CBH breaks ground on $50m Kwinana Fertiliser Facility to supercharge foothold in the competitive market

CBH Group has broken ground on one of its biggest construction projects since it built the Kwinana Grain Terminal more than 40 years ago, with hopes a new $50 million fertiliser storage facility will supercharge its foothold in the highly competitive market. The co-operative and chosen builder Kerman Contracting turned the sod on the historic project last week, with plans to build a 55,000-tonne granular fertiliser shed and two tanks to store 32,000 tonnes of liquid fertiliser next to the Kwinana Grain Terminal. CBH plans to leverage its existing infrastructure at the Kwinana Grain Terminal and build a dedicated liquid pipeline — for urea ammonium nitrate — along the alignment of the existing terminal jetty which would then go underground to the fertiliser facility. CBH board chair Simon Stead said construction of the Kwinana Fertiliser Facility was one of the most exciting milestones in CBH’s 88-year history and would enable CBH Fertiliser to expand its product range into liquid urea ammonium nitrate for the first time. He said the 70,000sqm project could cost upwards of the $50m flagged when CBH first revealed the “debt-funded” project in October 2020, as the WA economy braces for further COVID-19-related supply chain disruptions. CBH first proposed a bigger project, with an 80,000-tonne granular storage shed and three tanks to store 48,000 tonnes of UAN, before scaling it back in August due to surging construction costs. “We will be north of that ($50m figure) by a bit, given the current environment with COVID and prices of commodities and steel, we haven’t got a final number but hopefully we aren’t too far north of that,” Mr Stead said. “This allows us to run our own facilities (and) reduce our costs, so while this is an expensive piece of capital, CBH is an 88 year business and it isn’t going to go anywhere.” CBH entered the now highly competitive, 1.8 million tonne-a-year WA commercial fertiliser market in 2015, providing a range of compound granular fertilisers from Kwinana and Geraldton facilities leased from Qube. CBH Fertiliser business manager David Pritchard said sales had grown 30 per cent each year since the company dipped its toes into what he labelled an “uncompetitive” market in 2015, with strong demand sending its sales up 47 per cent to 184,000t last financial year. “When we started out, we were not really sure how we would go, to be brutally honest. . . we thought we would come to market, add competition, and do the right thing as a co-operative,” he said. “Growers have backed us all the way. This UAN (liquid fertiliser) phase will be a new market for us — a market of 500,000 tonnes (per year) we have not been active in, which gives us a fair bit of scope. “This new facility will enable us to bring surety of supply to growers, and the efficiencies gained through leveraging CBH’s supply chain will be passed along to growers, bringing further competitiveness to the market.” The ultimate goal, Mr Stead said, was to provide a low-cost, quality product to growers and to increase the competitiveness of the market, therefore creating a downward impact on prices. However, Mr Stead noted CBH was operating in a “global market” and paying “world parity pricing” at a time when fertiliser prices were at record highs. “CBH entered the fertiliser market. . . with the idea of reducing on-farm costs for growers,” he said. “The cost savings of discharging UAN down our jetty and into our tanks will be passed straight on to growers, and we believe those (savings) will be significant. “Reducing on-farm costs is part of the core strategy of the group. Our foray into fertiliser has proved we are making a difference in the market.” Mr Pritchard said the company planned to shake up the less competitive liquid fertiliser market and eventually capture 15 per cent of the market in coming years. A sod-turning event at the site last week attracted leading figureheads from CBH and construction company Kerman Contracting, as well as Federal Labor MP Madeleine King who labelled the project an “exciting” development. CBH chief executive Ben Macnamara said building the storage facility was the “next phase of growth” for the business that racked up a 47 per cent increase in sales last year on the back of strong demand. “This new phase of growth will see the business enter the liquid fertiliser market for the first time and expand its granular fertiliser offering to provide consistency of supply and deliver on our strategy to reduce on-farm input costs for WA grain growers,” he said. Kerman Contracting managing director Chris Kerman said the project marked the company’s 30th project with CBH after viewing it as a “must-win” contract despite what he said were “cost constraints” in CBH’s budget. He said Kerman had “probably” built more fertiliser facilities in WA than any other company and was well equipped to address “significant design issues” essential to building a quality project on-time and within budget. “We want to send everyone home from the site in a safe manner,” Mr Kerman said. “We want to build a quality project, and we need to hit the time and cost constraints within the contract timeframe and budget.” “Hopefully around this time next year, we are having a big celebration,” he said. In a statement, CBH said the facility had been designed to provide for further expansion opportunities in future, enabling the business to expand with the rapidly increasing demand. CBH hopes to open the facility March 2023, with vegetation clearing starting this week and official construction kicking off in March.