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Feed the world: the global fertiliser market
- 1. INDUSTRIAL METALS, MINERALS &MINEABLE ENERGY INVESTMENT SUMMIT Feed the world: the global fertiliser market Steven Markey – CRU Strategies IRONMONGERS’ HALL, CITY OF LONDON THURSDAY, 3 NOV 2011 www.ObjectiveCapitalConferences.com
- 2. │ Feed theWorld: The Global Fertilizer Market Steve Markey, CRU Strategies Objective Capital November 2011, London 31 Mount Pleasant, London. WC1X 0AD Tel: +44 20 7903 2132 Fax: +44 20 7833 4973 www.crugroup.com
- 3. Introduction Nitrogen O Nitrogen Overview Important Trends U Phosphate T Phosphate Overview Important Trends L I Potash Potash Overview N Important Trends E Fertilizer Outlook Supply & Demand Key Points and Conclusions │
- 4. ABC’s of Fertilizer– Three Primary Plant Nutrients N nitrogen a key component of amino acids which make up plant proteins and chlorophyll P phosphorus is important in fruiting, flowering, and root development K potassium improves crop quality and increases nitrogen uptake Fertilizer sector is a combination of mining industries and chemical industries. │
- 5. Nitrogen Overview Nutrient content is defined in terms of elemental N China 33% China 43% China 36% Egypt Canada Indonesia Trinidad Russia Ukraine Indonesia Russia 7% Russia 6% USA 6% USA 6% India 7% The Gulf 10% India 12% India 9% The Gulf 8% Natural Gas is the primary feedstock typically representing 70-80% of ammonia production cost – 80% of N capacity uses natural gas as feedstock │
- 6. Nitrogen trends Urea: Nitrogenproduct of choice representing 60% of total N fertilizer use M Tonnes % 250 30 29 More urea for export – regions with 200 28 cheap natural gas continue to build urea for export business. 27 Demand 150 25 M tpa between now and 2015 26 Trade 13.7 M tpa in MENA % Trade 100 25 Rising price of Russian gas – expect 24 to see shutdowns in Ukraine and 50 eastern Europe as gas market in 23 Russia is liberalized. Ukraine urea 0 22 exports to fall 35-40% by 2020. 2005201020152020 │
- 7. Phosphate Overview Nutrient content is defined in terms of P2O5 or BPL China 33% China 30% China 32% Brazil Tunisia Russia Russia 6% Brazil 8% Morocco 13% USA 20% USA 16% India 17% Morocco 10% USA 10% 62% of identified recoverable phosphate rock reserves are in Morocco │
- 8. Phosphate Trends DAP andMAP = 65% phosphate fertilizer Advent of Ma’aden – massive integrated phosphate capacity in Saudi Arabia will weigh Others include on prices as production is ramped up over • TSP the next several years. 5.3 m tonnes phosphate rock (Al-Jalamid) • SSP 3 m tonnes DAP Decline of Florida – diminishing reserves and increasingly stringent environmental regulations will reduce production: Phosphate rock market stable at 10-15% of 50 total production as established players 106 t phosphate rock capacity Florida Other states 40 continue to invest in downstream capacity offsetting new pure play mining entrants: 30 Legend and Minemakers – Australia 20 Bayovar – Peru 10 Sandpiper - Namibia 0 2005 2010 2015 2020 2025 2030 Source: USGS (2005) │
- 9. Phosphate Exploration Activity QUEBEC Arianne Resources FINLAND Yara ONTARIO PhosCan Chemical Corp. IDAHO KAZAKHSTAN Stonegate Agricom EuroChem TUNISIA Sunkar Resources Numidia Phosphate Sra Ouertane IRAQ Iraq State Company for Phosphate MALI 9 PERU Great Quest Metals Cementos Pacasmayo Oklo Uranium Focus Ventures UGANDA AUSTRALIA GrowMax Agri Corp Nilefos Minerals Stonegate Agricom Arafura Resources ROC / DRC / ANGOLA Korab Resources Cominco Resources Krucible Metals Minbos Resources Minemakers MOZAMBIQUE Legend BRAZIL Oklo Uranium Aguia Resources Vale Phosphate Australia MBAC Fertilizers NAMIBIA Rum Jungle Resources Redstone Resources Minemakers / Union Resources Rio Verde Minerals GUINEA-BISSAU Vale Amazon Mining Holding Resource Hunter Capital Corp. Copper Range │
- 10. Potash Overview Nutrient content is defined in terms of K2O – fertilizer-grade MOP contains 60% K2O Jordan USA 18% China Canada 36% Israel Indonesia & China 16% Germany Malaysia 7% EU 10% Belarus 14% Brazil 13% Russia 17% India 12% Very few producers – production capacity concentrated in Canada, Russia, Belarus Poor overlap between areas of high production and areas of high demand leading to 80% of demand is met by imports │
- 11. Potash Overview 80% of 2010 sales from 6 companies 2 JVs handle 65% of seaborne trade QSL Potash Co., Ltd 16% 19% 4% 35% 40% 7% 16% 10% 12% 16% 25% BPC includes IPC │
- 12. Potash Trends Uralkali/Silvinit merger – two Russian Arrival of mining conglomerates – higher companies brought together by Suleiman potash prices have attracted mining majors Kerimov. Creates world’s largest producer. into the sector. Exports from new company and Belaruskali BHP Billiton Vale will be marketed co-operatively. Increases Rio Tinto (In, out, back IN!) supplier pricing power. BHP recently failed in a $40bn bid for PotashCorp., but are progressing a greenfield project in Saskatchewan. New Players EuroChem – Gremiachinskoye 2.3 m 2013 Brownfield expansions PCS building 7m tonnes new capacity – 42% of worldwide brownfield expansions 2009-2019 Uralkali 4.5 m tonnes by 2019 │
- 13. Potash Exploration Activity A LBERTA SASKATCHEWAN MANITOBA Grizzly Discoveries Acron / Agracity BHP Billiton Canasia Industries BHP Billiton Western Potash Cloudbreak Resources Canada Potash Corp. First Lithium Devonian Potash RUSSIA (URALS) Pacific Potash Corp. Encanto Potash Acron Softrock Minerals Potash One EuroChem Sidon Resources Karnalyte Resources Universal Potash Tri-River Ventures KAZAKHSTAN Western Potash Fortis Mining / Ji’an Resources / Wyot Vale Satimola UNITED KINGDOM York Potash (Sirius Minerals) MONGOLIA NEWFOUNDLAND General Mining Corp. Altius Resources Vulcan Minerals RUSSIA (SIBERIA) UNITED STATES Red Emperor Resources Transit Holdings TURKMENISTAN American Potash Turkmenkhimiya Universal Potash Mesa Uranium Dakota Salts (Sirius Minerals) THAILAND & L AOS BUA (Ringbolt Ventures) Passport Metals ASEAN Potash Mining PERU Asia Pacific Potash (Ital-Thai) Red Metal ERITREA & ETHIOPIA GrowMax Agri Corp Mingda Thailand Salmueras Sudamericanas Allana Potash Sinoagri Mining BHP Billiton Sinohydro Mining BOLIVIA Ethiopian Potash Corp Viet-Lao Salt & Chemicals Comibol Sainik / IFFCO Zhongliao Mining BRAZIL South Boulder Mines Kaiyuan Potash Amazon Mining A RGENTINA CONGO Atacama Minerals Allana Potash Brazil Potash Corp. MagMinerals Dajin Resources Lara Exploration Congo Potash Co. A USTRALIA Lithium Americas Corp Petrobras Elemental Minerals AusPotash (Sirius Minerals) Marifil Mines / Oxbow / Sacharrum Potash Atlantico Queensland Potash (Sirius Minerals) Orocobre Redstone Resources Potash West PRC (Vale) Rio Verde Minerals Reward Minerals Rincon Lithium Talon Metals South Boulder Mines Rondonia Minerals Vale East Coast Minerals │
- 14. World Fertilizer Demand Fivefoldgrowth in half a century Global aggregate application ratio for N:P:K = 1.0 : 0.37 : 0.26 This suggests growth rates for P, and particularly K, should outperform N. │
- 15. Fertilizer Demand 20 15 USA 50 10 EU 10 40 China 5 5 30 0 0 20 N P K 20 N P K 15 India 10 10 0 5 N P K 10 0 Brazil N P K 5 0 N P K million tonnes nutrient │
- 16. Fertilizer Demand Forecast 200.0 175.0 +3.2% CAGR 150.0 urea 125.0 DAP/MAP As P2O5 million t/y 100.0 MOP 75.0 +4.6% CAGR 50.0 +2.7% CAGR 25.0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 │
- 17. Short-term Demand Drivers Index of grain and fertilizer prices – 2006=100 Crop prices – international 450 400 Wheat, Corn, Soya crop prices have a big effect 350 Urea, DAP, K2O on fertilizer demand and 300 prices 250 200 150 100 Current Price vs Average 50 Benchmark 1990-2005 0 Jan 10 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 11 Jul 01 Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Urea 390% DAP 343% MOP 550% Fertilizer prices – P&K Holiday without immediate effect on yields Tactical buying – consumers are less likely to build inventory (more risk averse post 2008) creating more market volatility and higher prices will stretch financing capacity │
- 18. Maize global stocksto use ratio 35% Historical (USDA) Forecast (FAPRI) 30% 25% 20% 15% Shading indicates StU "danger zone" 10% 1990 1995 2000 2005 2010 2015 2020 │
- 19. Long-term demand drivers Rising population + Falling arable land per capita Need to raise crop yields yield (indexed to USA) 120 Corn Rice Soybeans 100 80 60 40 20 Data: FAO 0 USA China Brazil India Fertilizer is widely under-applied and inefficiently applied in developing economies poor yields Better nutrient balance – ratio of N : P&K is too high in many developing countries │
- 20. Meat & Biofuelsare Significant Drivers Biofuels: the food/feed/fuel 150 Production debate – many governments Bln Litres Consumption have set biofuel targets, but 100 bio-fuels are today only 50 significant in USA (corn), Brazil (sugar cane) and Germany 0 (rapeseed). 2005 2000 2010 2015 2020 2025 Future is dependent on political factors, oil prices, technology developments (“2nd gen biofuels”). 300 Global Livestock and Poultry Demand (M tonnes) Modest direct impact on fertilizer 250 demand, more potential to affect crop 200 Poultry Consumption prices. Pork 150 Beef Changing diets – more 100 protein (1kg meat requires 3- 50 10kg grain), more premium 0 products like fruit 1992 1980 1982 1984 1986 1988 1990 1994 1996 1998 2000 2002 2004 2006 2008 2010 │
- 21. Key Nitrogen Conclusions •Chinese exports and trade policy remain a significant wild card for urea trade China Urea Exports • Government decisions have major consequences (China export tariff, Russia-Ukraine gas 8.0 prices, Indonesia export moratorium) 7.0 6.0 • Substantial volume of new capacity to come on- 5.0 stream, following investments made during the boom years of 2007-8 4.0 3.0 • Evolving energy prices (and production costs) remain 2.0 fundamental! 1.0 • Shale gas production has changed North America 0.0 2001 2003 2005 2007 2009 │
- 22. Key Phosphate Conclusions •Major rock producers are all looking at downstream integration projects • Full impact of Ma’aden is yet to be felt by the market • Some early warning signs of demand destruction in India • What is the long term solution to the Florida rock problem ? • How many new projects will get financing in today’s environment? │
- 23. Key Potash Conclusions •Potash demand is recovering worldwide but some buyer resistance is still occurring (India) • Producers continue to push the price envelope but slower pace may avoid severe demand destruction seen in 2008 • Future ownership of Belaruskali will have significant market impact • Multitude of brownfield and prospective greenfield projects will likely test pricing stability in 2-3 years │
- 24. │ Thankyou for listening Available from CRU Fertilizers... Steve Markey TEN-YEAR OUTLOOK SERVICES CRU Strategies Ammonia the consulting arm of CRU Fertilizers (formerly British Sulphur Urea Consultants) Phosphate Rock Phosphoric Acid, DAP, MAP & TSP +44 20 7903 2127 Potassium Chloride Sulphur steve.markey@crugroup.com Sulphuric Acid www.crugroup.com COST SERVICES Available from CRU Strategies... Market Decisions (e.g. pre-feasibility and BFS) Nitrogen fertilizers Negotiation Support Potassium chloride Valuation Phosphate Rock (coming March 2011) Strategy Development Performance Improvement 31 Mount Pleasant, London. WC1X 0AD Tel: +44 20 7903 2132 Fax: +44 20 7833 4973 www.crugroup.com
- 25.
- 26. Fertilizer Overview Rawmaterials Intermediates Fertilizers Urea Ammonium nitrate (AN) Urea 60% NITROGEN Ammonium sulphate (AS) Natural gas Ammonia FERTILIZERS (or other fossil fuels) Urea Ammonium Nitrate (UAN) DAP& Mono-ammonium phosphate (MAP) Sulphur MAP Sulphuric acid PHOSPHATE Di-ammonium phosphate (DAP) 65% FERTILIZERS Phosphate rock Single superphosphate (SSP) Phosphoric acid POTASH Triple superphosphate (TSP) MOP 90% FERTILIZERS Potassium salts Potassium chloride (MOP) Potassium sulphate (SOP) Potassium chloride Potassium nitrate (NOP) │
- 27. New Export UreaCapacity (‘000 t/y) Start-up Plant Country Urea EASTERN HEMISPHERE Q4 2011 Qafco V Qatar 1,270 2011 Iran 1,075 NPC – Shiraz 2014 Safco V Saudi Arabia 1,073* 2013 Fertil II UAE (Abu Dhabi) 1,155 Q4 2012 Qafco VI Qatar 1,270 2015 Iran 1,075 NPC – Golestan 2015 Iran 1,075 NPC – Lordegan 2015 Iran 1,075 NPC – Zanjan 2014 Perdaman Australia 2,000 2013 Matix Fertilizers and Chemicals India 1,300 Mid 2014 PT Pupuk Kaltim V Indonesia 1,155 * Based on surplus Ammonia already produced at Al Jubail │
- 28. New Export UreaCapacity (‘000 t/y) – continued Start-up Plant Country Urea WESTERN HEMISPHERE Nov/Dec 2011 Sorfert Algeria 1,138 Mid 2012 EAgrium / MOPCO Egypt 1,270 2012 Pequiven – Puerto Moron Venezuela 726 2015 Tatgazinvest Russia 677 2012 JSC Cherepovets Russia 495 Mid 2013 Algeria Oman Fertilizer Company Algeria 2,310 2013/14 Pequiven – Jose Venezuela 1,452 2014 Pequiven – Puerto Nutrias Venezuela 726 2013? CF/Pluspetrol DOESN’T LOOK LIKE Peru 1,073 IT IS GOING AHEAD 2014 Olam Int/ Tata Chemicals/ gov of Gabon Gabon 1,271 JV Mid 2014 or 2015 Petrobras, Tres Lagoas Brazil 1,188 2014 Tierra Del Fuego Power & Chemical Co. Argentina 800 Mid 2015 Cuvenpeq Cuba 726 Total 26,302 │