Nitrogen Supply/Demand Outlook · ‐Flat growth prospect in the longer ... In the future –where’s the historical opportunity from an investor’s ... (biostimulantsand biofertilizers)

Fertecon | Agribusiness intelligence1

Nitrogen Supply/Demand Outlook


TFI Fertilizer Outlook and Technology Conference

15 November 2017

New Orleans, LA

Luke Hutson

Head of Urea and Nitrates Analysis

[email protected]

10 years as fertilizer analyst

Formerly CRU, Argus FMB

Urea and Nitrates Outlooks

Specialty fertilizers


Near‐term urea prices $/t fob

100

120

140

160

180

200

220

240

260

280

300

2016 2017Yuzhnyy prills Egypt gran USG metric Middle East gran


Near‐term urea prices $/t fob

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017Yuzhnyy prills Egypt gran USG metric Middle East gran


China Iran

MAP/DAP/NPK47%

0

50

100

150

200

250

300

350

400

450

500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 2017

0

200

400

600

800

1000

1200

1400

1600


2016 2017

Urea Expo

rts ‘00

0 prod

uct ton

nes (Cu

stom

s da

ta)


US urea exports

0

50

100

150

200

250


2016 2017 Reported destinations in 2017 include: Canada, Mexico, Chile, Brazil, Nicaragua, Costa Rica


0

1,000

2,000

3,000

4,000

5,000

6,000

2013 2014 2015 2016 2017 2018 2019 2020

Urea imports

Key Issues:‐ weakness of Real‐ The reconciled 2016 figure from the trade matrix shows a CY total of 4,709,000 t

‐ Delay in domestic project at TresLagoas

‐ New supply from Bolivia‐ Increasing volumes of Middle East urea

Direct Application Growth‐ 2015‐20 1.7% p.a.

BRAZIL

7

0

2,000

4,000

6,000

8,000

10,000

12,000

2013 2014 2015 2016 2017 2018 2019 2020

Urea

Key Issues:‐ Lack of investment in new urea production (not new!)

‐ Farmers benefit from current low urea prices, so no incentive to invest

‐ Indecision over gas pricing‐ Nutrient‐based subsidy scheme still skewed to urea

‐ Looking for JV partnerships like Omifco, likely with Iran


- .

INDIA

0

500

1,000

1,500

2,000

2,500

2013 2014 2015 2016 2017 2018 2019 2020

Urea

Key Issues:‐ The reconciled 2016 figure from the trade matrix shows a CY total of 2,382,000.

‐ Urea imports have increased since nitrates movement ban in 2016

‐ Possible contender for new urea capacity – one company is looking at it

‐ TANAP pipeline being constructed‐ Likely that urea imports moving to Syria

‐ Urea imports for non‐fertilizer applications


TURKEY

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015 2016 2017 2018 2019 2020

UreaTHAILAND

Key Issues:‐ The reconciled 2016 figure from the trade matrix shows a CY total of 2,265,000 t, which is higher than the total of 2,044,000 t for the 2015 matrix. Should benefit from regional supply coming on‐stream, although has long‐term contracts with Middle East supplier

‐ Flat growth prospect in the longer term


Key Urea importers to 2020

Source: Customs data / Fertecon reconciled data


India urea imports by origin (000 metric t)

‐

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2012 2013 2014 2015 2016 2017 YTD

China Oman Iran Ukraine RussiaEgypt Algeria Bahrain Kuwait QatarUAE Indonesia Uzbekistan Saudi Arabia Pakistan


Utilisation rates

70

72

74

76

78

80

82

84

86

88

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Capacity additions (Mt left axis, ex‐China) vs global utilisation rate (right axis)

Algeria Bangladesh Bolivia Brazil EgyptIndia Indonesia Iran Kazakhstan MalaysiaNigeria Russia Saudi Arabia Turkmenistan UAEUSA Uzbekistan Venezuela Utilisation rate

Av App Con addition 2.6 Mt /y

Source: Fertecon Urea Outlook


USA ‐ UAN capacity could reach 19.4 million t by 2020; 15.3 million t in current projections

Ohio ValleyResources

Northern Plains Nitrogen

MidwestFertilizer

OCI Iowa Fertilizer1.4 million t/y ‐ 2017

CF Industries (on‐stream 2016)1.5 million t/y

UAN capacity end‐2015: ~12.5 million t

Definite additions 2016‐2017: 2.9 million t

Possible additions 2018‐2020: 4 million t

Source: Fertecon Nitrates Outlook


Additional capacity causes shifts in the US UAN balance ...

2015 2017 2020 2025Production 8,800 10,650 12,000 13,500Imports 3,093 2,690 2,050 1,125Exports 538 1,350 1,470 1,555App Consumption 11,355 11,990 12,580 13,070

US UAN Balance (`000 t product)

‐1,000

‐500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2005 2010 2015 2020 2025

Net imports Projection

US UAN Net Imports & Projection (`000 t product)

Latest projections suggest the US will become a net

exporter of UAN between 2020 and 2025, but could be

sooner.

Imports are projected to decline, while exports are projected to

reach around 1.5 million t by 2020.



... and in global UAN trade

More from USA to Europe

More UAN from USA to Brazil, Argentina and LatAm in in general

Less from Lithuania to USA

Stable volumes from China to USWC

Russia to suffer least amid lower US imports



13

Innovations and trends in N fertilizersFocus is on premium products and new blend compositions

Addition of sulphur NP+S CAN+S

Addition of magnesium CAN+Mg

Addition of biostimulants

Satellite imaging and drones

Growth of NP fertilizers and blending / liquids and fertigation


SCRF and SF: Opportunities and Obstacles

• SCRF and SF typically sold at premium to conventional fertilizers

• Environmental drivers – such as Nutrient Use Efficiency, GHG emission

• Policy drivers – China 2020

• EU regulations

• Barriers to entry – big players already involved

• Limited data sources

• Conventional producers already involved in enhanced products (such as adding

magnesium or boron)

• Classification of biostimulants


In the future – where’s the historical opportunity from an investor’s

perspective?

Hutson


Water‐use efficiency – and area‐use efficiency AUE ?

Hutson


• Established markets for SCRFs and growing markets for SFs

• Diverse products into diverse markets

• Expansion into broad acres for controlled release – the battle between coatings and SFs

• New capacity in conventional sector to place limit on price premium – especially if

looking towards agricultural end‐use

• Large fertilizer companies already in the SCRF/SF space AND looking at enhanced

fertilizer products (biostimulants and biofertilizers)

• Controlled and delayed release active area of R&D


18

Conclusions

Chinese urea exports – expect lower volumesChinese urea exports – expect lower volumes

Changes in urea trade now apparentChanges in urea trade now apparent

UAN – watch out for growing US exportsUAN – watch out for growing US exports

Feedstock prices offer support but upside risk Feedstock prices offer support but upside risk


19

Final thoughts…

Trends already include adding sulphur and micro‐nutrients to conventional products. Longer term – value over volumeTrends already include adding sulphur and micro‐nutrients to conventional products. Longer term – value over volume

Fertilizer companies recently moved into biostimulant space. Eurochemnow an ‘agrochemical’ companyFertilizer companies recently moved into biostimulant space. Eurochemnow an ‘agrochemical’ company

Shale gas exploration in Europe. Fracking bans in France and Netherlands, but UK and Poland keen to pursueShale gas exploration in Europe. Fracking bans in France and Netherlands, but UK and Poland keen to pursue

LNG – more cargoes to West and East Europe particularly once US started exporting in 2016. Ukraine has plans to build receiving terminal.LNG – more cargoes to West and East Europe particularly once US started exporting in 2016. Ukraine has plans to build receiving terminal.

Technology – urea plant revamps rather than new greenfield projects to become more common and bring production efficienciesTechnology – urea plant revamps rather than new greenfield projects to become more common and bring production efficiencies

R&D – new fertilizer products. Combination or impregnated products with sulphur and micronutrients. R&D – new fertilizer products. Combination or impregnated products with sulphur and micronutrients.

Blockchain – could this technology help suppliers particularly with premium products?Blockchain – could this technology help suppliers particularly with premium products?


20

And…

Future of DEF?Future of DEF?

Source: reneweconomy.com.au


Urea Outlook

• Forecast prices out to 2030 – seven benchmarks $/t – Yuzhnyyprills / Chinese prills/ Egypt gran/ US NOLA gran/ Middle East gran/ Middle East prills/ Caribbean gran

• Production, Import, Exports, App Consumption – by country, historical (from 1981) and projections to 2030 – available EXCEL. Production by country

• Split fertilizer and non‐fertilizer urea (approx. 80/20)

• Trade matrices – split prill/gran

• Project assessments / new capacity in projections

• Feedstock cost projections – oil, natural gas, coal

• Production cost projections (by country)

• Cost curves with projections

• Delivered cost projections (freight estimates)

• Price forecast, PIEC data (Excel), production costs ALL INCLUDED in subscription

Quarterly report on global market


Slow and controlled release and stabilised fertilizer report

This report includes:

• Slow and Controlled release fertilizers (SCRF) – an overview with definitions, descriptions and products

• Sulphur‐coated urea/ polymer‐coated urea• Stabilised fertilizers (SF) – an overview with definitions,

descriptions and productions • Nitrification and Urease inhibitors / Neem coating• Market breakdown – by volume and value for SCRF and SF• Main producers of SCRFs and SFs• Capacity list for SCRFs• Market projections – by value and volume for SCRF and SF• 100‐word glossary• Overview of conventional fertilizers/ water soluble/ foliar

application/ micronutrients


InformaChristchurch Court10‐15 Newgate Street London EC1A 7AZ

+44 (0)20 7017 5000info@informa.comwww.fertecon.comwww.agribusinessintelligence.com

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Nitrogen Supply/Demand Outlook · ‐Flat growth prospect in the longer ... In the future –where’s the historical opportunity from an investor’s ... (biostimulantsand biofertilizers)