Globalized fertilizer industry in 2012: demand for increased production capacity

In 2011, the international fertilizer market experienced major fluctuations:

The increase in grain production is a topic of long-term concern to various countries. For decades, the demand for food has been steadily rising. In 2011, the food demand will reach 1.84 billion tons, which is 8 times that of 2000. Despite the global economic instability, food demand is expected to grow by 3% year-on-year in 2011, and food production in 2011 is expected to increase by 4% to 1.82 billion tons. Driven by strong demand, global fertilizer prices have experienced a sharp upward trend.

In terms of nitrogen fertilizers, the price of small-particle urea in Yuriin at the beginning of 2011 was FOB price of US$380/ton, which fell to US$320/ton in April, and soared to US$510/ton in the following three months. From July to November, Adjusted at high levels but quickly fell below $400/ton in November. In terms of phosphate fertilizers, Tampa's diammonium FOB price was around US$580/tonne at the beginning of 2011, and it began to recover after rising by US$40/ton within two months. During the period from June to September, Tampa's diammonium FOB price was US$600/tonne. The ton has risen to 660 U.S. dollars per ton, and it has been adjusted back to below 600 U.S. dollars per ton since September. In terms of potash fertilizer, the international market experienced a period of steady price increase throughout the year. The standard Vancouver standard bulk potassium chloride FOB price has increased from US$400/ton at the beginning to the current US$530/ton, and the potash fertilizer production enterprises have basically maintained the maximum operating rate. The company’s potash fertilizer business has achieved a considerable profit.

The increase in nitrogen fertilizer production mainly occurs in low-cost areas

Global nitrogen fertilizer demand will increase. It is expected that in 2012, the global demand for ammonia and urea will increase by 4%. Driven by chemical fertilizer production and industrial use, the consumption of synthetic ammonia will increase. The demand for synthetic ammonia as a direct use of fertilizers or for the production of fertilizers may increase by 4%, while the industrial use will increase by more than 4%. Global industrial urea demand may increase by 5% in 2012, and urea demand for fertilizer applications will also increase by 4%.

In 2012, the price of natural gas for major nitrogen fertilizer producers in the world may decline. However, in low-cost areas, new capacity projects that were originally scheduled to be released this year will postpone the commencement of work, which may result in tight supply. The development of domestic natural gas has greatly increased the competitiveness of U.S. nitrogen fertilizer producers compared with Ukrainian and Western European producers.

Global urea production capacity will increase, but the increase in exports is mainly reflected in low-cost areas. Many of the new urea production projects that were originally planned for launch in 2011 have been postponed, which has led to a tight supply of the global urea market. The major new export projects in Algeria, Iran, Qatar and North Africa will provide a large amount of urea exports to the global market in the short term. About 2.6 million tons of new capacity planned for 2011 was postponed until 2012. This led to a very tight global urea supply in 2011, which will continue until at least mid-2012. By the end of 2012, low-cost areas will provide 8 million tons of urea exports.

China is the major changing market in the global urea trade. In 2010, the export volume of urea reached the highest level in history, prompting the Chinese government to adjust its tariff policy in 2011. Therefore, China’s urea export volume in 2011 was estimated to be less than 2.8 million tons. It is expected that China’s urea export volume will be less than 2 million tons in 2012. The increase in the supply of natural gas in India is simply not enough to meet the domestic demand for nitrogen fertilizer production. India already has some large-scale import tenders. It is estimated that India will import 6.7 million tons of urea in 2011 and 7 million tons in 2012.

Potash Fertilizer Volume Will Re-innovate

Although global fertilizer distributors are now cautious about reducing inventory and take-over risks, most potash producers in 2011 maintained a fairly high operating rate. It is estimated that the global potash shipments will reach 57 million tons throughout the year. It is expected that the global potash fertilizer shipment volume in 2012 will reach a new high of 58-60 million tons.

In North America, part of fertilization in the United States in the fall of 2011 will be postponed until the spring of 2012. Dealers have remained cautious and unwilling to increase inventory levels, resulting in lower stock levels at the end of 2011. Affected by the better food economic situation and the increase in corn and soybean planting area, it is expected that the demand for potash fertilizer in North America will remain strong in 2012, and it is expected that the sales volume will reach 10 million-10.5 million tons of potash fertilizer.

In Latin American market, the use of chemical fertilizers reached a record high in 2011, and the import volume of potash fertilizer reached the highest level in history. The rapid growth of Brazil’s agricultural economy has led to an increase in the demand for potash fertilizer and a strong demand in the global crop market, which has led Brazilian farmers to increase their enthusiasm for planting soybeans, cane sugar, and corn. It is expected that the demand for potash fertilizer in Latin America will continue to be strong. In 2012, consumption will reach 10.7 million tons, which is higher than the 10 million tons in 2011, of which imports will reach 8 million-8.2 million tons.

China needs to continue to increase grain production. This is China's top priority. However, due to the limited capacity of potash expansion and the potash demand is still strong, especially supported by the prices of fruits and vegetables and the rise of major grain prices, it is expected that China will increase the import of potash fertilizer in 2012. The consumption may reach 11 million tons, of which 650 are imported. Millions - about 7 million tons, domestic potash fertilizer production will also increase.

The continuous and rapid growth of India’s population has led to an increase in food supply pressure. Increasing the amount of potash fertilizer plays an important role in both short-term and long-term food production increase. India's 2011 contract negotiations were postponed, resulting in very limited stocks, which led to a significant drop in potash consumption. It is expected that India will supplement the shortage of potash in the soil and supply chain in 2011, so the demand for potash fertilizer in India will rebound sharply. Potassium fertilizer imports in 2012 may reach 5.5 million-6.4 million tons, India's potash fertilizer imports in 2011 was 4.5 million tons in 2010 to 6.4 million tons.

Potassium fertilizer consumption in other Asian countries remains strong, and farmers are more active in planting major crops, including palm, rubber, sucrose and rice. These crops require the application of potassium fertilizer. Although the volume of shipments in the fourth quarter of 2011 decreased, it was because Indonesia and Malaysia had a considerable amount of imports in the first three quarters, which resulted in the accumulation of certain stocks. However, stocks will be consumed at the end of 2011. It is estimated that the demand for potash in these countries in 2012 will remain unchanged from 2011, reaching 8 million-8.2 million tons.

New phosphate fertilizer production capacity will be quickly digested

In terms of phosphate fertilizers, due to strong demand, delays in expansion projects, and closure of some plants, it is expected that the phosphate fertilizer market may become tight. The operating rate in 2011 has reached the highest level in history. In 2012, the operating rate may be reduced because the Ma’aden diammonium plant in Saudi Arabia will be launched in mid-2011, and maintain maximum production capacity, and new projects in Morocco have been launched. However, due to the strong market demand for phosphate fertilizers, new production capacity will be quickly absorbed and the phosphate fertilizer market will remain relatively balanced.

Saudi Arabia’s export capacity increased in 2012. The new production at the Maiddin plant in Saudi Arabia will account for a portion of the global phosphate import market in 2012. At the same time, there are some factors that will increase the market's tension: First, in 2011, some US phosphate fertilizer plants were closed, reducing their export volume. Second, China's phosphate fertilizers have been affected by tariffs to reduce exports, while China has also faced the situation of small-scale and inefficient plant closures.

The diammonium production cost is more favorable to the integrated manufacturer. As the main raw material for the production of phosphate fertilizers, the market prices for phosphate rock, cesium, and synthetic ammonia have increased significantly in the past five years. The price of phosphate rock has tripled in 2006, resulting in a 30% increase in the global cost of phosphate fertilizer plants that rely on the purchase of phosphate rock raw materials. The price of synthetic ammonia and ** also increased the production cost of phosphate fertilizer.