Incitec Pivot renews gas price warning

Incitec Pivot says its Gibson Island plant is at risk from high gas prices, amid debate over gas’s role in Australia’s recovery.

Workers at Incitec Pivot's Gibson Island ammonia plant. Picture: Lyndon Mechielsen

Incitec Pivot has again warned Queensland’s Gibson Island fertiliser plant is at risk from high gas prices, as political debate ramps up over the role of gas in Australia’s recovery from the coronavirus pandemic.

Incitec signed a short-term gas deal in mid-2019 which will keep Gibson Island operating until the end of 2022, but new fertiliser boss Stephan Titze told investors on Tuesday the company was already out in the market trying to secure long-term supplies to keep the plant operating.

The plant employs about 400 Queenslanders and was rescued by a cheaper gas deal and a promise from the Queensland state government to allow access to gas exploration tenements that would be required to supply only into the domestic market.

But Mr Titze said the plant was still feeling the impact of the savage drought in Queensland and NSW, and lower global urea and fertiliser prices.

“Gibson Island continues to be challenged with the high cost of gas on the east coast of Australia and lower global urea prices and reduced demand for our end products as the drought in the cotton areas and lower water levels in cotton dams continued in northern NSW and southern Queensland,” he said.

Mr Titze said unless a long-term gas deal could be signed, the company could be forced to turn the Brisbane site into a terminal to import cheaper fertiliser products from Asia, potentially dealing another blow to Australia’s hard-hit manufacturing sector.

“We are working hard to secure economic gas to continue the operation of our Gibson Island plant post 2022. It’s a great site with a very strategic location for imports and to serve adjacent markets, which gives us the option to import nitrogen products in case we cannot secure economical gas.”

Managing director Jeanne Johns told analysts demand for the company’s explosives and mining services products remained strong, despite the impact of the coronavirus, with some recovery appearing in demand for its agricultural and fertiliser products as rains helped give Australian growers more confidence.

She said the company had drawn up plans to find another $40m in annual savings across its business, on top of the $20m in savings the company announced at its April half-year results.

In July Ms Johns said the government should act to ensure forecasts of lower long-term global gas prices were passed onto Australian manufacturers.

“If oil prices remain subdued as evidenced by producers’ stated expectations, inevitably LNG netback price for domestic users must fall in line with these oil price decreases,” she said.

“We know Australian gas will now be cheaper for customers overseas, so surely this will lead to cheaper Australian gas for Australian customers.”