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Fertilizer Trends: A large product variety

Mounir Halim

GPCA, Dubai7th Sep 2016

• Nitrogen’s struggle: Oversupply overshadowing nutrient demand with limited forward visibility

• Phosphates Resistance to price pressure but downtrend continued reflecting a general trend

• India’s fluctuation, China’s shock absorber and Africa the next frontier

Overview

Argus FMBDedicated global expertsLarge portfolioPrice assessments used globally

Argus FMB Wide Coverage and widely used

RESOURCES INTERMEDIATES

POTASH

Ammonia

Integrated Urea Producers

N-Fertilisers

DAP/MAP/TSPMGA

Sulphur

Blenders / Distributors

AGRI Supply

RETAIL

COOPSAGRI-INPUTS

RETAIL NETWORK

SINGLE COMPOUNDS

Financial institutions / NGOs / Governments…

MIXED COMPOUNDS

New weekly report

• Weekly publications: prices and market intelligence• Monthly publications: forecast and market trends• Annuals : long term strategic forecast

Indexation price assessments in contracts

Argus Brazil cfrUrea, MAP indexMOP NegoUS, Russian, Moroccan, and Saudi Origins

Argus Nola fobN and P Index

Argus AG fobUrea, DAP indexGlobal trade

Argus Algeria, Egypt fobUrea indexEuropean Market*

Argus fob MoroccoPhosphatesN&L America, Asia

Argus Baltic fobUrea indexGlobal trade

Argus fob YuzhnyUrea indexGlobal trade

Argus fob TampaDAP index

U R E A lower fluctuations, lack of visibility and increased riskFloor price and VolatilityCapacity and Forecast

Ammonia Cost Curve flat-lining in the short-term

Source: Argus FMB Ammonia Cost & Margin Service

Notes: Tonnage refers to merchant ammonia supply potential

Nitrogen Over supply a dominant theme in 2016 overshadowing nutrient demand

Plants returning from turnaround increasing availability

More than 13mn t exports in 2015. 30% less in 2016

Capacity to export but setting a floor price

Healthy demand – market rebound

new capacities

Increasing product availability

Urea prices bottomed out after India Tender at $180

AG 2016 average price, $201, 80$/t (28pc) lower than in 2015

• Oversupply, a dominating theme of urea market in 2016

• Near the end of a five year downtrend in prices

• Searching for a level at which old capacity will be closed

• Needing to find a new equilibrium to absorb US capacity

Urea prices

reserved

Lowest since 2004

Supply/Demand fluctuations driven by price range $180-200

Nitrogen price 10+ year low

• Lowest levels since 2004 – new dynamic

• $180-$200 range. Demand Rebound vs. Delay Purchase

• Expect range to remain for months to come – less volatility

• End of mini-Rally $180 $200:

Plant outages and turnarounds

• Return of Egypt and FSU raising availability: Buyers not attracted by current prices

5 Year Range

Olympic average

2016 prices

Jan-Jul 2014 2015 2016

Global 5.283 7.749 5.778

India 1.592 3.03 1.617

MS in India 30% 39% 28%

In million t

• Prices bottomed at $180 soon after Indian tender in July

• Difficult price for Chinese and other supplier – setting international floor price $180 fob china

• Chinese exports down 25pc (Jan-Jul). Expected to fall at 9mn tonnes for 2016: 4.7mn tonnes fall year one year

• Chinese shrinking exports to eventually be outweighed by new on-stream capacities

Coalprojects

Crops Curtail

Economycurrency

Fertilizer Floor Price Dynamics

FLOOR PRICE

2015- 2016Low to date

floor Tightening of spread

FACTORS INFLUENCING FERTILIZER FLOOR PRICE

Urea Price Volatility tightening

Urea Middle East: Jan – Aug 2015

Standard Deviation: 0.0272

$/t fob

Source: Argus FMB

Urea price, right axis

Week to week price delta, left axis

Urea Price Volatility tightening

Urea Middle East: Jan - Aug 2016

Standard Deviation: 0.0250

$/t fob

Source: Argus FMB

Urea price, right axis

Week to week price delta, left axis

• Before the end of 2016, new plants:

◦ in Malaysia (1.2m tonnes/year)

◦ Iran (1.1m tonnes/year

◦ US (1.2m tonnes/year

◦ Joining Algeria’s 1.2m tonnes/year and Nigeria’s 1.4m tonnes/year

• Need to find a new equilibrium to absorb new capacities

New capacities

• Traded market 48mn tonnes2015-16

• Traded market to shrink 2017 due to US

• Supply to rise approx 3mn tonnes from 2017

• Oversupply worsens

Short-term oversupply shrinking seaborne trade

World urea trade - m tonnes

2016 2017

Total 48 46-47

Middle East 18 19

China 13 13

FSU 8.5 8.5

Africa 6 7

SE Asia 1.6 2.6

W Europe 1.5 1.5

Caribbean 1.2 1.2

Others 2 2

Available 51.8 54.8

Phosphatesregional focus new capacities startingstable to soft outlook

Phosphates resistance but downtrend continues

Recovery in L America through traders

NP/NPK strong line-up

Brazil importing more this year but not the same levels as 2013’s

Strong supply of 11-44 China limits upside

Source: Argus FMB

China restricting output

Focus on regional markets

Supply side consolidation

New capacity plateauing

US domestic trades at discounted world prices

Switch to MES and regional focus

New capacities

NPK diversification

Africa Strategy

East: weak/flat marketWest: stable DAP/MAP market

India expected to reach 5.5mn t DAP imports

Demand insufficient to mop up Saudi, Chinese and Australian DAP

Phosphates prices holding but much lower levels

• China is holding fob DAP levels by restricting output

• But Indian/Pakistan demand insufficient to mop up Saudi, Chinese and Australian material

• Indian buying continues but will be less than last year at about 5.5mn t DAP imports

• MAP price in Brazil is also limited by fundamental oversupply especially from China (11-44)

• Overall outlook is for marginally weaker prices in the east through rest of 3Q and into 4Q

• Brazil will import more than last year but still less than the high points of 2013 (which were around 3mn t)Phase 1 Phase 2 Phase 3

DAPPRICE CYCLE

DAP vs.SulphurCHINA

5 Year Range

2016 prices

DAP normalisedSulphur normalised

• Brazilian prices will be steady basis lack of 11-52 available especially in trader hands

• More capacity already on line in Morocco (2nd plant of 4)

• Prices will erode as seasonal demand dies down in India and Pakistan

• Subsidy for DAP unlikely to rise in India hence any drastic increase in imports unlikely

• Ethiopian tender will boost exports for OCP and PhosAgro but no relief for DAP

Phosphates: next 3-6 months

NPKs and Africa

Global NPK trade

Latin AmericaBrazil :main gateway for imports taking almost 500,000t

AfricaCurrent market in excess of 2 mn tRussian Moroccan origin…OCP Africa ambition

RussiaAccounts for around 28pc of global exports

ChinaAlmost 1.5mn t of imports dominated by Russia and NorwayTax potential game changer

Southeast AsiaThailand accounts for around 45pc of this 2mn t market

West EuropeAccounts for around 47pc of global exports, most of which come from Belgium, Norway and Finland

Norway/FinlandLargest exporting producer

Global footprint

Ethiopia

19-38-0+7S

Tenders

Nigeria

15-15-15

12-12-17+2MgO

Private/Restricted Tenders

14-18-18+6S+1B

15-15-15

Burkina Faso

14-18-18+6S+1B,

15-20-15+6S+1B

Cote D’Ivoire

80-100kt

15-15-15

15-15-15+B

20-10-0

23-10-5

15-15-15

0-22-18+MgO

26-5-5

Africa NPKs: consumption and supply selection…

OCP: 1 mn capacity dedicated to SSA

More capacities being rolled on

10 kg/ha

Note 1. This is a selection of NPK tenders in Africa. Source: Argus FMB NPK weekly publication

Demand in Africa Complex vs. Blend

• Steam granulation, compaction and blending as routes to NPK, are usually much more local in their reach

• and the battle for share will be a key factor in the market in the coming decades

Source: Argus FMB Consulting, Argus FMB SSH Report

NPKs Imports to sub-Saharan Africa

Demand in Africa Complex vs. Blend

Source: Argus FMB

2016 NPKs 15-15-15Imports to sub-Saharan Africa

Complex cfr West Coast AfricaBlend cfr West Coast AfricaMorocco Fob

Summary

• Market expects an upswing due to market fundamentals

◦ recovery of Brazil demand, increased competitiveness

◦ potential in Africa

• But are we at the bottom of the cycle, ready to swing or flat for sometime

◦ global malaise, commodity prices

◦ lower nutrient demand

◦ oversupply dynamic

• Market shares/presence to play key role in this transition

• Adoption of more indexation to secure positions

Where next

illuminating the markets

• Volatility to continue to be driven by Trade/Demand balance

• Chinese exports to remain a key driver in the global fertilizer pricing

• An upswing is expected but the extra capacities will bring market shares into play

• Indexation as solution for volume/price risk management

• NPKs as an option for diversification

Summary

NPKs Global Publication weekly trade and prices

• Detailed table on African tenders (volumes, suppliers …)

• Supply, demand and price updates

• Summary of latest deals

• NPK compound and blend price comparison

• Russian weekly exports by grade, producer and destination

• Monthly Ukrainian imports by grade, producer and origin

• Key import/export market commentary

• Related nutrients markets

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fertilizer trends: a large product variety · pdf filebeijing tokyo sydney dubai moscow astana...

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