the manufacturing and marketing of nitrogen fertilizers in

fíqiñ 0C8JMWCH £>

The Manufacturing and Marketing of

Nitrogen Fertilizers in the United States

■ï^^-

AV^

Duane Paul i-r^

Richard L Kilmer %i: "^ -'%2-

C2. :^

t/^

Economic Research Service

U.S. Department of Agriculture

Agricultural Economic Report No.3|90- 3^f /f77- ^^

THE MMUFAGTURING AND m OF NITROGEN FERTILIZERS IN THE UNITED STATES, by Duane A. Paul aad Rrcliard L. Kilmer, National Economic ^âï)mis Division, EGOnomá-C Researeh Service, U.S. Department of Agriculture. Agricultural Economic Repoït Bo. 390•

ABSTRACT

Newer nitxogen fertilizer firms--those built since 1963--are larger^ use less electricity, and can operate more efficiently than older, smaller fiirms. Regardless of age or size, all firms are affected by the availability of natural gas. Many newer firms use intrastate gas, for while it is more expensive than interstate gas, supplies are more certain. Due in part to gas curtailments, and also to seasonal demands, terminal storage capacities close to the areas of consumption are now in use. Trucks, barges, and particularly pipelines are becoming major alternatives to railcars for the shipment of products.

Keywords : Fertilizer, Nitrogen, Anhydrous ai!monÍ5ir,fuifl^^ Ammonium nitrate, AmmoniiM phosphate. Urea, Natural gas. Pipelines, Terminal facilities, Plant capucity, Industrial plants. Manufacturing plants, GhemicaJ; industry.

Washington, D.C. 20250 Deoember 1977

SUMMARY

Newer fertilizer plants use more efficient production processes. As a result, they use smaller quantities of critical raw materials, like natural gas, for each ton of final product. Despite such savings, fertilizer prices to farmers will not likely decline substantially from 1971-73 levels because energy and capital costs have risen dramatically.

U.S. farmers, using a record 49 million tons of fertilizer last year, have doubled their fertilizer use since 1960, according to this ERS review of the operations of nearly 50 firms engaged in fertilizer production.

Most plants currently producing fertilizer components (such as anhydrous ammonia, urea, and nitrogen solutions) have been built since 1963. These plants are usually larger and more efficient than older plants. For example, electrical consumption in plants built before 1963 averages 500 kilowatt-hours (kWh) per ton of product. But the newer, larger plants, using gas turbine engines rather than electric motors, use only 37 kWh per ton of product.

Regardless of age or size, ail fertilizer plants rely heavily on natural gas for heat and power. Therefore, many newer firms are locating plants near sources of intrastate gas. Although its price is considerably higher than the price of interstate gas, which is federally regulated, intrastate supplies are more certain.

Those plants depending on interstate gas often face curtailments on supplies. To deal with such restrictions, along with seasonal demand, many plants are constructing terminal storage facilities near areas of consumption. This ensures that fertilizer inputs will be available during periods of gas shortages.

CONTENTS

Page

INTRODUCTION 1 Survey Procedure 2

CHARACTERISTICS OF RESPONDENT AND NONRESPONDENT FIRMS 2

DIVERSIFICATION IN THE NITROGEN INDUSTRY 4

CHARACTERISTICS OF PRODUCTION FACILITIES 8 Inputs Required to Produce Nitrogen Products 8 Rated and Maximum Capacities to Produce 18 Capacity Utilization 21

SPATIAL DISTRIBUTION OF PRODUCTS 21 Transportation 27 Onsite and Offsite Storage 28 Types o£ Outlets 33

CONCLUSIONS AND IMPLICATIONS 33

REFERENCES 35

11

LIST OF TABLES

Table Title Page

1 Total industry and respondent capacity to produce nitrogen fertilizer products, fall 1976 3

2 Number of respondent and nonrespondent firms by annual nitrogen capacity, 1976 3

3 Niimber of respondent and nonrespondent firms by annual capacities of various fertilizer materials, 1976 5

4 Age distribution of plants operated by respondent and nonrespondent firms, 1976 6

5 Diversified activities of nitrogen manufacturing firms, 1975 7

6 Distribution of nitrogen product capacity by firms' principal production activities, 1975 9

7 Fertilizer sales in relation to total sales of respondent firms, 1975 10

8 Distribution of sales and product capacities among respondent firms, 1975 10

9 Average annual nitrogen production capacity of respondents, January 1, 1976 11

10 Average physical inputs per ton of anhydrous ammonia, by age and size of plants responding to survey, 1975 13

11 Average physical inputs per ton of ammonium nitrate, by age and size of plants responding to survey, 1975 14

12 Average physical inputs per ton of ammonium phosphate, by age and size of plants responding to survey, 1975 16

13 Average physical inputs per ton of nitric acid, by age and size of plants responding to survey, 1975 17

iii

Table Title Page

14 Average physical inputs per ton of nitrogen solutions, by age and size of plants responding to survey, 1975 19

15 Average physical inputs per ton of urea, by age and size of plants responding to survey, 1975 20

16 Capacity utilization by survey respondents, 1975 22

17 Distance of domestic fertilizer shipments, by plant capacity, 1975 24

18 Distance for nitrogen product shipments, by region, 1975 26

19 Rated one-load capacities of vehicles owned and leased by respondents, January 1, 1976 28

20 Rated one-load capacities of owned and leased vehicles by transportation mode and type of material, January 1, 1976 29

21 Regional consumption and capacity to store selected fertilizer materials, January 1, 1976 30

22 Respondents' storage capacity compared to their production capacity, January 1, 1976 31

23 Respondents' owned storage capacity compared to their total storage, January 1, 1976 32

24 Distribution of 1975 product sales and transfers of respondent firms among types of outlets 34

IV

THE MANUFACTURING AND MARKETING OF NITROGEN FERTILIZERS IN THE UNITED STATES

by

Duane A. Paul and Richard L. Kilmer IJ

INTRODUCTION

During the 1960's, large increases in productive capacity in the fertilizer industry outweighed the growth rate of demand, and farm fertilizer prices fell. By the beginning of the 1970's the situation reversed itself, as the supply glut disappeared and prices began to increase sharply.

There is a potential for further cyclical activity by the end of this decade, and farmers, policymakers, and many members of the industry are con- cerned. Farmers have been affected strongly by the higher capital and energy costs of producing fertilizers, but often have little information regarding these issues as they affect fertilizer prices. Policymakers need objective data regarding the fertilizer situation while attempting to guarantee the availability of resources, such as natural gas, that are necessary for production and to encourage the buildup of productive capacity to supply fertilizers. Firms in the fertilizer industry continually attempt to monitor the demand and supply situation; some see the period from 1971 to 1975 as similar to the initial phase of past periods in which there were accelerated buildups of productive capacity, declines in product prices, and low profit levels. Knowledge of industry-input levels, capacity-utilization rates, and signifi- cance of plant age, among other factors, will aid plant managers in their decisionmaking,

This report describes several structural, manufacturing, and marketing characteristics of firms in the nitrogen fertilizer industry. Most of the information presented is based on an Economic Research Service (ERS) survey of the industry conducted in the fall of 1976^ Where appropriate, the survey results are supplemented with data from other government and private sources. Industry structure is discussed in further detail in (13). 2/

\J Paul is an agricultural economist with Chase Econometric Associates, Incorporated, in Philadelphia. Kilmer is an assistant professor in the Food and Resource Economics Department at the University of Florida at Gainesville. Both were agricultural economists in the National Economic Analysis Division, Economic Research Service, when this research was done.

2/ Underscored numbers in parentheses refer to references listed at the end of the report.

Survey Procedure

The population of nitrogenous fertilizer manufacturers was determined using lists of producers prepared by the Stanford Research Institute (1^, 2_, 3^, ^, 6_, S_, 9) and the Tennessee Valley Authority (14). Firms included in the universe produced at least one of the following products: anhydrous ammonia, ammonium nitrate, ammonium phosphate, ammonium sulfate (synthetic, involving the reac- tion of anhydrous ammonia and sulfuric acid), nitric acid, nitrogen solutions, and urea. The entire universe was canvassed in the ERS survey. A preliminary letter was mailed to an executive in each firm explaining the purposes of the survey and encouraging cooperation. The survey itself was then mailed to the appropriate individual, and phone calls were made to verify receipt and to answer questions about the schedules. Further phone calls encouraged return of the forms.

The survey was sent to 65 firms comprising the nitrogen fertilizer manufacturing industry. In the case of parent firms having subsidiary firms, a questionnaire was requested only from the parent fii^. Accordingly, subsidiary firms are not included in the population count of 65 firms. Of the 65 questionnaires mailed, 49 were completed and returned, representing 75.3 percent of the firms in the population. The capacity represented by these respondents comprises up to 70 percent of the total industry capacity (table

1).

The industry capacity shown for nitric acid includes only the capacities of firms which produce both nitric acid and one or more of the other products considered. These were the only firms that received the questionnaire, as nearly all of the remaining U.S. nitric acid capacity is used for nonfertilizer products (for example, for explosives and synthetics). Total annual industry capacity is approximately 12 million tons, but about 2.5 million of this is used only for nonfertilizer products.

Industry capacity represented by survey respondents is highest for synthetic ammonium sulfate and lowest for nitric acid. Weighted by the percentage of nitrogen in their products (table 1), the respondents' aggregate capacity represents 58.2 percent of the total nitrogen production capacity for the United States.

CHARACTERISTICS OF RESPONDENT AND NONRESPONDENT FIRMS

The majority of the respondents have nitrogen capacities of less than 200,000 tons per year (table 2), while most of the nonrespondents have nitrogen capacities of over 400,000. There may be many reasons for the relatively large proportion of nonrespondents which are large firms. Two firms which did not complete the forms cited the amount of time which they felt would be required to do so. Other firms indicated that they were involved in civil or antitrust suits and that their lawyers recommended against filling out the survey. Nonetheless, over 25 percent of the respondents had annual nitrogen capacities of at least 400,000 tons.

Table l--Total industry and respondent capacity to produce nitrogen fertilizer products, fall 1976 1/

Total capacity Capacity of survey respondents

as a percentage of industry total

Product Industry

\ Survey ; respondents

1,000 tons Percent

Anhydrous ammonia (82.24) 2/ 18,438 10,733 58

Ammonium nitrate (35.00) 8,692 5,285 61

Ammonium phosphate (15.20) 3/ 5,147 2,909 57

Ammonium sulfate (21.20) 799 560 70

Nitric acid (22.22) 9,475 4,158 44

Nitrogen solutions (29.00) 6,541 4,106 63

Urea (46.65) 5,793 3,637 63

1/ All capacities are in tons of material except ammonium phosphate, which is~in tons of P^Oi-,

2/ Numbers in parentheses notes the percentage of nitrogen contained in the fertilizer material.

3/ A weighted average for monoammonium phosphate (12.8% nitrogen) and di¥mmonium phosphate (21.13% nitrogen).

Table 2—Number of respondent and nonrespondent firms by annual nitrogen capacity, 1976 1/

Annual nitrogen ; ; I

capacity Respondent : Nonrespondent : Total in tons ; ;

Number of firms

Less than 100,000 18 2 20 100,001-200,000 9 1 10 200,001-300,000 4 0 4 300,001-400,000 5 1 6 400,001-500,000 1 4 5 500,001-600,000 7 2 9 600,001-700,000 2 1 3 700,001-800,000 : 0 2 2 More than 800,000 : 3 3 6

Total 49 16 65

1/ Sources of data for nonrespondents are (!_, 2_, 3^, £, 6_, 8^, 9^, 1£).

3

Respondents to the survey had plants of many different sizes (table 3). Anhydrous ammonia operations in particular were of both the smaller (under 600 tons per day) and often older vintages as well as the larger and usually newer designed sometimes exceeding 1,000 tons per day.

Many of the nitrogenous fertilizer plants now on stream began production between 1963 and 1969, a period of extensive capacity buildup in the industry (table 4). Fifty-seven percent of the respondent anhydrous ammonia plants began operating during that time, as did over 50 percent of the respondent ammonium nitrate, nitrogen solutions, and urea plants.

ITie age composition of nitrogen material plants is, in part, a result of technological changes which have occurred in the ammonia production process» As a result of the incorporation of these changes, l^öth capital and operating costs per ton of ammonia were reduced considerably in the early I960's (13). In order to take advantage of these changes, however, it was necessary to build large plants and to operate them at near-capacity rates. Industry capacity grew significantly until 1969, when an overcapacity situation became apparent. There were virtually no additions to anponia capacity for 3-4 years, as the industry attempted to adjust to this overcapacity. Since 1973, seveial new plants have been built. This is partly a response to the price increase all fertilizer products have undergone since 1972, and to anticipate future demands for fertilizers. As a result, 22 percent of the plants now producing began operating between 1970 and 1976.

Between 1963 and 1969, production capacities for all nitrogenous products increased significantly, and many of the plants currently producing reflect that growth. Urea was not a popular fertilizer until the ear^ly I960's ; about a third of the plants now producing it began operation before 1963. Since then, urea capacity has jujic)ed. Nearly all of the newer urea plants are adjacent to ammonia plants, as ammonia and carbon dioxide (a byproduct of the airanonia process) are the raw materials required to produce urea (13).

DIVERSIFICATION IN THE NITROGEN INDUSTRY

Many firms producing nitrogen materials also manufacture other products. Among the 49 respondent firms, 37 provided data on the composition of their 1975 total domestic dollar sales (table 5). Fertilizers contributed less than 10 percent to total sales among the firms, while chemicals, food and agricultural products, and fossil fuels contributed considerably more. One reason is that many of the firms now in the fertilizer industry began producing fertilizer as a secondary product, one relatively unimportant in terms of total firm revenues. Fertilizers remain a minor product for some of the larger firms.

Capacity ownership varies considerably by product and type of firm. For example, while nearly 40 percent of the respondents' anhydrous ammonia capacity is owned by firms which are primarily fertilizer producers, less than

Table 3--Number of respondent and nonrespondent firms by annual capacities of various fertilizer materials, 1976 \J

Product and daily : capacities of

Respondent firms

\ Nonrespondent ; ; firms \

Total plants in tons ;

Number of plants

Anhydrous ammonia: Less than 400 37 7 44 400-600 10 6 16 601-1,000 8 8 16 More than 1,000 10 8 18

Total 65 29 94

Anmionium nitrate: Less than 150 11 9 20 150-338 14 5 19 339-600 10 7 17 More than 600 7 4 11

Total 42 25 67

Ammonium phosphate: Less than 1,160 18 8 26 More than 1,160 8 7 15

Total 26 15 41

Ammonium sulfate: Total 6 2 8

Nitric acid: Less than 150 11 12 23 150-220 7 6 13 221-515 21 9 30 More than 515 6 17 23

Total 45 44 89

Nitrogen solutions: Less than 400 21 4 25 More than 400 9 9 18

Total 30 13 43

Urea: Less than 150 9 6 15 150-441 17 5 22 More than 441 9 4 13

Total 35 15 50

1/ Sources of data for nonrespondent firms are (1, 2, 3, 5, 6, 8, 9, 14)

Table 4--Age distribution of plants operated by respondent and nonrespondent firms, 1976 1/

Product : Age of plants in 1976

and firm : 0-6 years . 7-14 years . ^^ years : more :

Total

Percent

Anhydrous ammonia: : Respondents : Nonrespondents : Industry :

19 26 22

57 52 55

24 22 23

100 100 100

Ammonium nitrate: : Respondents : Nonrespondents : Industry :

25 32 28

58 58 58

17 10 14

100 100 100

Ammonium phosphate: : Respondents : Nonrespondents Industry

44 27 38

31 36 33

25 37 29

100 100 100

Ammonium sulfate: Respondents Nonrespondents Industry

2/ : 2/

: 2/

2/ 2/

2/

2/ 2/

2/

100 100 100

Nitric acid: Respondents Nonrespondents Industry

: 24 : 33 : 28

38 44 41

38 23 31

100 100 100

Nitrogen solutions: Respondents Nonrespondents Industry

*: 32 : 33 : 32

55 56 55

13 11 13

100 100 100

Urea: Respondents Nonrespondents Industry

: 11 : 2/ : 2/

56

2/ 2/

33 2/ 2/

100 100 100

1/ These data are not directly comparable with data in table 3, as on-stream daTes were not available for several plants of nonrespondents. Consequently, the figures in table 4 do not include all nonrespondent firms. Sources of data for nonrespondent firms are Q, 2^, 3^, £, 6_, 8^, £, 14).

2/ Withheld to avoid disclosing individual operations.

Table 5--Diversified activities of nitrogen manufacturing firms, 1975 1/

Dollar sales in product group ai ; percentage of

Product Nitrogen firms manufacturing other products

total domestic sales of:

group All 37

respondents

Only those firms in the product group

Number Percent -----

Fertilizers 2/ 36 6.6 6.8 Pesticides 16 .8 1.3 Seed 5 .1 1.0 Feed 5 .6 3.6 Chemicals 22 19.2 30.9

Food and agricultural products Fossil fuels

: 6 16

11.5 43.5

55.3 64.1

Manufacturing Metals

5 8

6.2' 2.8

25.9 27.9

Other 17 8.7 13.5

1/ Based on those 37 of the total respondent firms that provided domestic dollar sales data.

2/ Includes nitrogen and other fertilizers.

a fourth of the capacity is owned by firms which deal primarily in fossil fuels (table 6), 3/ (The figures in table 7 may b^ partially biased by the nonresponse of several larger fertilizer producers and by the lack of sales compjosition information for several respondents. It is likely that the inclu- sion of data from the nonrespondents would increase thê fertilizer firms* capacity for products such as ammonia and urea.)

On the average, firms with 10 percent or less of their total sales in fertilizers have considerably larger sales than firms more specialized in fertilizers (table 7). Several of the former had 1975 domestic sales in excess of $1 billion, while the average for firms with 41-100 percent of their sales in fertilizers was less than $200 million.

Firms specialized in nonfertilizer products own a majority of the productive capacity for several nitrogen products (table 8). In particular, firms with 30 percent or less of their total sales in fertilizers own at least half the capacity to produce each product except ammonium phosphate and ammonium sulfate.

Generally, the average nitrogen production capacity of firms with more than 10 percent of total sales in fertilizers exceeds that of firms with less than 10 percent in fertilizers (table 9), For example, in 1975, average urea capacity was twice as high for the former. Such larger capacities were the case for all the products except ammonium nitrate. 0ne explanation for the latter might be that a considerable amount of ammonium nitrate is produced for norifertilizer purposes.

CHARACTERISTICS OF PRODUCTION FACILITIES

The production of fertilizers requires capital- and energy-intensive chemical complexes which use particular raw materials. Without these, production must stop as there are no acceptable or feasible substitutes for most of the materials. Consequently, fertilizer producers cêfullyimmi their uses of such inputs as natural gas in aimnonia producMon and ammonia in deri^tive production. Companies that design fertîiizer plants devote considerable amounts of their research budgets to finding more efficient ways to use raw materials and energy. Efficient use of inputs directly affects the capacity to produce, and consequently the ability to respond to changes in demand.

Inputs Required to Produce Nitrogen Products

Most chemical processes for producing nitrogenous fertilizers use relatively fixed proportions of feedstock materials per unit of output. However, there is some variation in these proportions depending on the size and age of the plant, technical refinements in the production process, and the frequency

3/ The primary product group of a firm is classified as that for which its dollar volume is highest.

Table 6--Distribution of nitrogen product capacity by firms' principal production activities, 1975 1/

^JD

Nitrogen product

Principal product ion activity

: Chemicals : Fertilizers : Food and : :agricultural : : products :

Fossil \ fuels \ Other : Total

Percent

Anhydrous aimnonia : 22.4 37.6 7.4 24.6 8.0 100.0

Airanonium nitrate 30.4 34.7 8.5 22.9 3.5 100.0

Ammonium phosphate 17.5 74.6 2.2 1.2 4.5 100.0

Ammonium sulfate 0.0 86.4 0.0 13.6 0.0 100.0

Nitric acid : 26.7 35.8 8.6 24.6 4.3 100.0

Nitrogen solutions : 34.2 40.9 9.9 12.8 2.2 100.0

Urea : 26.1 31.2 9.3 16.2 17.2 100.0

Total nitrogen : capacity 2/ : 24.0 41.3 7.3 19.8 7.6 100.0

1/ Each firm is classified by the product for which dollar sales are the greatest. 2/ Excluding nitric acid. Calculated by multiplying the capacity for each product by its nitrogen

content (table 1) and summing across products.

Table 7--Fertilizer sales in relation to total sales of respondent firms, 1975

Fertilizer sales as \ percent o£ firm's [

total sales [

Number of

firms

1975 domestic sales

Range Average

No.

7

AÍ4 1 1 -5 r\-n doll ars -------

217 10 or less : 500 or less

U A J.V/JJ.

do. : 7 501- -1,500 897

do. 4 1,501-3,000 2,433

do. 4 3,001 or more 5,601

11-30 : 3 i/ 463

31-40 3 1/ 683

41-90 : 4 y 337

91-100 : 5 y 83

Total : 37 1,220

1/ Data withheld to avoid disclosing individual operations.

Table 8--Distribution of sales and product capacities among respondent firms, 1975

Fertilizer s£ lies of ; sales.

Proportion of respondent production capacity in:

as percent firms's total

Anhy- drous ammonia

: Ammo- : : nivan : ¡nitrate;

Urea :Nitrogen : solu- : tions ;

Ammoniiom phos-

. phate

1Ammonium; 1 sulfate \

Nitric acid

Percent

10 or less 50.0 64.7- 47.9 57.1 12.3 13.4 58.5

11-30 7.4 .7 6.0 1.9 9.2 0.0 5.7

31-40 4.5 .5 0.0 0.0 16.6 86.6 .4

41-90 : 21.9 12.3 23.4 26.6 43.7 0.0 12.7

91-100 : 16.2 21.8 22.7 14.4 18,2 0.0 22.7

Total : 100.0 100.0 100.0 100.0 100.0 100.0 100.0

10

Table 9--Average annual nitrogen production capacity of respondents, January 1, 1976

Fertilizer sales \ Product

as percent of firm's total sales

• Anhy- drous

ammonia

: Ammo- : : Nitrogen:Ammonium : nium : Urea : solu- : phos- :nitrate: : tions : phate

[Ammonium; [sulfate

Nitric acid

1,000 tons material weight

10 or less 224 219 139 175 167 191 65

More than 10 ; 388 192 274 262 177 1,003 422

of plant breakdowns. Tables 10-15 present data on the physical inputs used by respondent firms to produce each of the nitrogen products considered in the study. Plants are stratified by age and capacity to illustrate the effects of these two variables and the corresponding technological effects on input re- quirements. The figures in parentheses within each table are the numbers of plants for which the corresponding mean(s) are calculated. In some cases, there were insufficient numbers of firms or plants to present a figure for a particular age and size class without revealing the operation of an individual respondent. In these instances, the data were combined with those from adjoining cells and an average was computed for the combined classes. These cases are noted by arrows in the columns for the corresponding input(s).

Average input levels also are shown for all plant sizes in each age class and across age classes. A simple average is calculated across sizes and ages by adding the input coefficients of all respondent plants and dividing by the number of plants. In addition, a weighted average coefficient is calculated by multiplying the input value of each plant by the plant's annual capacity (from the survey), summing these annual input levels for all respondents, and dividing this total by the plants' aggregated annual capacities. In some cases, there are significant differences between the simple and weighted averages. There may be some differences between the average inputs shown and those of nonrespondents. However, it is unlikely that these variations are significant and the figures shown should be representative of the industry.

Anhydrous Ammonia

Natural gas is the largest variable cost component in domestic anhydrous ammonia plants (13). Many ammonia producers are susceptible to gas curtailments, especially during the winter, when interstate gas supplies may be diverted to residential and other uses assigned higher priorities in Federal regulations.

Natural gas is used as both a feedstock and a source of heat and power in ammonia plants. Quantities used depend on the technological characteristics, size, and age of each plant. There is little variation in the amount of gas used for feedstocks among U.S. ammonia plants, regardless of size or age, but

11

within each age class, the average is slightly higher for the smallest plants (table 10). The weighted and simple averages both indicate, however, that average natural gas feedstock use per ton of ammonia is about 23,000 cubic feet.

Gas consumption for heat and power pui^oses is also quite uniform for all plants, at about 14,300 cubic feet per ton. Total natural gas use for both feedstock and heat and power averaged 37,600 cubic feet. Among age classes, total consumption is lowest for the plants which started operation before 1963, and highest for the newest plants.

Inputs of electricity and labor differ widely among ammonia plants. All plants built before 1963 and nearly all plants built since then with daily production capacities of less than 600 tons utilize electric motors to drive the compressors. Electrical consumption is consequently quite high in these units, averaging nearly 600 kWh per ton of product. Conversely, the newer, larger plants utilize gas turbine engines to drive tlie compressors, and electrical consunç^tion is much lower. Among plants producing more than 1,000 tons per day, consumption ayeraged 37 kWh. The substantial difference between the simple and weighted statistics (396 and 216 kWh, respectively) is due to the low input use coefficients of the newer and larger plants.

Only seven plants of the respondent firms use fuel oil in their ammonia operations. These data are not shown in table 10, as there appears to be substantial variation in the uses of fuel oil among the plants. Until recently, little fuel oil was used in any plants. However, several producers may use fuel oil as a substitute for natural gas in nonfeedstock applications in the future because of uncertainties regarding gas prices and supplies (13).

Ammonium Nitrate

Ammonium nitrate is produced in either liquid or solid form for fertilizer, depending on the way it is to be utilized, iünmonium nitrate vrtiich is to be applied directly to the soil is usually prilled or granulated for ease of packagiiig and handling. Other aimnonium nitrate is incorporated in liquid form into nitrogen solutions.

The simple average input of natural gas for heat ^d power does not differ for plants producing all solids or solids and solutions, but the weighted averages differ considerably. Consumption is almost twice as high in the all- solids operations as in the solids-and-solutions plants (table 11). Similarly, electricity use is about twice as high in the all-solids plants. The primary reason for the difference is that extra energy inputs are required to make prilled or granulated solid products.

Plants built before 1963 use slightly less anhydrous ammonia and nitric acid and more labor per ton of product than plants built more recently. The ammonium nitrate processes available have slightly different efficiency levels, and these most likely account for much of the variation.

Ammonium Phosphate

Mamy grades of ammonium phosphates can be produced depending on the proportions used of the primary ingredients (anhydrous ammonia, phosphoric acid, and

12

Table 10--Average physical inputs per ton of anhydrous ammonia, by age and size of plants responding to survey, 1975

Output

Year plant began operation and

daily production capacity in tons

Before 1963: Less than 20O 200-400 401-600 601-1,000 More than 1,000

Average

1963-69: Less than 200 200-400 401-600 601-1,000 More than 1,000

Average

1970-75: Less than 200 200-400 401-600 601-1,000 More than 1,000

Average

All years: Less than 200 200-400 401-600 601-1,000 More than 1,000

Average Simple Weighted

Inputs

Natural gas

Feedstock Heat and power

1,000 cubic feet

23.6(931/2/

22.1(5)

23.1(14}

27.3(3) 23.7(5)

23.0(8) _JL„ 22.8(9) 23.5(25)

23.3(4)

t 22,8(4)

23.0(8)

24.8(9) 23.3(13) 22.0(7) 23.3(6) 23.0(11)

23.3(47) 23.0(47)

14.4(9)

10.1(5)

12.9(14)

12.1(3) 13.2(5)

17T5(8)

1474(9) 14.7(25)

14.3(4)

16.7(4)

15.5(8)

15.7(9) 13.0(14) 11.7(7) 17.6(6) 14.7(11)

14.3(47) 14.6(47)

Electricity

Kilowatt-hours

639(8)

475(5)

576(13)

429(7)

1^2(7)

39(9) 195(23)

896(6)

896(6)

572(8) 686(13) 403(6) 182(6) 36(11)

396(44) 216(44)

Production workers

Man-hours

74(8)

.38(5)

.60(13)

1.09(3) .35(5)

.23(7)

.22(8)

.36(23)

.75(6)

.90(9)

.59(12)

.37(7)

.19(5)

.21(9)

.50(42)

.30(42)

-- = no response in this class or data withheld xo avoid disclosing individual operations. 1/ Figures in parentheses denote number of plants for which the corresponding mean is calculated. 2/ Arrows note instances where data were combined with those of adjoining cells and an average was computed for the combined

classes.

Table ll--Average physical inputs per ton of ammonium nitrate, by age and size of plants responding to survey, 1975

Output Inputs

Year plant began Natural gas Electricity Production wor kers operation and (heat and power) "^ Anhydrous

ammonia • Nitric

daily production capacity in tons All solids;

Solids and solutions

All solids ; Solids and solutions 1 All solids :

Solids and solutions

acid

- 1,000 cubic feet - - - Kilowatt -hours - - - - Man-h( Durs - - - - - Pounds - - -

Before 1963: Less than 150 _ _ -- .26(7) 1/

44^(8)2/ •'r^ ■

150-338 __ -- 1 __ 1581(8) 339-600 -- -- -- --

457(4) 1

601-800 -- -- -- -- .16(5) 164^7(4) More than 800 — — — — — 4f if

Average -- -- -- 31(9) .22(12) 451(12) 1603(12)

1963-present: Less than 150 4 f 150-338 ^_ -- -- -- -- 472(8) 1590(8) 339-600 -- ,- --

43^(3) 4-

601-800 -- __ -- _- -- 1749(3) More than 800 -_ -- -- -- i i Average -- -- -- 8(9) .15(9) 464(11) 1633(11)

All years: Less than 150 150-338

— ~ - 29(7) 36(5) .24(8) if

_ ^ 460(16) 1588(16)

339-600 : -_ t 8(4)

f -- 4- 449(7)

t 601-800 More than 800 Average

• -- 63(8) .16(13) 1691(7)

1 Simple 1.4(13) 1.4(7) 47(15) 23(9) .19(21) -- 458(23) 1618(23) Weighted : 1.7(13) 0.9(7) 38(15) 19(9) .17(21) — — 457(23) 1617(23)

-- = no response in this class or data withheld to avoid disclosing individual operations. 1_/ Figures in parentheses denote number of plants for which the corresponding mean is calculated. 2^/ Arrows note instances where data were combined with those of adjoining cells and an average was computed

for the combined classes.

sulfurie acid). 4/ Among the most common monoammonium phosphate grades are 11-48-0 and 16-20-0. Typical diammonium phosphate grades are 18-46-0 and 21-53-0 (15). Anhydrous ammonia and phosphoric acid form the respective bases for nitrogen and phosphate values, and sulfuric acid is often utilized to con- trol the grades produced. In addition, sulfuric acid is used directly in the production of phosphoric acid.

Inputs used per ton of ammonium phosphate differ considerably among plants in the industry (table 12). For some factors, such as natural gas and electricity, differences in average use are not clearly explainable. Figures may differ because of varying accounting practices of different firms, among several other reasons. Inputs of anhydrous ammonia, phosphoric acid, and sulfuric acid differ considerably, but this is due most likely to the wide variety of ammonium phosphate grades produced by the industry.

Ammonium Sulfate

Synthetic ammonium sulfate is produced by neutralizing artiydrous ammonia with sulfuric acid. 5/ Although there are few synthetic plants operating in the United States and no new plants planned through at least 1980, ammonium sulfate is utilized in mixed fertilizers and as a direct application material, especially in the Mountain and Pacific States (15). On the average, it requires 540 pounds of anhydrous ammonia and 1,553 pounds of sulfuric acid to produce one ton of ammonium sulfate. In plants that use natural gas for heat and power, average gas consumption per ton is 180 cubic feet. Among all plants, average electricity consumption is 21 kWh, and average labor input is .24 man-hours.

Nitric Acid

There are many different processes available for producing nitric acid. They differ mainly by the pounds of pressure employed in the two primary process steps. The process selected for a given plant depends on many factors, including the costs of anhydrous ammonia (the basic ingredient) and electrical power, and the availability of capital (13). Electricity use per ton of product varies considerably depending on the size of plant, the amount of com- pression required in the process steps, and the extent of energy efficiency and product recovery in the process.

Average electrical use drops sharply with newer and larger plants (table 13). For plants of all ages, the simple average is 145 kWh, but the weighted average is 112. The difference is due to the relatively low average consumption of several large plants built since 1963 and their corresponding effects on the weighted average. Average labor input drops also, though not as much.

4/ A fertilizer's grade or analysis is the percentage it contains, by weight, of nitrogen, phosphate, and potash. y There are other sources of ammonium sulfate, including the byproducts of

other chemical processes and the neutralization of coke-oven gas with sulfuric acid. Discussion relates only to synthetic product, however.

15

Table 12--Average physical inputs per ton of ammonium phosphate, by age and size of plants responding to survey, 1975 l^f

Output Inputs


daily production Natural gas

(heat and power) Electricity; Fuel oil

Production workers

Anhydrous ammonia

Phosphoric acid

Sulfuric acid

capacity in tons 1,000 cubic feet Kilowatt-

hours Gallons Man-hours _ ^ Pounds - -

Before 1963: Less than 400 106(3) 2/ 1.36(3) 1286(2)

400-575 -- 34(5) 3/ -- .38(5) -- 1032(5) -- 576-1,150 1,151-2,400 t- " -- -V- -- > -- More than 2,400 -- -- Average .94(4) 61(8) 2.5(6) .75(8) 337(7) 1104(7) 273(6)

1963-60: Less than 400 -- 81(4) -- 7*^(4) 405(4) 1260(4) -- 400-575 - - * V V i 576-1,150 58(5) -- 50(4) 454(5) 1283(5) -- 1,151-2,400 -- 55(3) -- .17(3) 415(3) 978(3) -- More than 2,400 -- Average .43(8) 65(12) 1.8(7) .49(11) 428(12) 1199(12) 203(9)

1969-76: Less than 400 -- -- -- -- -- -- -- 400-575 -, -- -- -- -- -- -- 576-1,150 -- -. -- -- -- -- -- 1,151-2,400 -- -- -- -- -- -- -- More than 2,400 -_ _> _- -.., ,-. ,- Average .91(3) 57(6)

--■ 1.00(7) 376(7) 1113(7) 107(4)

All years: Less than 400 -- __ 1.18(7) 351(6) 1168(7) -- 400-575 ._ „^ -_ .74(8) 429(8) 1288(8) -- 576-1,150 -- -„ -_ .50(7)- 360(8) 1080(8) 1,151-2,400 -- -- -- .18(4) 427(4) 1072(4) -- More than 2,400 __ -- -- -- -- -- Average

Simple .68(15) 68(26) 2.0(15) .71(26) 389(26) 1150(26) 188(19) Weighted .48(15) 49(26) 2.2(15) .42(26) 387(26) 1088(26) 123(19)

-- = no response in this class or data withheld to avoid disclosing individual operations. 1_/ Excludes plants which utilize coke-oven gas as their primary hydrogen source. 2^1 See footnote 1, page 10. 3^/ See footnote 2, page 10.

Table 13--Average physical inputs per ton of nitric acid, by age and size of plants responding to survey, 1975

Output



Before 1963: Less than 150 150-220 221-370 371-515 More than 515 Average

1963-present: Less than 150 150-220 221-370 371-515 More than 515 Average

All years: Less than 150 150-220 221-370 371-515 More than 515 Average

Simple Weighted

Natural gas (heat and power)

1,000 cubic feet

1.03(4)

1.63(5)

1.63(5)

t 1.80(5)

4- .31(4)

1.14(9) .80(9)

Inputs

Electricity

Kilowatt-hours

215(5) 1/

112(8) y

152(13)

T" 226(9)

>^

^8)

141(17)

285(6) 175(8) 113(6) 85(3) 79(4)

145(30) 112(30)

Production workers

Mán-hóurs

.25(5)

AMI-)

.17(12)

T .13(9)

I .09(^7)

.11(16)

.14(6)

.20(8)

.12(8)

.08(6)

.14(28)

.12(28)

-- = no response in this class or data withheld to avoid disclosing individual operations. 1/ See footnote 1, page 10. 2/ See footnote 2, page 10.

Anhydrous ammonia

Pounds

595(5)

604(9)

601(14)

592(5) 608(5) 588(3) 600(3) 595(3) 598(19)

542(7) 604(8) 592(9) 600(3) 610(6)

599(33) 606(33)

Nitrogen Solutions

Nitrogen solutions are aqueous mixtures of ammonia, ammonium nitrate, or urea, separate or in combination. They may be applied directly or used to manufacture liquid or dry mixed fertilizers. ''Pressure'* solutions contain free anhydrous ammonia and must be stored under pressure to prevent the ammonia from .volatilizing (15)> Conversely, solutions of urea and/or ammonium nitrate do not require pressurized storage. The total nitrogen content per ton of a given solution depends on the amounts of the three nitrogen carriers that are mixed with water.

Less than a third of the respondents produced pressure solutions (table 14). The nitrogen content of a typical nonpressure solution, based on the nitrogen percentages specified in table 1 and the weighted averaged in table 14, is 31.3 percent. 6/ Some producers include other nutrient-carrying materials as well, usually phosphate or potash, to increase the nutrient value of the fertilizer. If the input of 414 pounds of anhydrous ammonia is added to form a pressure solution, the total nitrogen content is increased to 48.3 percent. 7/

Urea

There are three basic urea production processes, each of which has several commercial variations. The basic difference among the processes is the degree of recovery of anhydrous ammonia, one of two primary raw materials. Among "total recovery" plants, ammonia efficiency ranges from 85 to 95 percent, and inputs per ton of product vary accordingly (15). There is some variation by plant age, reflecting in part the technologies which have been developed over time (table 15).

Urea is used in both solid and liquid forms. Liquid urea is used ex- tensively in nitrogen solutions, and the solid product is applied directly or incoiporated into mixed and bulk blend fertilizers. Among those respondent plants which provided data on electricity use and labor inputs, 5 produced only solids and 10 produced both solids and solutions. Both inputs were higher in the solids-and-solutions plants than in the all-solids plants.

Rated and Maximum Capacities to Produce

The variable inputs which a fertilizer plant uses to produce a unit of product are relatively constant and are defined by the nature of the chemical processes and equipment used. Capacity, on the other hand, relates to the ability of the plant to produce a certain amount of product per unit of time and is usually defined by parameters more closely related to the fixed factors of production, especially the sizes of process units and the degree of in- tegration among the individual process steps. The initial ar installed capacity is often called "nameplate'' capacity.

6/ Total nitrogen content is (891 x .55) + (674 x .4665) = 626 pounds. The percentage content is 626/2000 =51.5%.

7/ ((891 X .55) + (674 x .4665) + (414 x .8224))/2,000 = 48.5%.

18

Table 14--Average physical inputs per ton of nitrogen solutions, by age and size of plants responding to survey, 1975

Output

Year plant began operation and daily production capacity in tons

Before 1963; Less than 100 100-250 251-400 401-800 More than 800 Average



Simple Weighted

Inputs

Electricity Production workers

Kilowatt-hours

7(4) 3/ 4/

Man-hours

+- 11(3)

8(7) .26(5)

9(8)

11(5)

7(10)

9(15) 8(12)

.21(7)

.46(4)

i_ .11(8)

.23(12)

.74(9)

Anhydrous ammonia 1/

452(7) 414(7)

Ammonium nitrate 1/ 2/

Pounds ~

T 880(4)

837(7)

970(10)

984(6)

877(7) 879(4)

915(17) 891(17)

y 3/ 4/

= no response in this class or data withheld to avoid disclosing individual operations. Average qualities of anhydrous ammonia, ammonium nitrate, and urea combined per ton of pressure solution. Average qualities of ammonium nitrate and urea combined per ton of nonpressure solution. See footnote 1, table 10. See footnote 2, table 10.

Urea 1/ 2/

702(4)

664(3)

686(7)

685(10)

734(6)

627(7) 715(4)

685(17) 674(17)

Table 15--Average physical inputs per ton of urea, by age and size of plants responding to survey, 1975

Output Inputs



Natural gas (heat and poyer) ~77l TT^ i Solids and All solids 1 4.-« solutions

Electricity

All solids Solids and solutions

Production workers

Solids and All solids

solutions Man-hours - - - -

Anhydrous ammoni a

Carbon dioxide

Founds

Before 1963: Less than 150 150-250 251-441 442-629 More than 629 Average



Simple Weighted

- 1,000 cubic.feef" Kilowatt-hours

1.1(4) 2.7(4)

150(5) 156(5)

140(3) 1/

182(7)

134(3)

184(7)

169(10) 161(10)

.32(5)

.31(5)

.45(3)

.39(7)

.51(3)

.37(7)

,41(10) .46(10)

1166(6) 1406(4)

1213(12) 1549(10)

1188(4) 1205(7)

1566(3) 1542(7)

1149(4) 2/,4^43

12SSÍ3) *

1197(18) 1508(14) 1224(18) 1492(14)

-- = no response in this class or data withheld to avoid disclosing individual operations. j7 See footnote 1, table 10. 2/ See footnote 2, table 10.

After a plant has begun production and supervisors have acquired experience in operating the unit, opportunities for smoothing or streamlining the production process often appear. In some cases, streamlining involves the removal of bottlenecks, such as insufficient sized machines in one or more steps of the production process. In others, the process steps are integrated more closely than they were in the original plant design. The net effect is that the plant's production capacity is increased.

Many of the respondents' plants have been in operation for some time. Apparently they have undergone a number of changes which have increased their production capacity above nameplate figures. On the average, as of January 1, 1976, the respondents' rated daily capacity for anhydrous ajmnonia is 92.9 percent of their maximum capacity (91.4 for ammonium nitrate, 85 for anmionium phosphate, 83,3 for ammonium sulfate, 80.8 for nitric acid, 85 for nitrogen solutions, and 94.3 for urea). These potentials for increases in production may not be without cost, as operation above current rated capacity may require greater inputs by supervisors and other managers for more closely coordinating the operations. As a consequence, the maximum capacities may not be sustain- able for extended periods of time without some changes in the resource bases of the plants and firms.

Capacity Utilization

The extent to which production capacity is utilized depends not only on the characteristics of demand for a product, but also on the frequency of plant breakdowns and repairs and the availability of the factors required for production. Also, if large inventories of particular products are on hand, producers may choose to reduce or cease production until the situation changes. The processes for some of the nitrogenous products may be slowed down, although those for anhydrous ammonia in the newer, larger plants require continual, high-utilization production in order to be efficient.

Most nitrogenous plants depend on critical raw materials for which there are no feasible substitutes unless plants are completely redesigned. In the case of anhydrous ammonia, natural gas is a required feedstock in nearly all U.S. plants, and a reduction or elimination of gas deliveries to a plant similarly reduces or eliminates ammonia production. Adjoining plants for ammonia-based derivative products are affected, in turn, as ammonia is the primary raw material required for each of these products.

Among the respondents, the utilization of rated capacity varied considerably depending on the product considered, ranging from 45 percent to nearly 95 percent (table 16). The average for all plants was about 88 percent.

SPATIAL DISTRIBUTION OF PRODUCTS

The directions and distances of fertilizer shipments depend on the locations of production in relation to the areas of consumption. Many things in- fluence the locations of production plants, but most involve the product or

21

Table 16-- •Capacity utilization by survey respondents, 1975

Product and daily ', 1975 utilization of: prOûucLion capaexiy ; ;

in tons Maximum capacity Rated capacity

Pércéát

Anhydrous anunonia: : Less than 200 : 63.2 68.4

200-400 : 83.4 87.1 401-600 : 87.2 94.6 601-1,000 : 80.7 88.9 More than 1,000 : 84.4 88.2

Average : 82.4 87.8

Animonium nitrate: : Less than 338 : 76.8 79.5 339-600 : 74.3 77.8 601-800 : 90.5 94.2 More than 800 : 73.1 77.4

Average : 76.5 79.2

Ammonium phosphate: : Less than 575 ; 60.4 69.1 576-1,150 : 44.4 48.4 More than 1,150 : 47.7 68.0

Average 50.4 61.0

Ammonium sulfate: '

Average 50.5 60.6

Nitric acid: Less than 150 : 68.4 68.7 150-220 : 77.9 ' 82.4 221-370 : 85.6 87.7 371-515 : 89.0 95.6 More than 515 : 87.9 90;5

Average : 85.2 88.4

Nitrogen solutions: Less than 250 *: 44.8 61.2 250-400 : 44.9 45.2 401-800 : 67.5 69.3 More than 800 : 50.9 56.4

Average : 56.0 61,3

Urea: Less than 150 : 69.5 76.6 150-250 : 80.7 88.0 251-629 : 87.1 91.0 More than 629 : 85.6 87.3

Average : 84.1 85.3

22

inputs. For weight-losing processes—that is, those for which the output of a specified weight of product requires more than that weight of raw material(s)-- it is usually more economical to locate the plant at the raw material point than at the market. 8/ Doing so results in the overall movement of less weight than if the plant is located at the market. These factors are significant for many of the phosphatic fertilizers, as the production of a ton of phosphoric acid, for example, requires over 3 tons of phosphate rock. Phos- phoric acid plants, as a consequence, are usually located adjacent to, or very near, the sources of phosphate rock (13).

In the case of nitrogenous fertilizers there are other factors involved as well. Possibly the most important factor affecting the locations of anhydrous ammonia plants and, consequently, movement of ammonia, is the availability of natural gas. Natural gas is essential to ammonia production in nearly all U.S. plants. Continued supplies of gas, however, are becoming increasingly uncertain to ammonia producers. This is due, in part, to the separate "markets'» for the gas: interstate (in which the price is federally regulated) and intrastate (in which the price is not so regulated). There has been little incentive for gas producers to ship through interstate pipelines for the last several years, as the federally-set price has been considerably below the average prices received by intrastate suppliers.

Some ammonia producers have been directly affected by curtailments, as the regulatory agencies have the authority to divert interstate supplies to other uses in emergency situations. Further, almost half of U.S. ammonia capacity relies on interstate gas (13). Consequently, many of the newer anhydrous ammonia plants have been located close to sources of intrastate gas, particularly in the Delta and Southern Plains States. Although intrastate gas is considerably more expensive than interstate gas, ammonia producers prefer the former, as supplies are more certain. The size of capital-related costs makes it even more important that ammonia producers be able to produce continually.

The transportation and storage of fertilizers have become increasingly important because of the relative concentration of production facilities in a few areas of the country and scattered seasonal use of these products. With the trend toward larger production facilities (13), the availability of adequate onsite and offsite storage and transportation facilities is even more important.

Fertilizer products utilize several modes of transportation to move products to the points where they are stored and to those where they are sold through a variety of outlets. The modes of transportation used depend in part on the distances the materials are shipped and the availability of vehicles to

ymove the products. The distances shipped in turn depend on the size of a plant's market area, the availability of competitive products, and other factors.

In general, there is a positive relationship between the capacity of a fertilizer plant and the size of the market area that it serves (table 17). Smal- ler plants generally serve smaller market areas, as the transportation costs for moving products increases directly with the distance from the plants. Further, the presence of economies of scale among many of these types of

%J See (10). This assumes equal transfer costs per unit weight of raw material and finished product.

23

Table 17--Distance of domestic fertilizer shipments, by plant capacity, 1975

Product and daily production capacity of plants in tons

Anhydrous ammonia: Less than 200 200-400 401-600 601-1,000 More than 1,000

Average

Ammonium nitrate: Less than 338 338-600 601-800 More than 800

Average

Anunoniiom phosphate: Less than 400 400-575 576-1,150 More than 1,150

Average

Ammonium sulfate: Average

Nitrogen solutions : Less than 250 250-400 401-800 More than 800

Average

Urea: Less than 250 250-629 More than 629

Average

Average distance shipped

Miles

108 262 256 657 441 447

210 302 206 307 271

475 788 506 305 509

308

203 210 279 663 434

187 385 443 405

24

operations causes the average production cost to be higher for a smaller plant. Consequently, the total delivered cost of product increases with the size of the market area, and the small plant becomes relatively uncompetitive. Larger plants, especially those producing anhydrous ammonia, benefit substantially from economies of scale (15), and may in turn ship greater distances before the combined production and transportation cost cause the plant to lose its competitive advantage.

There may be several factors other than plant size which affect the distance a product is shipped. Some of the most probable factors are the density of demand in the area served, the locations of raw materials required by the plants, geographical barriers to shipments of products, new transportation technology not yet employed by all participants, and the degree of scale economies among producing plants.

There also appears to be a positive relationship between the nitrogen content of a product and the distance it is shipped from the plant. The greater the nitrogen content, all other factors equal, the greater is the area over which delivery can be made at lower total cost per pound of nitrogen. Among the nitrogenous products, anhydrous ammonia has the highest nitrogen content and, on the average, is shipped the furthest (except ammonium phosphate, for which there are other unexplained variables involved). Nitrogen solutions average 29 percent nitrogen, yet appear to be shipped further than ammonium nitrate, which comprises 35 percent nitrogen. However, plants in the largest size class may use pipelines, which effectively increase the sizes of the areas they serve.

The distance a product is shipped also depends upon the area in which it is produced. For example, anhydrous ammonia plants in the Delta States and Southern Plains ship their output 2.5 times as far as plants in the Corn Belt and Lake States (table 18). This relationship appears quite plausible, for although the Com Belt and Lake States account for nearly 50 percent of total U.S. airanonia consumption (15), the greatest proportion of production capacity is in the Delta and Southern Plains States. Consequently, large amounts of ammonia move considerable distances from production locations in the latter to the Corn Belt and Lake regions.

The average distance between areas of production and consumption is especially significant for ammonium phosphate. Many U.S. plants are located in the Southeast and Delta States, close to sources af phosphate rock and natural gas, the materials required to produce the raw materials for anùnonium phosphate. However, 65 percent of U.S. ammonium phosphate consumption is in the Mountain and Pacific States (15). Although there are ammonium phosphate plants located in those consuming areas, their aggregate production capacity is not sufficient to meet demand. Consequently, much of the ammonium phosphate produced in the Delta and Southern States is shipped to the areas of heavy use in the West.

Nitrogen solutions are also shipped considerable distances, especially from plants in the Delta States and Southern Plains. The long shipping distances from these areas are in part due to the availability of barge and pipeline transportation facilities to the Lake, Corn Belt, and Northern Plains States, which consume over 50 percent of U.S. nitrogen solutions (15). On the

25

Table 18--Distance for nitrogen product shipments, by region, 1975

Product and region(s) in ] Average distance shipped which plants are located [ from plant

Miles

Anhydrous ammonia: Corn Belt and Lake States 216 Northeast and Appalachian 81 Southeast : 172 Delta 552 Southern Plains 566 Northern Plains and Mountain 218 Pacific 149

Ammonium nitrate: Corn Belt, Lake States, and Northern Plains 327

Northeast, Appalachian, and Southeast : 231

Delta States and Southern Plains : 217

Mountain and Pacific 223

Airanonium phosphate: Corn Belt, Lake States, Appalachian, and Northern Plains \ 319

Northeast and Southeast : 786 Delta States and Southern

Plains ': 313 Mountain and Pacific : 663

Ammonium sulfate: All regions : . 308

Nitrogen solutions: Corn Belt and Lake States \ 162 Northeast, Appalachian, and

Southeast : 250 Delta States and Southern

Plains i 676 Northern Plains and Mountain : 448 Pacific : 137

Urea: Corn Belt, Lake States, Northern Plains, Mountain, and Pacific : 325

Northeast, Appalachian, Southeast, Delta States, and Southern Plains ! 434

26

other hand, the relatively short average shipping distances from Com Belt and Lake States^ plants indicate that most of the nitrogen solutions produced in those areas are also consumed there.

Transport ati on

The transportation of fertilizer is particularly important during the spring planting and fall post-harvest seasons. In the past, transportation bottlenecks have developed at these times because vehicles have not been, available to move materials from production locations to storage terminals or from storage to the areas of use. Producers utilize several modes of transportation, but have preferences (table 19). Some firms own most of the vehicles they use, and others lease them. For all modes of transportation, nearly 3.5 times as much capacity was leased as was owned.

Rail transportation is the most common mode for fertilizer shipment, comprising 88 percent of the total vehicle capacity (table 19). Several factors are responsible. First, many fertilizer materials are bulky and uneconomical to move by truck for long distances. Second, production is becoming more oriented toward resources than markets: nitrogenous-fertilizer plants are concentrating near sources of natural gas in the Gulf Coast and Plains States, phosphatic fertilizers are usually produced near the southeastern sources of phosphate rock, and potassic materials are produced in Canada and parts of the Southwest. Rail transportation is at present the most feasible for many producers, particularly when they do not have access to navigable waterways or pipelines. Nonetheless, between 1967 and 1972, use of railcars declined. This trend may continue as producers shift from rail transportation to ather modes because of continued uncertainty about rail line abandonments and car availability.

In table 19 tonnage figures are not representative of the entire nitrogen industry because of the nonrespondents. However, the percentage figures should reflect relatively well the composition of owned and leased vehicle capacities for all producers, including both respondents and nonrespondents.

Different types of vehicles are used to haul liquid, dry, and gaseous fertilizer materials. The aggregate capacities of owned railcars and trailers are largest for liquid materials (table 20). Conversely, the total capacity of leased railcars and trailers is highest for dry materials. Vehicles used to haul dry fertilizers can also be used to carry a variety of products, whereas units for transporting gas and liquid materials are specialized for those materials.

In 1975, respondents used railcars to transport about 52.2 percent of all fertilizer materials (18.9 for barges, 24.6 for trailers, 1.7 for trucks, and 2.6 for pipelines). 9/ It is likely that the pipeline percentage will increase. Parts of a large pipeline network have been built in the Corn Belt and Plains States, and future expansions are planned. Some of the pipelines carry anhydrous ammonia, while others move nitrogen solutions.

9/ This includes 1975 domestic fertilizer shipments of nitrogen, phosphate, an^ potash materials from production locations only; it does not include move- ments from wholesale or retail outlets.

27

Table 19--Rated one-load capacities of vehicles owned and leased by respondents, January 1, 1976

Mode of transportation

Barge

Railcar

Trailer

Total

Total rated capacity owned

and leased Capacity owned Capacity leased

Tons

73,500

641,728

10,950

726,178

- - - - Percent - - - -

62 38

17 83

79 21

22 78

Onsite and Offsite Storage

Fertilizer consumption is highly seasonal, with 35 percent of total use occurring from March through May of each year (15), However, fertilizer is manufactured throughout the year, and anhydrous ammonia plants with daily capacities of 600 tons or more are especially vulnerable to significant cost increases if capacity utilization drops below 70 percent. Consequently, it is important that adequate storage capacity be available both at production locations and at points close to areas of use.

Respondents had onsite and offsite capacity for storing about 5 million tons of fertilizer materials as of January 1, 1976 (table 21). Nearly 35 percent was for anhydrous ammonia, 32 percent for dry bulk materials, and 30 percent for nonpressure solutions. The greatest proportion of ammonia storage was in the Corn Belt and Delta States: together they accoimted for over two- thirds of the respondents' total ammonia storage capacity. Most of the dry bulk storage capacity was in the Corn Belt, Southeast, and Moxmtain regions* Nitrogen solutions storage was scattered throughout the United States, but the Corn Belt, Northern Plains, and Southeast areas together accounted for over half of the storage capacities.

Storage capacity as a percentage of annual total production capacity dif- fers considerably for the different products (table 22). In general, storage capacity is sufficient for approximately 2.5 months of production. Because nitric acid storage requires more specialized and costly facilities, less is stored; onsite storage capacity is usually adequate for only a few days' production.

Regardless of size, most respondent firms own, rather than lease, most of their terminal and plant storage facilities (table 23). In general, firms appear to own higher proportions of the specialized storage facilities used for anhydrous ammonia and nitric acid than those used for other products. Several

28

Table 20--Rated one-load capacities o£ owned and leased vehicles by transportation mode and type of material, January 1, 1976

Transportation mode and

type o£ material

\ Ownership

1 Ovmed Leased 1/

; Vehicles Capacity Vehicles ; Capacity

: Number Tons Number Tons

Barge: Liquid Gas Dry

Total

: 6 : 0 : 5 : 11

15,000 0

30,500 45,500

4 4 1 9

10,000 15,600 2,400

28,000

Railcar: Liquid Gas Dry

Total

970 257 250

1,477

67,043 18,605 22,750 108,398

3,418 952

3,010 7,380

222,889 50,614 259,826 533,329

Trailer: 2/ Liquid ; Gas : Dry :

Total :

162 213 17

392

4,285 3,967

370 8,622

37 18 56

111

818 360

1,150 2,328

Grand total: : 162,521 563,657

1/ Three or more years 2/ Tractor-trailer units

29

Table 21—Regional consumption and capacity to store selected fertilizer materials, January 1, 1976

Proportion of 1975 U.S. consumption T^roportion of respondents '

total storage capacity

Region Anhydrous ammonia

: Ammonium : nitrate

:Ammonium: : sulfate :

Nitrogen solutions

Urea All

fertilizer materials

Anhydrous ammonia

Dry bulk

/products

Dry bagged products

Non- • pressure • solutions •

Fluid acids

Percent

Northeast : .6 2.5 1.6 3.6 4,1 5.4 u. 1.5 4.5 V 13.2

Lake States 10.2 6.2 1.6 5.8 10.1 8.7 J

2.5 16.2 3.2 )

Com Belt 38.1 12.3 5.8 29.7 23.8 26.7 51.0 14.9 28.1 13.7

Northern Plains

Appalachian

22.7

1.1

15.9

7.5

1.6

.6

13.6

12.9

7.4

2.7

8.2

5.9

5.2

1.5 x 6.8

0

S 22.6

10.9

10.7

33.0

I 20.9

Southeast 1.8 14.6 1.4 15,4 1.0 12.7 2.8 27.5 14.7 1

Delta States 2.6 12.1 3.7 2.3 16.9 4.5 16.8 8.2 48.1 6.6 ...

Southern Plains 9.9 11.5 12.4 4.9 11.4 6.7 8.5 7.4 \ 7.9 ,/

Mountain 5.8 12.6 18.5 4.2 6.4 8.9 3,9 22.3 y 13.1 2.9 V 10.7

Pacific 7.2 4.8 52.8 7.6 16.2 12.3 4.0 8.9 1 10.5 1 Total :

Percent Tons

100.0 4,018,042

100.0 2,811,584

100.0 815,787

100.0 4,110,161

100.0 1,152,046

100.0 42,508_,,030

100.0 1,732,859 I

100.0 100.0 ,602,050 151,350

100.0 1,470,781

100.0 25,089

1/ Brackets are used to avoid disclosure of information for an individual firm in a region by combining it with those in adjacent regions.

Sources : ERS survey and (15).

Table 22--Respondents' storage capacity compared to tLeir production capacity^ January 1, 1976

Anhydrous anunonia

Annual firm capacity

Tons

Storage as a percent of firm

capacity

Nitric acid


Percent Tons


capacity

Other


Percent Tons


capacity "Percent'

Less than 100,000 14.4 0-50,000 3.0 0-150,000 11.9

100,000-200,000 17.2 50,001-100,000 .8 150,001-300,000 19.6

200,001-350,000 21.6 100,001-150,000 1.6 300,001-500,000 15.9

350,001-500,000 22.2 150,001-200,000 .5 500,001-1,000,000 33.6

500,000 and 200,001 and 1,000,001 and larger 17.0 larger ,2 larger 12.7

Table 23--Respondents' owned storage capacity compared to their total storage, January 1, 1976

Anhydrous ajninonia


Storage as a percent o£ firm

capacity

Nitric acid



capacity

Other



capacity

04

Tons Percent Tons Percent Tons Percent

Less than 100,000 84 0-50,000 100 0-150,000 31

100,000-200,000 96 50,001-100,000 94 150,001-300,000 74

200,001-350,000 65 100,001-150,000 100 300,001-500,000 86

350,001-500,000 100 150,001-200,000 100 500,001-1,000,000 34

500,000 and larger 74 200,001 and larger 74 1,000,000 and larger 74

Aveïage for all sizes 80

Average for all sizes 92

Average for all sizes 63

respondents indicated that they often lease storage capacity on a short-term basis if the supply and demand situation requires it.

Types of Outlets

Some firms utilize most of their nitrogen products captively (within their own operations) to produce other products, while other firms sell nearly all their output to outside buyers (table 24). Over half the anhydrous ammonia sold or transferred by respondents in 1975 was used captively by the firms. This is understandable given the substantial amount of ammonia and derivative production capacity owned by these firms (15). Considerable volumes of ammonia are also traded among firms to reduce the amount of handling and transportation required. That is, if firm A has an ammonia plant in firm B's market area, and firm B has a plant in firm A's market area, B may secure some of its ammonia from A and provide a similar trading service to A in return.

Several large corporations, both investor-owned and cooperative, did not respond to the questionnaire for various reasons. The omission of their data may cause a bias in attempting to generalize the data on respondents' use of different outlets to the entire population of nitrogen firms.

CONCLUSIONS AND IMPLICATIONS

Many smaller fertilizer plants are owned by firms specializing in other industries, such as fossil fuels and chemicals. Further, many of the newer plants, and those planned but not yet open, are owried by firms which specialize in fertilizer production. As a result, the proportion of total fertilizer capacity owned by fertilizer firms appears to be increasing. However, partly because the larger, newer plants generally can be operated more efficiently, many of the smaller, older plants may close down first. Little additional U.S. ammonia capacity is slated to begin production beyond 1979, and there is the possibility of domestic nitrogen deficits by the early 1980's unless these older plants are replaced as they close down.

Since many of the newer plants incorporate more efficient processes than those in plants built one or two decades earlier, the overall usage of critical raw materials, such as natural gas, per ton of product may decline. Prices to farmers will most likely not decline substantially from their 1971-73 levels, however, as the costs of energy and capital have risen dramatically.

As capital and energy costs continue to increase, construction of new plants will be subject to increasingly stricter decision criteria within firms. It seems unlikely that firms which have never operated in the fertilizer industry will attempt to enter the industry in the next decade, barring the improbable recurrence of the rapid growth of fertilizer demand in the I960's or of the capacity shortfall of the early 1970's. Successful penetra- tion of the fertilizer market requires efficient production and orderly and efficient marketing of the products involved. The costs of marketing have increased considerably over time and these expenditures, as well äs those for production, will make it more costly to enter the industry.

33

Table 24--Distribution o£ 1975 product sales and transfers of respondent firms among types of outlets

Type of sale or transfer

Product ; To own outlets

To controlled : outlets Sold

" to brokers

; Traded

Other sales

Used : captively:

Used by wholly ovmed and

operated com- pany outlets

• Coopera- tive

■ Other : Coopera-' : tives

Other

Percent

Anhydrous ammonia 52.4 4.4 0.0 2.9 . 1.9 13.3 6.7 18.4

Ammonium nitrate 27.5 11.4 0.0 1.1 .4 8.2 11.6 39.8

Ammonium phosphate : 5.0 7.4 0.0 4.6 14.6 8.4 13.5 46.5'

Ammonium sulfate ': 24.6 4.2 0.0 0.0 1.8 2.4 .4 66.6

Nitric acid ! 96.3 0.0 0.0 0.0 .1 .1 0.0 3.5

Nitrogen solutions ': 3.6 5.3 3.4 13.1 3.4 7.0 5.5 58.7

Urea ': 40.0 5.5 0.0 5.3 3.8 2.7 9.7 33.0

Unreliable supplies and rising prices of natural gas may cause additional funds to be allocated to research regarding the feasibility of alternative fuels both for feedstocks (for example, in ammonia plants) and for heat and power.

REFERENCES

(1) Ayers, Jeannie H. Ammonium Nitrate. Chemical Economics Handbook. Stanford, Calif., Stanford Research Institute, Jan. 1976, pp. 756.4000A-756.4008.

(2) . Urea. Chemical Economics Handbook. Stanford, Calif., Stanford Research Institute, Mar. and Aug. 1976, pp. 756.2000A-756.2008G.

(3) Blue, Thomas A. Ammonium Phosphates. Chemical Economics Handbook. Stanford, Calif., Stanford Research Institute, Nov. 1973, pp. 760.5000A-760.6006D.

(4) ^. Ammonium Sulfate. Chemical Economics Handbook. Stanford, Calif., Stanford Research Institute, Aug. 1967, pp. 708.5020A-708.5020B.

(5) _. Ammonium Sulfate. Tabulations from North American Fertilizer Plants Survey. Stanford, Calif., Stanford Research Insti- tute, 1976.

(6) . Anhydrous Ammonia. Tabulations from North American Fertilizer Plants Survey. Stanford, Calif., Stanford Research Institute, 1976.

(7) . Nitric Acid. Chemical Economics Handbook. Stanford, Calif., Stanford Research Institute, 1968, pp. 750.5020A- 750.6060.

C8) . Nitric Acid. Tabulations from North American Fertilizer Plants Survey. Stanford, Calif., Stanford Research Institute, 1976.

(9) - . Nitrogen Solutions. Tabulations from North American Fertilizer Plants Survey. Stanford, Calif., Stanford Research Institute, 1976.

(10) Bressler, Raymond G., Jr., and Richard A. King. Markets, Prices, and Interregional Trade. New York, John Wiley, 1970.

35

(11) Dean, Robert D., William H, Leahy, and David L. McKee. Spatial Economic Theory. New York, Free Press, 1970.

(12) Meister Publishers. Farm Chemicals Handbook. Willoughby, Ohio, 1976.

(13) Paul, Duane A,, and others. The Changing U.S. Fertilizer Industry. ÀER-378, U.S. Dept. Agr., Econ. Res. Serv.; 1977.

(14) Tennessee Valley Authority. World Fertilizer Production Capacity (a computerized listing of fertilizer plant locations and capacities available through agency on a time-share basis). Muscle Shoals, Ala. Dec. 31, 1975.

(15) U.S. Department of Agriculture, Statistical Reporting Service. Commercial Fertilizers: Consumption in the United States. Various issues, 1950-76.

■ U. S. GOVERNMENT PRINTING OFFICE : 1977—261-496/ERS-249

36

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