Overview of Industrial Urea Markets: Applications and ... - An Overview of... · Overview of Industrial Urea Markets: Applications and ... US Census Bureau, Integer Industrial Urea

Overview of Industrial Urea Markets: Applications and Opportunities Prepared by Monica Baker – Research Manager, Integer Research TFI Fertilizer Technology and Outlook Conference Philadelphia, PA November 13th, 2012

www.integer-research.com

Agenda

November 13th 2012

• Industrial urea markets: o How big is the market? o Key applications: resins, NOx controls, feed and others o Global and regional breakdown o North American market drivers o Europe’s integrated structure o Influencing factors: legislation

• Opportunities:

o Future opportunities and challenges

Market size and breakdown


Non-fertilizer urea represents 11% of global urea consumption

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0 2015 2014 2013 2012 2011 2010

Fertilizer Industrial

‘000 tonnes

Source: IFA, Integer

November 13th 2012


Industrial urea applications & industries

• Resins and adhesives;

• Melamine;

• Environmental controls;

• Animal feed;

• Pharmaceuticals;

• Cosmetics;

• Foliar applications;

• Hydrazine;

• Cyanuric acid

• Chemicals;

• Wood-working;

• Textile and paper;

• Automotive;

• Industrial pollution controls;

• Agriculture;

• Medicine;

• Cosmetics;

• Specialty fertilizer

Applications Industries

November 13th 2012


Industrial urea demand drivers by region: legislation & economic growth

North America South America Europe Asia Pacific

1 Mobile (on and off-highway) and stationary NOx abatement legislation

Construction industry growing strongly

On and off-highway and stationary NOx abatement

Resins market to grow strongly driven by investment in the region

2 Economy and construction industry looking up and immigration trends underpinning resins rebound

On-road heavy-duty trucks NOx abatement legislation kicked in in Brazil 1 Jan 2012

Resins are strong but have suffered a setback. Increasing activity in Russia?

Pull from NOx abatement legislation has been strong in Japan, Korea and Australia and NZ, and China is moving

3 Legislation and lobbying on formaldehyde content in wood-based furniture

Cattle feed consumption to increase with disposable income and more meat-based diets

Cattle feed and pharmaceuticals to remain resilient

Cattle feed use is growing but unevenly according to disposable income. Weather is a strong variable.

4 Cattle feed and pharmaceuticals to remain resilient

Pharmaceuticals also developing strongly in some countries

Pharmaceutical industry to develop in the East of the region

Pharmaceutical use is resilient in advanced economies, has potential in developing countries

November 13th 2012

Source: Integer


UF and MUF resins represent just over 80% of the industrial urea market globally

Source: Integer

4%

7%

84%

5%

Others SCR Feed Resins

2010: 17.2 million tonnes

• Just over 80% of consumption is represented by resins. UF and MUF resins are used by the wood-working industry as adhesives and glues in furniture and buildings.

• The second largest use for urea in industrial applications is as a protein supplement in animal feed and, growing fast, the third use is as urea solution or AUS 32 in SCR-equipped vehicles, targeted at lowering NOx emissions from on and off –highway vehicles, as well as from stationary sources such as power stations, cement factories and industrial boilers and incinerators. SCR is also a good choice to meet 2014 GHG targets.

• Other uses include pharmaceuticals and other minor segments.

November 13th 2012


In North America, the share of resins has shrunk since the peak of urea consumption in 2006/2007. Environmental use is the fastest growing

Source: Integer

17%

65%

2%

16%

Others SCR Feed Resins

2010: 1.7 million tonnes

• Resins and glues/adhesives used to represent 80% of the market for industrial-grade urea in North America before the recession of 2008/2009 took hold of the building and construction industries, prompting a major step change in consumption for these products.

• Demand for all types of resins, adhesives and sealants used in the building and construction sectors peaked in 2006-2007, with the abrupt end of the housing boom and has shrunk dramatically since 2008 and 2009, in some extreme cases even by as much as 50% in some areas of the region, and at least by 30% in others.

• SCR applications - stationary and mobile - are now a larger segment for urea consumption and represent around 16% of the market. Cattle feed comes in at around 17% and pharmaceuticals and others at 2% - with pharmaceuticals accounting for around 1.4%.

November 13th 2012

Market drivers in North America


Environmental uses have been and are likely to continue to drive industrial urea growth in North America

Source: Integer

500

1,500

2,000

2,500

1,000

0

+8%

2015 2014 2013 2012 2011 2010

Stationary SCR Mobile SCR Resins Others Animal Feed

‘000 tonnes

November 13th 2012


USA – Urea consumption into resins falls in 2008-2009

Source: US Census Bureau, Integer

US housing permits (monthly series), ‘000 units 250

200

150

100

50

0

-81%

01. Jan

2012

01. Jan

2011

01. Jan

2010

01. Jan

2009

01. Jan

2008

01. Jan

2007

01. Jan

2006

01. Jan

2005

2,000

1,500

1,000

500

0

-33%

2010 2007 2008 2009

Urea consumption into resins, ‘000 tonnes

November 13th 2012


Going forward? Towards a five-year high for housing permits

US housing permits (monthly series), ‘000 units

01. Jan

2010

01. Jan

2009

01. Jan

2008

01. Jan

2007

01. Jan

2006

01. Jan

2005

220

200

180

160

140

120

100

80

01. Jan 2011

60

40

20

0

+70%

01. Jan

2012 Source: US Census Bureau, Integer Industrial Urea Market Report

November 13th 2012


DEF supply infrastructure

Source: Integer


Urea consumption into Diesel Exhaust Fluid (DEF) in the USA

Source: Integer, excludes stationary, rail, marine and barge

600

500

400

300

200

100

0 2015 2014 2013 2012 2011 2010

700

50

150

250

350

450

550

650

750

‘000 short tonnes

November 13th 2012

Light-duty & pickups Off-highway equipment On-highway Class 4-8

Europe’s integrated structure


Strong industrial use for urea in West Europe

51% 49%

Fertilizer use Non-fertilizer use

Urea

Melamine

UF/MUF resins

Crosslinking with

PU/acrylates

AdBlue

The BASF model

November 13th 2012

Source: Integer

Fertilizer vs non-fertilizer use


Environmental uses to drive West European demand growth, while resins look strong in East Europe

Source: Integer

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

+2%

2015 2014 2013 2012 2011 2010

Resins SCR Feed Others

1,100

1,000

900

800

700

600

500

400

300

200

100

0

+6%

2015 2014 2013 2012 2011 2010

‘000 tonnes ‘000 tonnes East Europe West and Central Europe

November 13th 2012


Russian industrial N markets are recovering

650

600

550

500

450

400

350

300

250

200

150

100

50

0 2009 2008

-45%

+11%

2007 2013 2012 2011 2010

‘000 tonnes N

Source: Azotecon

November 13th 2012

Influencing factors


Influencing factors for resins: legislation

•JIS/JAS F**** (0.05mg/m2h) Japan

•E1 (<0.75ppm)

•E0 (<0.07ppm)

•Formacare

Europe

•CARB (<0.75ppm)

•Greenguard USA

November 13th 2012

Legislation limiting formaldehyde use in wood


Influencing factors for environmental uses: legislation

November 13th 2012

NOx Abatement Legislation timeline (USA)

Application Legislation Targets Start date

ON-HIGHWAY APPLICATIONS Use of DEF compulsory to reduce NOx emissions

New heavy-duty vehicles EPA 2010 - January 2010

OFF HIGHWAY APPLICATIONS Reduction of NOx and other pollutants

Ag/construction and mining machinery

Transition 2010-2014 from T4 interim to T4 final

STATIONARY APPLICATIONS NOx and mercury emissions reduction

Power plants ‘Transport Rule’ approved 2010 and aiming to reduce NOx emissions by 52% by 2014

NOx and mercury emissions reduction

Cement factories Approved 2010 to reduce mercury, soot, smog and NOx emissions. Comes into effect 2013

NOx and mercury emissions reduction

Industrial boilers and waste incinerators

Approved 2011 to establish work practice standards. Public review closing July 2011

MARINE APPLICATIONS Reduction of NOx and other pollutants

Ships and ocean-going vessels

US EPA Tier 4 from 2016 for US flagged vessels

Source: U.S. EPA, Integer

Opportunities & challenges


Opportunities & challenges

• Opportunities for growth in the resins and environmental sectors

• Strongest industrial urea markets are still North America and Europe in terms of diversification and margins

• Environmental uses have taken over as the main driver for industrial urea growth

• Fastest developing markets for industrial urea are Latin America, Turkey, Russia, Southeast Asia and East Asia, chiefly China

• Industrial urea fetches a premium to fertilizer-grade urea for high-purity grades

• Legislation and strict standards are important drivers for most applications

November 13th 2012

• What does the supply/demand balance look like?


Urea - Demand side

November 13th 2012

100,000

300,000

250,000

200,000

150,000

50,000

0

+99,202

2030 2016 2011

SS Africa SE Asia & Oceania S Asia North America MENA Latin America FSU Europe E Asia

‘000 tonnes

Source: Integer Nitrogen Cost and Profit Margin Service

Global urea demand growth projections 2011-2030


Urea - Supply side

September 19th, 2012

Source: Integer Nitrogen Cost and Profit Margin Service

15,000

7,452

13,417

-1,939-1,357

7,848

44,563

4,9673,011

-2,428-1,170

2,446

7,700

407

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

-5,000 Sub-

Saharan Africa

Russia

ROTW-low

ROTW-high

Pakistan

North Americ

a

MENA

Indonesia

India Europe-Oil

indexed

Europe-Hub

China

Caribbean

Belarus Baltics Ukraine

‘000 tonnes Projected urea capacity changes by region 2011-2030


Implications

November 13th 2012

• Total net capacity additions are likely to total 99 million tonnes 2011-2030, responding strongly to demand growth in fertilizer and industrial applications

• Most of the additions will take place in low-cost locations, with some closures taking place in high-cost locations

• North America is attracting strong interest for N investment and industrial applications are on existing producers’ and newcomers’ lists

• ETS III will impact N costs in Europe and is prompting closer scrutiny of the region’s nitrogen assets

• Overall, demand growth will be met by expansions or new builds

Thank you! For more information: [email protected]

Data and analysis from: Industrial Urea Market Survey AdBlue & DEF Monitor/DEF Tracker The Emerging DEF Market Nitrogen Cost & Profit Margin Service

mailto:[email protected]

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Overview of Industrial Urea Markets: Applications and ... - An Overview of... · Overview of Industrial Urea Markets: Applications and ... US Census Bureau, Integer Industrial Urea