Qatar Fertilizer Company, or Qafco, has signed up construction firms for the expansion of the world's biggest ammonia and urea plant in a rare tangible display of faith in a fertilizer sector recovery.

The Middle East group, in which Norwegian nitrogen giant Yara has a 25% stake, has hired Italy's Saipem and South Korea's Hyundai Engineering and Construction for the so-called Qafco-6 project, which will take three years and cost an estimated $610m

The building firms are the same as those working on the ongoing Qafco-5 project, allowing the fertilizer group to capture "major cost synergies", Yara said.

"Qafco strengthens its position as the world's largest single-site producer of ammonia and urea," Yara added.

'Low world prices'

The project comes as most fertilizer groups are running with mothballed capacity, following a slump in farm demand in response to tumbling crop prices and tight credit.

Middle East urea prices are, at roughly $260 a tonne, less than one-third of levels reached during a spike in the summer of 2008, and below 2007 prices.

Safco, the Saudi Arabian fertilizer group, on Saturday revealed that tough markets were continuing to bite, reporting a 75% slump to 464m riyals ($123.7m) in the July-to-September quarter.

Safco, which produces about two-thirds of the kingdom's fertilizers, blamed the slip on "low world prices".

Shares in Safco closed 0.4% higher at 117.75 riyals on Monday, pulling out of a decline which had seen them lose 6.4% in the first two days since the results.