Global Fertilizer Supply/Demand

Five-Year Market Outlook (2012-2017)

Magnus Berge

2º Congresso Brasileiro de Fertilizantes

São Paulo, August 27, 2012

2

Global Market Overview

Supply, Demand, Trade and Prices

Nitrogen Market Outlook

Phosphates Market Outlook

Potash Market Outlook

Outlook for the Brazilian Market

Conclusions

CRU International

Presentation Outline

3

Global Market Overview

4

Fertilizer Demand

million mt nutrient

0

5

10

15

20

N P K

0

5

10

15

20

N P K

0

5

10

15

20

N P K

0

5

10

15

20

N P K

0

10

20

30

40

50

N P K

Brazil

USA

EU

India

China

China 28%

India 16%

USA 12%

EU 10%

Brazil 6%

ROW 28%

>70% fertilizer

consumption is in

China, India,

USA, EU and

Brazil

5

Demand Drivers

Changing diets

Better nutrient balance

Rising population

Non-food crops

Crop prices

Fertilizer prices

Tactical buying

Weather patterns 0 50 100

US

A

Chin

a

Bra

zil

India

Indexed to USA

Soybeans Rice Corn

Fertilizer is widely

under-applied and

inefficiently applied

in developing

economies poor

yields and high

growth potential

SHORT

TERM

LONG

TERM

6

Trends in N, P & K Demand – 2007-2012 (million mt)

125

130

135

140

145

150

155

160

20

07

20

08

20

09

20

10

20

11

20

12

Urea

0

5

10

15

20

25

30

35

20

07

20

08

20

09

20

10

20

11

20

12

DAP

0

10

20

30

40

50

60

20

07

20

08

20

09

20

10

20

11

20

12

MOP

7

Supply & Demand Balances for Key Crops: Corn & Soybeans

8

10

12

14

16

18

20

650

700

750

800

850

900

950

ST

U in

%

milli

on

mt

CORN

Production Consumption STU

10

12

14

16

18

20

22

24

26

28

30

100

120

140

160

180

200

220

240

260

280

300

ST

U in

%

milli

on

mt

SOYBEAN

Production Consumption STU

8

Fertilizer Affordability Index

50

100

150

200

250

300

350

400

Jan

2006 =

100

Index of Fertilizer Prices

Index of Crop Prices

Correlation: 81%

9

CRU’s Crop Price Index Forecast (2000=100)

60

110

160

210

260

310

360

Export Price Index (2000=100) Wheat Corn Soybeans

Forecast

10

Supply, Demand, Trade and Prices

Nitrogen Market Outlook

Phosphates Market Outlook

Potash Market Outlook

11

N Fertilizer Use by Main Regions - 2010

Europe + FSU

9%

Americas 22%

South Asia 24% E Asia

37%

SE Asia + Oceania

4%

Other 4%

12

N Fertilizer Use by Crop – 2010

Wheat; 17%

Rice; 16%

Corn, 17% Other Coarse Grains; 5%

Soybeans, 1% Oil Palm; 1%

Other Oilseeds; 4%

Cotton; 4%

Sugar Crops; 3%

Fruits & Veg.; 16%

Other Crops; 16%

13

Urea Supply/Demand Balance, 2000-2017

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

Millio

n m

t u

rea

Supply Demand Utilisation

14

Urea Capacity Forecast to 2017 (million mt)

100

120

140

160

180

200

220

240

260

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Million mt

15

Urea Demand Forecast to 2017 (million mt)

100

110

120

130

140

150

160

170

180

190

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Million mt

16

Urea Trade Forecast to 2017 (million mt)

20

25

30

35

40

45

50

55

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Million mt

17

Crude Oil and Urea Prices, History and Forecast

0

20

40

60

80

100

120

0

50

100

150

200

250

300

350

400

450

500

Oil price Urea price index

Brent Crude Oil, $/bbl Urea, Black Sea FOB price index (2000=100)

18

Urea Price Forecast Indices, Major Benchmarks

2000-2017 (2000=100)

0

100

200

300

400

500

600

20

00

=10

0

Black Sea Prill, FOB Middle East Granular, FOB NOLA Granular, FOB

19

Supply, Demand, Trade and Prices

Nitrogen Market Outlook

Phosphates Market Outlook

Potash Market Outlook

20

OCP, 5%GCT, 2%

Mosaic, 11%

PCS, 2%CF, 2%

Other USA, 2%Vale, 3%

Ma'aden, 4%

IFFCO, 4%PhosAgro,

3%YTH, 5%

Wengu, 3%

Kailin, 3%Other

China, 25%

ROW, 27%

Granulation capacity by major producer in 2011

21

Over 30% of annual production is traded…

22

The short term forecast is dominated by India...

1

1. Dec 2011: Chinese export policy tightened

2. Q1/2 2012: Production difficulties continue

3. May 2012: OCP secures Phos Acid export

contract at $885/mt CFR

4. May 2012: PhosChem DAP contract agreed at

$580/mt CFR

5. June 2011: Chinese producers hold out and

secure $580/mt contract

23

Is anyone else able to pick the slack? Brazil!

0

10

20

30

40

50

60

1977 1982 1987 1992 1997 2002 2007 2012 2017

Bra

zilia

n c

rop

are

a, m

illio

n h

ecta

res

Sugar Soyabeans Corn

24

… which will push result in Brazilian P demand growth of 5% CAGR 2011-2017

25

On the supply side, China has driven global production growth over the past decade…

26

… and exports are under pressure

DAP DAP

MAP

TSP

SSP

NPs

NPKs

DAP

MAP

TSP

NPs

30% 30%-135% 110% 110% 110% 110% 110% 110%

DAP

MAP

TSP

DAP

MAP

TSP

DAP

MAP

DAP

MAP

DAP

MAP

DAP

MAP

27

… therefore limiting future production growth

28

Where is new supply going to come from?

OCP

Eurochem

Meleuzskie

GCT

Ferphos

Ma’aden

Vale

Copebras

Pequiven

JIFCO

IFFCO

Paradeep

Xiangfeng

Yidu Xingfa

Vinachem

29

The outlook for prices: bulls and bears

29

Bearish factors: Short/medium term trends:

• Indian import are under threat (high prices, reduced subsidies, weak rupee);

• Anticipation of new supply ramping up in MENA (Ma’aden, OCP);

• Anticipation of existing supply returning to production in 2012/13 (Tunisia, Egypt);

• Chinese trade policy could promote additional DAP/MAP supply, at lower prices.

Long term trends:

• Further capacity growth expected in MENA over long term, could flood market.

Bullish trends: Short/medium term trends:

• Agricultural markets remain relatively tight (corn, soybean);

• Willingness of producers to cut production (Mosaic, PhosAgro, OCP);

• Continued technical difficulties at Ma’aden’s operations;

• Continued strong P demand in Latin America over short term.

Long term trends:

• Higher cost structures (opex & capex);

• Continued demand growth.

30

FOB TAMPA DAP Price Index forecast: 2010-2017 (2010=100)

95

100

105

110

115

120

125

2010 2011 2012 2013 2014 2015 2016 2017

Pri

ce In

de

x, 2

01

0=1

00

31

Supply, Demand, Trade and Prices

Nitrogen Market Outlook

Phosphates Market Outlook

Potash Market Outlook

32

World Potassium Chloride Capacity

1 9 3

1

3 12

10

11

6 5

5

7 5

4

2

8

0 2 4 6 8 10 12 14

PotashCorp

Uralkali Mosaic

Belaruskali ICL

K+S

Arab Potash

QSL Potash

Agrium

SQM

Vale

Intrepid

Other

2011 Capacity (million mt/y)

12

11

10

9 8 7 6 5 4 3 2 1

33

VALE

Rio Colorado ProjectUS$5.9bn4.35m t/y

Start-up end-2014Ramp-up to 2021

K+SLegacy Project

C$3.25bn2.86m t/y

Start-up 2015Ramp-up to 2023

EUROCHEM

Gremyachaya ProjectUS$3.4bn

2.30m t/y (Phase I)2.30m t/y (Phase II)Start-up end-2014Ramp-up to 2017

EUROCHEM

Palaschersk ProjectUS$2.0bn

2.00m t/y (Phase I)Phase II pending approval

Start-up 2016Ramp-up to 2019

New Potash Mines Under Construction

34

Worldwide Capacity & Production Trend (million mt)

0

10

20

30

40

50

60

70

80

90

100

mill

ion

mt

KC

l

North America CIS ROW Global capacity

35

Forecast of Global KCl Deliveries to 2017

China China China China China China China

USA USA USA USA USA USA USA

Brazil Brazil Brazil Brazil Brazil Brazil Brazil India India India

India India India India

SE Asia SE Asia

SE Asia

SE Asia SE Asia

SE Asia SE Asia ROW

ROW

ROW

ROW ROW

ROW ROW 55,1

52,6

57,1

60,9 62,9

64,9 66,9

0

10

20

30

40

50

60

70

2011 2012 2013 2014 2015 2016 2017

milli

on

mt

36

Recent & Forecast KCl Deliveries – Central & South America

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

KC

l d

eliv

eri

es (

milli

on

mt)

Brazil Other

37

1

1. India still making imports under 2011/12 fiscal

year contract

2. China has imported strongly in H1 2012. New

contracts may not be signed until Q4

3. US has been hit by severe drought, potash

imports affected but largest corn planted-area

in decades to lead to spring demand rebound

4. Brazil has been importing at over 1m

mt/month over the last two months but

producers unable to raise prices

The short term forecast

38

The outlook for prices: bulls and bears

38

Bearish factors: Medium term trends:

• Risk of serious over-capacity developing over the next five years, despite recent news that BHP Billiton and Vale are postponing final approval for projects.

• Concerns that producers will continue to push to maximize prices, hampering demand growth.

• India remains a major concern, with consumption at least 30% below normal levels.

Bullish trends: Medium term trends:

• Although some dilution of pricing power is expected but producers will continue manage production to protect prices

• There remains significant scope for demand growth in some markets: Brazil, India, China and SE Asia

• Crop prices are expect to remain high by historical standards, supporting potash prices

39

KCl Annual Average Price Index Forecast to 2017 (2010=100)

95

100

105

110

115

120

125

130

135

140

2010 2011 2012 2013 2014 2015 2016 2017

Van

co

uve

r/P

ort

lan

d n

etb

ac

k (

201

0=

100

)

40

Brazilian Market Outlook

41

Brazil Yield Development (Main Crops)

0

10

20

30

40

50

60

70

80

90

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

Suga

r C

ane

in t

on

ne

s p

er

he

ctar

e

Co

rn &

so

yab

ean

s in

to

nn

es

pe

r h

ect

are

Soyabeans Corn Sugarcane

42

Brazilian main Crop Area & P2O5 K20 Consumption (2012-2017)

0

1

2

3

4

5

6

7

0

10

20

30

40

50

60

Nu

trie

nt

Dem

an

d in

millio

n m

t

Millio

n h

ecta

res

Corn Soyabeans Sugarcane P2O5 Demand K2O Demand

43

Conclusions • Price projections corn, soybeans and wheat to stay well

above first half of the 2000s on tighter stocks and ever-

rising demand for food

• Urea trade to see steady growth over next five years

rising to over 50 million mt by 2017 – prices to stay

above post 2008-crisis levels

• Phosphate China production to stabilise over next five

years; Brazilian P2P5 demand to support market; DAP

pricing to rebound from 2013

• Potash weakening supply/demand balance to put

downward pressure on prices over the next five years

44

CRU International

45

MARKET OUTLOOK SERVICES Ammonia Urea Phosphate Rock Phosphoric Acid, DAP, MAP & TSP Potassium Chloride Sulphur Sulphuric Acid

COST SERVICES Nitrogen Fertilizers Potassium Chloride Phosphate Rock Phosphate Fertilizers

CRU International

46

FERTILIZER WEEK ONLINE Urea Nitrates & Sulphates Ammonia Phosphates Potash Sulphur Sulphuric Acid

CRU International

SHORT TERM FORECASTS Urea DAP/MAP Potash

47

CRU EVENTS Sulphur 2012 - October 2012 - Berlin,

Germany

Fertilizer Latino Americano - January 2013 - São Paulo, Brazil

Nitrogen + Syngas 2013 - March 2013 - Berlin, Germany

Phosphates 2013 - March 2013 - Monte Carlo, Monaco

CRU International

Magnus Berge Managing Editor - Fertilizer Week

+44 (0)20 7903 2422 magnus.berge@crugroup.com

Por sua atenção, obrigado!

Márcio Goto Regional Manager

+55 11 5051 8124 +55 11 9972 64466 cell marcio.goto@crugroup.com

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