Amid expectations for continued cost inflation to build the raft of announced Gulf Coast ammonia projects over the next few years, the per-ton cost of CF Industries’ acquisition of the Waggaman ammonia production facility is going to look “really attractive,” CEO Tony Will said today on an investor call.
CF in March agreed to pay $1.675bn to Incitec Pivot Limited to purchase an ammonia production complex located in Waggaman, Louisiana, with nameplate capacity of 880,000 tons of ammonia annually.
Asked about potential cost inflation due to a burst in planning and construction activity for ammonia plants, Will noted that the expects every aspect of the projects to experience cost pressures in the coming years, impacting both the time it takes for the projects to get built and the overall cost picture. (ReSource is tracking eight announced green or blue ammonia projects on the Gulf Coast.)
“The raw materials, the metals, the fabrication, the transportation, the labor — you’re seeing inflation in every single aspect,” Will said. “Remember, none of these projects that have been announced are really under way at this point, so minimum of 2027, maybe 2028 before any of these would potentially start up. It’s one of the reasons that make us so happy about the Waggaman acquisition, because our belief is, by the time some of these projects that are being discussed […] the cost per ton of capacity is going to look really attractive” from Waggaman, he added.
CF is under agreements with JERA Co., Lotte, and Mitsui to advance three separate clean ammonia facilities. It is also advancing green and blue ammonia elements at its Donaldsonville complex, and has entered into an agreement with NextEra to evaluate a joint venture to develop a zero-carbon intensity (green) hydrogen project at CF Industries’ Verdigris Complex in Oklahoma.
Addressing a question about long-term demand dynamics given the prospect of a flood of new ammonia capacity coming online, Will acknowledged uncertainty in the market but expressed confidence in the potential for long-term contracts with counterparties that will use ammonia as a source of clean energy.
“Whether its JERA, Lotte, or a number of others, they’re pretty far advanced in terms of their thinking on some of the pilot projects they’ve run on co-combustion and so forth,” he said. “Our sense is that [demand] is probably going to be developing in larger increments as we get into the ’27 – ’28 timeframe, but by the time we get to 2030 I think there will be a sizeable volume of ammonia consumed in non-traditional applications.”
Will expressed doubts about whether some of the announced Gulf Coast ammonia projects would ever get build. “How real are they, are they actually going to go forward, and are people going to be willing to put the money down?”
Looking back to 2012, Will noted there were around 27 new project announcements, of which only four got built, two of them by CF Industries and the other two by traditional industry participants. “A lot of the speculative plants that were talked about never materialized. And I would expect that same dynamic to happen here,” he said, characterizing some of the announcements as “vaporware.”
