Competition for urea heats up with Leigh Creek Bunnings-style pledge
South Australia’s Leigh Creek urea project promotes its intention to be the nation's largest fertiliser producer and has been the first to achieve a carbon neutral status in 2022.
The marketing edge took another tangent on Flow on Friday when managing director Phillip Staveley went on the front foot after the federal government heavily backed in a Western Australian competitor on Thursday.
Federal agriculture minister David Littleproud announced on Thursday that the Northern Australia Infrastructure Facility would provide over a quarter of a billion dollars in support for the Perdaman project in north western WA, comprising:
$160 million to the Pilbara Ports Authority for a new multi-user wharf and facilities at the Port of Dampier to facilitate exports, and
$95 million to the Western Australia Water Corporation for the expansion of the Burrup seawater supply and brine disposal scheme that will also service the operation of Perdaman Urea Plant.
Minister Littleproud said the support for the projected 2.4 billion tonne per annum urea project would help Australian farmers:
“The NAIF’s investment will provide farmers’ access to locally manufactured fertiliser, securing our agricultural production and boosting our exports.”
Leigh Creek Urea Project managing director Phillip Staveley took aim at what he described as some spin on the announcement:
“Just ignoring the political spin, that is the northern Australia infrastructure fund – they haven’t provided direct support, what they’ve done is said they’ll build a port somewhere up north.”
“The fertiliser project along with everybody else will have access to that port ... but they put a fertiliser spin on it.”
On the project’s business model, Staveley reiterated the company's priority that Australian farmers source urea from Leigh Creek at an affordable rate, telling Flow on Friday at $50 per tonne less than any Australian competitor:
“We intend to just sell our Urea in bulk, cheapest in Australia.”
Staveley agreed the project will mirror “exactly a Bunnings thing”, referencing prominent Australian hardware chain Bunnings Warehouses’ commonly recognised marketing approaches to undercut competitors, in the Bunnings instance, by 10 per cent.
“We’re looking after the farmers; we’ve got to look after the shareholders, so it’s exactly a Bunnings thing.”
Mr Staveley reiterated his commitment that the project would create thousands of jobs, mostly in Leigh Creek.
On 19 January, Rowan Ramsey, the member for the SA federal seat of Grey including Leigh Creek, believes optimism for the project’s ability to create a large volume of jobs should be kept at a minimum for now.
“The talk of thousands of jobs I think is probably premature.”
“But let’s hope it’s a success; let’s hope they can actually put the proof of concept into practice and get something operating there that is actually harvesting gas from this underground sea.”
“Then you can talk about what you do next with that gas and that is obviously trying to turn it into urea, so long way to go yet.”
The Leigh Creek project managing director was also undeterred by the federal government support for a competitor, direct or otherwise, noting that the global urea market was 200 million tonnes per annum. Mr Staveley believed two Australian projects producing approximately 2 million tonnes per annum each ought to be able to meet domestic and international demand.
One half of the initial 1 million tonnes scheduled for production in 2023-24 from Leigh Creek is already committed to a Korea buyer but Mr Staveley said the remaining 500 million tonnes per annum was 'very likely' to find its way into Australian hands.