The industry faces more supply-related regulation
Regulations required for the issuance of potash and phosphate mining permits, and requiring safety measures for nitrogen plants are becoming more stringent in many countries.
The combination of relatively low crop and fertilizer prices, the emergence of large exportable capacity and relatively subdued prospects for demand growth have created pressures on domestic fertilizer producers in many countries and led to an increase in trade defense measures or quality requirements for fertilizer products.
The trade tensions and economic sanctions that have been emerging since the beginning of 2018 risk generating ripple effects on global fertilizer trade and future investments.
Large capacity expansions in 2018-2022
Between 2018 and 2022 the fertilizer industry will invest close to US$98 billion in constructing 60 new production units, adding 78 Mt products of capacity.
Investments are shifting from production assets to plant nutrient solutions, distribution infrastructure, customer/farmer services and added-value products.
In 2017/18, global fertilizer consumption grew moderately (+0.9%) to reach an estimated 187 million tonnes (Mt) of nutrients. This modest growth reflects a combination of relatively low but slightly increasing international prices for most agricultural commodities; an increasing emphasis on more efficient use of mineral fertilizers; and greater recycling of organic nutrient sources. Demand for P and K grew firmly while demand for N rose marginally.
Global fertilizer demand is expected to continue growing moderately in 2018/19 due to prospects for persisting low-to-medium international crop prices. Moreover, China will have reached a tipping point for domestic N and P fertilizer consumption. Demand is anticipated to grow by 0.8% to 189 Mt, assuming no major unexpected weather-related, geopolitical or economic shocks. K demand, especially strong in Asian countries, is forecast to increase firmly, while global growth in demand for N and P is seen as modest, influenced by an anticipated drop in N demand in both China and India as well as a decline in P demand in China.
Global fertilizer demand will be slightly below 200 Mt in 2022/23
The medium-term outlook for world agriculture remains broadly unchanged compared with last year. Moderate growth in prices is expected for most agricultural commodities. In addition, more environment-friendly policies in China are expected to lead to a progressive contraction of domestic fertilizer demand. Successive reforms of India’s national fertilizer strategy will start to impact growth in urea demand. Despite robust demand in Latin America and Sub-Saharan Africa, the current context indicates modest prospects for the expansion of global fertilizer demand in the next five years.
Global demand is seen as expanding on average by 1.3% per annum (p.a.) between the base year (average of the three-year period 2015/16- 2017/18) and 2022/23. It is projected to reach 199 Mt at the end of the outlook period. Consistent with past trends, global demand is forecast to grow faster for K (1.8% p.a.) than for P (1.4% p.a.) and N (1.0% p.a.) as a result of steady improvements in N management practices and more balanced fertilization in some regions.
Similar to last year, the highest rate of growth in demand is anticipated in Africa, followed by Eastern Europe & Central Asia (EECA) and Latin America. These three regions have the greatest agricultural growth potential in the decade to come. Growth in demand in South Asia is seen as below the historical trend, especially in the case of N owing to the Indian government’s policy of improving urea use efficiency. West Asian fertilizer demand growth is highly speculative in view of the regional geopolitical context. In East Asia, N demand is anticipated to contract slightly and P demand to stagnate due to a reversal of trends in China following decades of strong growth. Total fertilizer demand in East Asia would still increase because of robust demand for K in Southeast Asia.
Fertilizer demand growth in developed regions is seen as weak, with better prospects in Oceania and North America than in Western & Central Europe. In volume terms, Latin America, South Asia, Africa and EECA would account together for 80% of the projected increase in global fertilizer demand during the outlook period. - Source: IFA -