Two years after the beginning of
the financial downturn, the fertiliser industry seems to
finally be back to pre-level crisis, steadily continuing its
Today, there are prospects
for firm growth rates for fertiliser demand in the short term
as we have entered a strong recovery phase. We are now back to
pre-crisis levels for Nitrogen-Phosphorous-Potassium (NPK)
fertilisers applications, IFAs director, production
and international trade, Michel Prudhomme said to
There is a very important
demand for fertilisers owing to positive fundamentals in
agriculture as agri-commodities prices such as soya, wheat and
corn have increased significantly since mid-2010, he
added, underlining that farmers are anticipating on 2011
According to IFAs latest
figures, world fertiliser consumption grew by about 5% in
2009/10 and should increase +4.7% in 2010/11. A 3.8% growth is
forecast for 2011/12.
Last summer, IFA reported that
fertilisers were approaching 2007 levels as world fertiliser
demand was rebounding in 2009/10. The France-based organisation
expected a return to more favourable and more stable market
conditions, as farmers were seen as reinvesting in phosphate
(P) and potash (K) fertilisers to maintain or improve the
fertility of their soils.
According to IFAs data, world
nutrient production dropped by 8% to 194m. tonnes in 2008/09,
the lowest level since 2003. Phosphate rock production
decreased by 7% and potash production by 50%.
On consumption level, global
fertiliser consumption declined by 7% in 2008/09 to 156.7m.
tonnes of nutrients with -11% for P fertilisers and -20% for K
Nitrogen (N) fertilisers were much
less affected (-1.8%), causing concern at the end of 2009 about
their predominant consumption over potash and phosphate, which
could exhaust soils on long term.
While drops in consumption were
registered worldwide, South Asia, Eastern Europe, Central Asia,
and Africa remain strong markets for the fertiliser
Recovery began cautiously in
2009/10 in parallel to the progressive economic improvements.
There was an increase in global consumption to 162.5m. tonnes
(3.7%) in this period, with increases for N (+3.1%) and P (8%)
fertilisers and a 1.2% decline for K fertilisers.
Different types of fertiliser
recovered at different levels. Being the most essential
nutrient for crops, nitrogen got back to pre-crisis levels as
soon as 2009, followed by phosphate in 2010. Full recovery is
expected in 2011 for potassium according to
Potash catching up
According to IFA, K fertilisers demand is anticipated to rise
at higher annual rates (4.3%) than demand for N (1.8%) and P
(3.1%) fertiliser, a result of its strong contraction in
After decreasing by 50% during the
crisis, potash rebounded 53% in 2010 and is now back to
pre-crisis levels. We expect record levels for potash
consumption, production and sales for 2010,
Increasing crop prices (corn
+24% on three months, wheat +5%, sugar +38%) have been a
significant driver of tight fertiliser markets. Stronger crop
prices provide farmers with both the ability (in the form of
strong farm incomes) and the incentive (desire to take
advantage of strong pricing) to increase fertiliser
consumption, Jaret Anderson, investment
analyst, Chemicals, Fertilisers & Agriculture at Salmans
Partners, explained to IM.
The excellent returns in the potash
business over recent years are starting to attract capital to
the industry and fertiliser companies keep investing in new
projects. As an example, although it had to drop its takeover
bid on PotashCorp., BHP Billiton acquired significant potash
land holdings in Saskatchewan, Canada, and is moving forward
with plans on its Jansen project, an 8m. tpa greenfield potash
project that could start up in the back half of this
Jansen is a very large
project - it is 60% larger than any existing potash mine
today and would represent approximately 13% of the
industrys 2010 operational capability.
In addition, a number of
smaller greenfield potash companies are developing projects in
Saskatchewan, Africa and Brazil that could add to capacity
several years out, Anderson highlighted.
However, potash is produced in only
12 countries, with Canada, Russia and Belarus accounting for
the lions share. With relatively few deposits around the
world and a minimum of 4-5 years required to build a greenfield
solution potash mine (5+ years for a conventional mine), we are
unlikely to see any large scale greenfield potash operations
start up before 2016.
There are a number of brownfield
expansions underway which will add perhaps 6m. tonnes of
capacity between now and 2013. More than half of the brownfield
expansions over coming years will be at PotashCorp
It is likely that potash demand
will grow further. We expect a tighter market in 2011
compared to 2009 and 2010, Prudhomme explained as
potash production is not expected to significantly increase
between 2009 and 2011.
The potential potash surplus is
starting to reduce while increasing demand is more important
than expected increased capacity for 2010/11.
The market is tight at present as demand is stronger than
expected for all type of phosphates in all markets,
IFAs Prudhomme said.
Demand for phosphate keeps
increasing, particularly in Asia where China and India have
huge needs for the fertiliser mineral.
Although a significant amount of
projects - including OCP in Morocco; Minemakers Ltd and
Legend International Holding Inc. in Australia; Vale SA in
Brazil; MBAC Fertilizer Corp. in Canada; Sunkar in Kazhakstan -
are progressing worldwide to increase world phosphate capacity,
most of them are not expected to be into production before
A small increase in capacity is
expected in 2011 when Maaden Phosphate Co.s
project, a 70:30 joint venture between the Saudi Arabian Mining
Co. (Maaden) and Saudi Basic Industries Corp. (SABIC)
starts production. But it will not be enough to meet the
The phosphate market will be
tight through 2011 and likely until 2014, Prudhomme
After getting back to pre-crisis levels, it seems that the
fertiliser market will continue its healthy growth on short and
mi-term. World nutrient demand has entered into a phase
of growth, Prudhomme believes.
According to IFA, the growth rate
for fertiliser demand in 2010 and 2011 are well above the
15-year average of 2.2-2.5%, as the market is catching up after
the financial downturn in addition to being boosted by
attractive agricultural commodity prices.
IFA expects world fertiliser
consumption to grow by 4.7% in 2010/11 and by 3.8% in
The highest growth in demand for
both P and K fertilisers is expected to occur in East Asia even
though growth in regional demand is seen as slowing down as
China approaches a mature market status for N and P
fertilisers. Significant growth in demand for K fertiliser is
also forecast in North America and Latin America.
Richard Downey, senior director of
investor relations at Canadian fertiliser producer Agrium Inc.
confirmed to IM that Asia had significant
potential for fertilisers as the company plans to use its
latest acquisition in Australia as a base for further expansion
in South East Asia in the long term (IM 3 December 2010:
Fertiliser group Agrium completes acquisition of
In the medium term, the forecast
gets even brighter. According to IFA, the positive agricultural
outlook will stimulate fertiliser application, with world
demand expanding at an annual rate of 2.5% to 190m. tonnes in
However, while the market today is tight, the picture
five years out is less clear, Jaret Anderson pointed
Potash prices on the rise
Potash prices are firming on the back of rising crop
prices, particularly soy beans, wheat and corn, in strong
Near term, we expect potash
prices in Vancouver and offshore markets to play catch-up with
the price increases implemented in the US Midwest, Jaret
Anderson, investment analyst, Chemicals, Fertilisers &
Agriculture at Salmans Partners, explained to
In our PotashCorp model, we
have price realisations increasing approximately $100/tonne
over the next couple of quarters as the price increases
announced for the US Midwest take hold, he added.
Owing to increasing crop prices,
list prices for potash in Saskatchewan were reported with a 28%
increase over the past three months from $374/tonne to
In other markets, a $50/tonne
increase in Brazil and South East Asian markets has also been
realised taking prices to $425-440/tonne CFR for standard
Long term, we assume a potash price of $400/tonne FOB
Vancouver - an assumption that allows us to evaluate
greenfield potash projects in a conservative manner,
Fertiliser minerals at a glance
Main fertiliser minerals
||World production (m. tonnes)
||World capacity (m. tonnes)
Often required in the greatest quantity by crops,
primarily for vigour and yield.
Plays a key role in chlorophyll production and
|Phosphate (phosphorous feedstock)
||165 (phosphate rock)
||200 (phosphate rock)
Vital component of adenosine triphosphate (ATP)
which supplies the energy for many processes in the
Phosphorus rarely produces spectacular growth
responses, but is fundamental to the successful
development of all crops. For example, maize or other
corn crops that lack phosphorus during the growing
season achieve lower yields.
|Potash (potassium feedstock)
Needed by virtually all crops and often in higher
rates than nitrogen.
Potassium regulates the plants water content
Key to achieving good yield and quality in cotton
and critical for increasing the size, juice content and
sweetness of fruit.
||Particularly important for ensuring the protein
content of cereal crop grains.
Types of fertilisers
|Direct phosphate fertilisers
|Complex phosphate fertilisers
Sources: IFA, USGS, AFA, IM