Until last September, the year 2008 was record breaking for
fertiliser mineral producers. Phosphate demand was through the
roof, potash was threatening to break the $1,000/tonne barrier
and sulphur was at a severe shortage owing to overwhelming
demand, predominately, from the fertiliser sector.
|South East Asia is seen as one of the most promising
growth regions for fertiliser minerals despite the
present demand slump. Courtesy K+S
Since September 2008, across the board demand has dried up
and producers have been left waiting for an upturn.
With food shortages gripping regions of the world
(particularly in Africa), the global population soaring, and
increased biofuel demand looming, surely the need for
fertilisers should always be there?
Except in India where fertiliser is subsidised, the
agricultural industry is subject to the same market dynamics as
any sector. Despite the sheer necessity for food, it is not
regulated by any governing body. For this reason, mineral
shipments have all but stopped as the end users are waiting for
clarity to the worlds economic situation.
Fertilisers IM position
When considering end markets for industrial minerals
ceramics, refractories, glass, construction, for example
they tend to have the following characteristic: a variety of
minerals consumed in volumes relatively lower than for
In this sense, the fertiliser market is unique: it is driven
by the consumption of only nitrogen, phosphorous and potassium
which are sourced from nitrate minerals (nitrates), phosphate
rock (phosrock) and potash, respectively.
Additionally, a major secondary nutrient worthy of a mention
is sulphur, a vitally important mineral not necessarily for its
direct granular application in fertilisers but more for its
influence over the sulphuric acid market key for
fertilisers, particularly in the production of phosphate
Despite having the same agricultural end use, supply of the
these key minerals is at the mercy of their own individual
market dynamics which have exhibited extreme yet differing
behaviour since the global economic crash began in September
||Nitrates: potassium nitrate and sodium
||Urea, ammonium sulphate, ammonium nitrate,
||A primary constituent of amino acids and
proteins. Since enzymes and membranes are
protein-based structures, a nitrogen deficiency
will curtail plant growth.
||2009 global nitrogen capacity: 136m.tonnes
(around 90% used in fertilisers)
||Phosphate rock (apatite), phosphate
||Diammonium Phosphate (DAP), monoammonium
phosphate (MAP), triple superphosphate (TSP),
NPK, phosphoric acid and phosphate rock
||The energy-containing molecules that are
present in respiration and photosynthesis
||2009 global phosphate rock capacity: 167m.
tonnes (>95% consumed in fertilisers)
||Commonly, muriate of potash - MOP (KCl),
potassium oxide (K2O), sulphate of potash - SOP
(K2SO4), and NPK.
||Potassium plays more roles in a plant than
any other nutrient. Potassium does not become a
direct part of the plant structure, but acts to
regulate water balances, nutrient and sugar
movement in plant tissue, plus drives starch and
protein synthesis and legume nitrogen
||2009 Global potash capacity: 58-59m. tonnes
present operating rate: 50m. Tonnes
||Calcium carbonate: limestone, dolomite,
chalk, marble, calcite etc
||A major constituent of cell
||magnesium sulphates, magnesite, dolomite
||Mg is central to photosynthesis,
a carrier of phosphorous in the plant, and an
||Elemental sulphur, pyrites
||Sulphuric acid, granular sulphur, ammonium
||S is a component in certain amino acids and
||2009 global sulphur capacity:72m. tonnes
(around 30m. tonnes consumed in fertilisers)
||Borate minerals (particuarlly
||Promotes seed production
||2009 global borates capacity: 4.1m. tonnes
(around 4% or 160,000 tpa consumed in
||Stimulates seed production,
||Aids cholorphyll formation and as
a catalyst in the plant
||One of the main
||Required in the smallest volumes;
stimulates growth of legumes owing to its role in
||Works with copper as a co-factor
in enzyme systems
Fertiliser demand for phosrock has slowed considerably in
2009, as fertiliser end users defer orders until clarity is
gained on the present economic situation. The pricing of
phosrock has reflected this falling by a third in three months
(see Phosrock pricing).
The worlds phosrock mining hubs are in China (for
internal usage), Morocco, and Jordan. The Office Cherifien des
Phosphates (OCP) in Morocco produces 30m. tpa with its main
export markets located in North America and Europe. Jordan
mainly supplies India with its 5-6m. tpa output, while
Chinas production dwarfs many countries, with an output
between 40-50m. tpa for domestic use.
For North America, phosrock is more of a logistical effort.
The continent receives the majority of its product from
Morocco, and it is a case of timing the orders correctly a) to
get a favourable price but, more importantly, b) to not be left
with a storage headache.
This is why sourcing phosrock outside of the continent has
been described as a strategic priority by The
Mosaic Co.s president and chief executive office, Jim
Mosaic holds the worlds largest phosphate fertiliser
production capacity at around 9m. tonnes, OCP is second with
~4m. tonnes, and Russias PhosAgro AG third with
Unlike the potash market (see Potash), phosrock
pricing is a fair reflection of the markets present
Phosrock (64% BPL) from Jordan, FOB, fell from
$300-375/tonne in January 2009 to $115-120/tonne at the
beginning of March. Elsewhere in India (CFR) prices dropped
from $300-375/tonne to the region of $140/tonne, 64-65% P, for
the same period.
More recently, FOB phosrock prices from Casablanca (70-72%
BPL) have fallen from $350/tonne at the end of last year to
$250/tonne now and even this appears optimistic from the
suppliers side. The cost of North African 68-72% product has
been quoted as low as $150/tonne FOB.
Phosrock production was in full flow in 2008 with the
industrys mines and processing plants working at full
capacity. Fertiliser and phosphoric acid demand was sky high
when the financial crisis hit the worlds blind side.
Production cuts at the worlds phosrock mines are yet
to force prices up or even, as the present prices suggest,
bring stabilisation to the industry.
Leading phosphate producer, The Mosaic Co. cut 1m. tonnes of
production in December and is expected to cut another 1m. tpa
in 2009 reducing its expected phosrock sales to 8m. tonnes.
In a seemingly strange situation, despite the cuts, a raft
of new phosphate projects are being announced including:
OCPs 15-20m. phosrock expansion in Morocco (see IM
February 09, p.6); Vales 3.9m. tpa Bayovar
project in Peru creating one of South Americas largest
mines; Fosfertils 2m. tpa mine in Minas Gerais, Brazil,
to come online in 2011; and a 3m. tpa phosphate sediment
development in Namibia increasing to 6m. tpa in 2011 (see
IM December 08, p.20).
This gives confirmation enough of the industry consensus
that this downturn is short term, despite the fact it is
Despite potashs slight pricing dip, visible on the
accompanying graph (N, P, K: same problems different
reaction), potash has suffered a significant demand hit
just as much as nitrogen and phosrock.
Potash in 2008 was the most celebrated of fertiliser
minerals and its demand was truly unprecedented for an
industrial mineral high bulk, low value? Potash
emphatically proved otherwise. Its spot price peaked at between
$800-850/tonne FOB, most of which was coming from Saskatchewan,
Canada, when only a year before it was languishing around
$140/tonne FOB. The price even threatened to break the
$1,000/tonne barrier, but this never materialised.
Major expansions were announced last year at all major
producers including an 8m. tpa program at the worlds
leading producer, PotashCorp of Saskatchewan, together with
increases at The Mosaic Co., USA, and JSC Uralkali and OAO
Silvinit, both Russia.
PotashCorp was even used by banks and financial markets
analysts as the barometer of the agricultural sector.
Then the worlds economy crashed resulting in a serious
demand slump. But many of the worlds potash producers
were quick to react with production cuts to maintain
Cuts control prices
PotashCorp announced the most aggressive cuts slashing 2m.
tpa production from its 11-12m. tpa capacity, while with USA
based The Mosaic Co. is estimated to have cut around 900,000
tpa potash from its 10m. capacity.
North Americas other major producer, Agrium Inc. is
not likely to announce any cuts on its 1.8m. tpa potash output,
instead affirming its intention to to proceed with a
project that would ultimately increase [its] Vanscoy mine
[output] to 2.8m. tpa.
One of Europes leading producer, Germany based K+S
confirmed last month that it has cut 400,000 tpa potash (a
figure which was estimated at double), but also revealed that
it may cut another 1.3m. tonnes from its 8m. capacity by the
middle of 2009.
As the table shows, Russia has also reduced production with
the most conservative estimates at around a tenth of the
Major producers, Belarusian Potash Co. (~7m. tpa capacity)
and Israeli Chemical Ltd (5m. tpa) are yet to announce any
As producers publically announced these cutbacks, the
availability of potash diminished, despite the full stockpiles,
warehouses and supply lines. This maintained potashs
price at around $600/tonne FOB.
In a situation that mirrors the phosrock market, cuts ensue
but so do expansions, confirming the bullish mood among
producers on the long term demand.
Bill Johnson, director public affairs at PotashCorp told
IM: Weve announced in Canada a
$6.8 billion expansion plan which started in 2007 and runs to
2012, raising production from 10-18m. tonnes. We have not
backed off on these expansion plans at all.
|Global potash cuts
|K+S Kali, Germany
Two of the worlds largest potash producers have been
subject to rumours circulating about a government forced
merger. A deal between Uralkali, Silvinit and OAO Apatite has
been circulating for the best part of 2009 (see IM February
09, p.15: Russia awaits fertiliser mineral
On the face of it, a merger would make sense the
companies share the same locality, the same logistic chains and
have the same target customer. The government is eager to
reduce dependency on food imports by boosting its domestic
production, and is therefore keen to control fertiliser mineral
Michael Freeman, research manager at British Sulphur
Consultants, commented to IM: Russia is
very difficult to read. We expect demand in Russia and the
Ukraine to significantly increase as demand shifts to a new
gear. The merger between Uralkali and Silvinit would make sense
but this wont happen unless the government intervenes.
Maybe in five or so years this will change.
Even with potash production increases, it is believed
Russias domestic supply would not satisfy demand once its
agricultural sector is in full swing, opening the door to
The focus over the last six months has been on Russia, but
the major emerging markets for fertiliser minerals is seen as
South East Asia and Brazil.
Johnson from PotashCorp explained: We see Russia
growing, but bigger for us is South East Asia and economies
with double digit growth.
This was echoed by K+S which expects the highest
increase in application and use of fertilisers in the main
Asian countries (China, India) and Latin America
There is not much negative talk in the potash industry on
the present demand situation, producers are planning for the
medium to long term and the demand levels of today are not even
registering. Business of around H1 2008 levels is expected to
be resumed at the end 2009, beginning of 2010.
Friedhelm Mester, global potash manager at K+S, told
IM: Medium and long term... the growing
world population will result in a higher demand for
agricultural commodities and lead to a higher application of
Because of the limited availability of arable land an
increase in crop production only can be reached by harvesting
higher yields. [Potash is] most effective way of increasing
yields per hectare. Furthermore, the future prospects for
potash will be above average. One answer to the question how to
increase yields is balanced fertilisation. In some of the
worlds crop growing regions this balance has not been
This also gives some insight into the questioning over
potashs necessity and that it is not deemed by some in
the same light as nitrogen and phosphates. Potash also has a
high residence time in the soil which results in long periods
of no application.
You can of course reduce potash application but only
for a short period of time, then the yields will suffer. Crops
need the three main nutrients [nitrogen, phosphorous,
potash], added Peter Rummel, K+S European potash
|Sulphurs falling fortunes
|Sulphur spot prices have crashed to historically low
levels. Contract negotiations have all but ceased as
customers halt plans owing to market uncertainty. Source:
Sulphur really is the rollercoaster of fertiliser minerals.
In 2007, the mineral was in excess as its production as a
by-product from the petroleum industry was far greater than
For the best part of 2008 this turned around significantly
with a shortage gripping the world. Sulphuric acid shortages
hit an array of industries including copper, titanium dioxide
and indeed fertiliser.
The situation, once again, has changed sulphur is in
excess and trading has all but ceased. The fertiliser market
has all but stopped buying sulphur for direct granular and
sulphuric acid applications, compounded by the stalling of
activity at major sulphuric acid end users.
|N, P, K: same problems, different reaction
|Analysing the downturn reaction of DAP (phosphate)
against MOP (potash fertiliser) and urea (nitrogen),
potash fertiliser has held up whereas phosphate and
nitrogen fertilisers have plummeted.
S prices tumble
Prices of sulphur have taken an astonishing tumble from
around $800/tonne in mid-2008 to figures as low as $45/tonne,
in the situations where customers have to pay!
In some cases, refineries in the USA are paying for tonnages
to be taken away. The same was reported in Mexico with
fertiliser producer, Grupo Fertinal, being paid to accept
molten sulphur from US and Venezuelan refineries.
At the beginning of 2009, South African phosphate producer,
Foskor Ltd, which utilises sulphur in production of phosphate
fertilisers, agreed a contract for $450/tonne down from
$850/tonne, FOB, Vancouver. A price which now, on the surface,
Speaking to South American sulphur trader, JBG Petroleum
Corp., the severity of the situation becomes clear.
Eduardo García, president and chief executive officer
of JBG told IM: We are coping with a lot
of sulphur volumes. This is basically due to the financial
crisis worldwide affecting the planning of the agro-industrial
The market simply does not want to negotiate sulphur
contracts with such volatility and uncertainty gripping the
García continued: [The fall in sulphur prices]
has put some of the petroleum manufactures and buyers behind
scheduling. They had postponed supply commitments and contracts
for a period of six months causing a lot of sulphur
On the other hand, sulphur producers using extraction
of sulphur from petroleum runs had experienced a gain in
inventories because of reduction on crude quotas thus affecting
more sulphur into their petroleum at the refinery
Despite this global gloom, as always China is looking to
take advantage with FMBs Weekly Sulphur Report (12 March
2008) stating: Players in the Chinese sulphur market are
describing it as very strong with buyers looking to snap up any
Of all fertiliser minerals, sulphur has the least control
over its destiny. Sulphur production is dominated by the
petroleum industry and thus controlled by the demand for
Unlike the potash and phosphate markets, where the producers
can take tonnages off the market to stabilised prices, sulphur
is continually being produced as a by-production of oil
refining, and is thus a by-product of oil demand and not
This has resulted in a volatile market and result is clear
in the accompanying graph: spot prices crash (see
Sulphurs falling fortunes).
As IM went to press, there were signs
that activity was slowly creeping back into the sulphur market
with Tunisia purchasing small volumes for $27/tonne, CFR, and a
cargo sold to Argentina for $40/tonne (CFR).
Despite the present downturn, sulphurs use in
fertilisers is predicted to breech the 40m. tonne barrier by
2011 from todays level of around 30m. tonnes.
Chris de Brey of the Sulphur Institute was decidedly upbeat
about the outlook for sulphur. He told IM:
Sulphur was considered a raw material to manufacture
phosphate fertiliser now it is considered a valuable
The vast amount of nitrogen is sourced as a gas, extracted
in large volumes from the atmosphere. However, there are a few
producers worldwide which mine it as a mineral, the group of
which is known as nitrates. The production bases tend to
cluster in brine sources of South America.
Nitrogen is the most in demand element for fertilisers,
unlike potash is has very limited storage capacity in the soil
and is constantly required.
SQM SA is the leading producer of nitrates extracted from
the Salar de Atacama brine resource in north Chile. The group
recently reported a decline of 23% in potassium nitrates sales
in 2008, falling to 585,300 tonnes.
At the end of 2008, the tide was going out on
the nitrogen sector with customers unwilling to buy in a
declining market. This has sent prices plummeting in the same
direction as phosphates and sulphur, as is apparent from the
graph highlighting urea trends (the nitrogen bearing
Ken Nyiri, principal consultant at British Sulphur
Consultants expects a rise in prices for the remainder of the
year: The market has over adjusted and prices may firm up
for the remainder of 2009 settling at over $300/tonne. On
average they will be down, but up from current
Agrium recently highlighted advantages for North American
nitrogen producers including a strong domestic demand coupled
with low gas prices. Nyiri also highlighted Bolivias
potential to emerge as a new production base owing to its gas
|World sulphur production and forecast
|Source: Suphur Outlook, TSI 2008
Many industries are playing the waiting game to see how the
unprecedented global economic crash pans out. If there ever was
a perfect example of a demand deference, or the wait and see
attitude, the fertiliser market is it.
The end users, the farmers, have taken a double impact. The
larger commercial scale farming corporations have taken a
demand hit particularly in the West sure, people still
need to eat, but they are watching the amount more than ever
and are opting for cheaper products from Eastern Europe, South
America, and South East Asia.
The small scale, individual farmers are struggling more on
the financial front bank loans are drying up thus they
are unable to support their business.
Credit lines have been affected and small customers
like farmers felt bearish with the situation... explained
sulphur trader Garcia from JBG Petroleum, ...and
[therefore] have put their customers on a backorder scenario
waiting for a better and clearer definition of the financial
There is also a seasonality factor impacting feedstock
producers, particularly in Europe after experiencing one of its
harshest winters and a wet spring.
The assumption that food is a necessity therefore the need
for fertiliser should match is not as straight forward as one
might presume. Bill Johnson of PotashCorp made a fair point to
IM: Who would have thought that the banks would be
nationalised by their respective governments. There are crucial
external factors weighing on the market
Times for all in the fertiliser industry are some of the
most challenging ever, and they are expected to get worse
before they get better. But food is the one product that takes
priority over all other commodities and this will ensure that
when the worlds markets rebound, fertiliser will probably
do so the strongest.
See IM May 2009 for an analysis of the global potash