetty, plus a gantry which consists of two bays and two arms each that can pump at 1000 kilograms a minute, meaning a truck can come in and out within about 35 minutes.
A 40,000t vessel coming into the site can be offloaded in 44 hours and whilst offloading, if need be, as soon as the UAN hits the tanks and gets to the pump, it can be brought straight to the gantry if there is a shortage.
The Nutrien logos on the tanks, measuring 20m by 7.5m, are also the biggest Nutrien logos anywhere in Australia.
This season was the biggest nitrogen year the State has ever seen and Nutrien was commissioning the tanks throughout that period which was nothing short of a challenge.
Mr Duperouzel said the tanks bring competition to the market which is good for farmers as it ultimately reduces the price of fertiliser.
"That is contradictory to what we're seeing with fertiliser prices at the moment as they have gone up significantly, but that price is determined by global factors and Australia is only a really small part of the global fertiliser business," he said.
"At the moment we are going through this off the chart volatility when it comes to fertiliser prices on a global scale, but ultimately these tanks should help to stabilise the price and give farmers more of a choice to get a reliable supply of UAN than they have had before."
As far as supply of UAN goes, Nutrien manufactures UAN in America, with the majority of this utilised in the United States, whereas the majority of Western Australia imports come from Russia.
Mr Hunt said it takes 50 days for a vessel to sail to Australia, so they are planning that boat four to five months in advance and have to negotiate shipping freight which is all done in US dollars.
"At the moment, the demand for natural gas in Northern Europe, which is a key ingredient for making UAN, has pushed prices through the roof," he said.
"For us to buy a vessel of MAP (monoammonium phosphate) is now over US $30 million, so there is a considerable amount of risk on the table and it's companies like Nutrien that are working to ensure the supply chain is managed with the current challenges."
Other factors around the globe are also adding to the increase in the price of fertiliser itself, as well as herbicides, pesticides and the cost of freight to get all of them to Australian shores.
The global market for crop protection is currently facing a few challenges with big disruptions in the supply chain, making the need for forward planning more important and difficult to predict.
On top of that, the situation with COVID-19 related issues continues to cause havoc to production within China and India.
According to Nutrien region business manager crop protection, horticulture and seed - west, David Rogers, China accounts for approximately 70 to 80 per cent of global pesticide production as either tech grade active constituents, end use products or intermediates.
"Adding to the supply problems within China over the last decade, the Chinese Government continues to increase scrutiny on pollution, namely wastewater and air quality," Mr Rogers said.
"A key part of this focus has been on rationalising the number of manufacturers and consolidating factories into major industrial parks, further away from the populous regions and as a result, for some key molecules there are often only a few major producers that supply to the global market.
"Power supply continues to be a problem due to coal shortages and as a result electricity quotas are now being enforced across all provinces in China which is causing material supply chain issues - Goldman Sachs referenced 44pc of all industries affected and a 2pc drop on quarter four Chinese gross domestic product growth."
If there are shutdowns or closures, there aren't any alternative manufacturers that have the scale to meet demand and shortages will continue to occur.
On top of that, the freight issues and congestion around the world have been widely known for some time and typical freight costs out of Shanghai to Fremantle or Melbourne have increased in the last 12 months.
A lot of Australian suppliers start to purchase tech grade active constituents finished goods out of China in Q3 and Q4 of 2021, for delivery in time for the new year or 2022 cropping season.
"International sea freight has been massively disrupted and prices have increased from a base two years ago of US $500 per 20 foot container to US $7000 to US $9000 and even through to US $12,000 which is still climbing," Mr Rogers said.
"For a granular product this alone will add US $0.85 per kilogram or more to the cost of goods sold due to the limited amount of product that can fit into a container and all products have been affected.
"Global demand remains incredibly strong for all crop inputs with strong demand meeting limited supply, which is adding to price increases."
UAN in the marketplace is very tight in a global sense and there has been proof of that in the last month when it seemed unachievable to sell at a certain price level, to it jumping to a price above that.
The supply chain has evaporated and getting product to WA for next year is going to be a challenge.
Nutrien Ag Solutions region fertiliser manager Shane Page said luckily, they've got trusted suppliers and as a business are making procurement decisions well ahead of time, with four shipments of fertiliser set to arrive in December.
"That is quite unusual for us as a business and we're looking at somewhere between US $25m and $30m for a boat load of fertiliser, which is a significant investment by our business to make sure farmers have the product to be able to be profitable and sustainable next year," Mr Page said.
"We need to be smart about what we do with our money when it comes to fertiliser - that includes soil testing to understand what removal we're about to see though this harvest which will be critical in order to maximise our spend on fertiliser for next year.
"Furthermore, the sooner phosphate is moved out of our sheds, the sooner we've got the ability to bring in nitrogen and I'm pleased to say that we have another shipment of UAN set to arrive in February."
With total fertiliser storage for Nutrien in WA now at 250,000t -50,000t for UAN and 200,000t for granular, the company is set for capacity for now.
"We won't need to expand our UAN capacity for now - what we have now will allow us to bring into the market annually around 180,000 to 200,000 tonnes from those two tanks and we're nowhere near that capacity at the moment, so there is plenty of room to grow," Mr Duperouzel said.
"When it comes to granular storage, we're looking at potentially investing in some of our regional storage sites, not in the next 12 months, but after that, so we're constantly reviewing things."
Want weekly news highlights delivered to your inbox? Sign up to the Farm Weekly newsletter.