Sometimes the stars align, and sometimes economic factors align. For CF Industries (IW 500/169), it was the economic part of the equation that proved more useful as the company was deciding where in the U.S. to grow its business.
"The fundamentals of the nitrogen business are strong at this time," explains Tony Will, senior vice president, Manufacturing and Distribution at CF Industries, the second largest nitrogen fertilizer producer in the world. It is also the third largest phosphate fertilizer producer among public companies. Each year the company produces 15 million tons of fertilizer.
Currently, the two main drivers of the fertilizer business are the increase in global demand for meat, especially in developing countries, and the push for clean energy. More fertilizer is required to grow the crops that feed cows, chickens and other protein sources than for a plant-based diet. And almost half of the company's fertilizers are tied to corn production, which is in demand for the production of ethanol.
"With North America being a net importer of nitrogen, we have an opportunity to expand our nitrogen network and wanted to do that in the U.S.," Will says.
Not wanting to wait around for others to fill that supply gap, CF Industries CEO Stephen R. Wilson said, while announcing the expansion of two plants in the U.S., that he "believes our projects will be among the first in North America to be in production."
Where else to expand than in the heart of corn country -- Iowa. The company will invest $1.7 billion to open new ammonia and urea units at its plant in Port Neal, Iowa. The expansion will create 100 new jobs.
The location offers low transportation and distribution costs -- key economic considerations. Another fundamental cost consideration is the availability of abundant, inexpensive natural gas, which serves as both a feedstock and fuel for the company's operations.
"The U.S. now has a low-cost, robust resource that will be available and can be measured in terms of decades instead of a single year," explains Will.
Other cost savings arise from comprehensive incentives programs offered by the Iowa Economic Development Authority. The board provided $1.5 million in direct assistance. The state also provided a variety of tax credits -- $13 million in sales tax refunds paid during construction and $9 million in investment tax credits (ITC). Future awards will include an additional $12 million in ITC credits in each of the next four years.
The state is also working with the company on improvements in infrastructure.
Efficiency was a key factor in CF Industries' decision to expand in Iowa rather than build a new facility. "We believe that it is more efficient to expand an existing facility than opening a greenfield plant due to the trained workforce as well as the supply chain network that has been established," says Will.
The strength of the workforce cannot be overlooked, he says. The workforce has a long tenure average with competitive salaries and extensive on-the-job training. That knowledge and training is reflected in the fact that the Port Neal facility has not had a single recordable safety incidence within the past year. Safety is one of the company's prime objectives: Eight of its factories have had no lost time due to accident in 40 years.
"We feel that we are making a smart investment by improving this already well-trained workforce," Will adds.