The fertilizer industry was heavily challenged in 2016. It was confronted with uneven global nutrient demand, soft economic prospects, depressed crop prices, rising market competition and volatile energy prices. This combination created high uncertainty in fertilizer markets throughout the year.
As fertilizer prices dropped to their lowest levels during the past five years, several producers reacted with cost reduction measures, temporary curtailments or mothballing of capacity, and consideration of trade defence measures.
Market conditions further deteriorated in 2016, driven by abundant supply and relatively soft demand growth
On average, the fertilizer industry operated at 81% of primary nutrient capacity in 2016. Global nutrient demand was adequately supplied from existing production capacity. Total nutrient sales in 2016 were estimated at 249 Mt nutrients. Fertilizer sales, which accounted for 76% of total sales, were estimated at 186 Mt nutrients, recovering by 2.5% over 2015.
Modest growth rate of fertilizer nutrient demand up to 2021
In 2021 world total nutrient sales are projected at 266 Mt nutrients, for an average annual growth rate of about 1.4%. Nutrient fertilizer sales in 2021 would total 198 Mt nutrients, growing at 1.3% p.a. and representing 74% of total sales.
The near future appears to show a growing imbalance between rapidly increasing supply and moderate demand growth. Massive new capacity additions will be commissioned over the next five years, driven by investment decisions made four to eight years ago. Supply will be ample, if not abundant, at least up to 2021.
Other challenges confronting the fertilizer sector include more stringent environmental regulations, increasingly volatile energy prices, competing uses of feedstock, and rising trade protectionism. In response to these, the fertilizer industry is actively seeking new markets, diversifying product ranges and striving for operational excellence.
Large capacity expansions in 2017-2021
Between 2017 and 2021 the fertilizer industry will invest close to US$ 110 billion in more than 65 new production units, increasing global capacity by 90 million tonnes products.
Based on current market conditions and a modest 1.4% demand growth projection during the next five years, the industry will face a supplydriven market, with growing structural imbalances.
Nitrogen Outlook
Global ammonia capacity still expanding by a net 8% between 2016 and 2021, despite some massive reductions in China
Global ammonia capacity is projected to expand by 8% over 2016, to reach 234 Mt NH3 in 2021. Large increases in capacity are expected in EECA, North America and Africa.
Rising nitrogen demand will present opportunities for exports to Latin America and South Asia
Regional nitrogen deficits are seen as increasing in Latin America and South Asia, while remaining relatively stable in West Europe and East Asia. The prevalent deficit in North America is shrinking thanks to growing domestic capacity. Rising demand in Latin America and South Asia will support higher imports by 2021.
Supply/demand imbalance accelerating in 2017-2019
Between 2016 and 2021 global nitrogen supply would expand by 1.8% p.a. while demand would see a 1.2% annual increase.
New urea capacity rising in the short term, but little growth after 2019
Urea represents half of total nitrogen output and will contribute two-thirds of the projected ammonia capacity increment. Global urea capacity is projected to increase by a net 17 Mt (+8%), to 226 Mt in 2021. Close to 90% of the planned expansions would occur in 2016/18. On a regional basis, North America, EECA and South Asia will account for 70% of overall capacity growth.
Global urea supply (effective capacity) is estimated at 200 Mt in 2021, growing at 1.6% p.a. over 2016.
An increasing imbalance in the short term
Global demand for urea for all uses is forecast to increase by 1.5% p,a. compared with 2016, to reach 187 Mt in 2021. Latin America, South Asia and Africa would contribute to the bulk of the global incremental demand.
Phosphate Outlook
Large supply of phosphate rock emerging, mostly for local uses
Global phosphate rock supply would grow by 10% compared with 2016, to 249 Mt in 2021. Large expansions would occur in Africa and West Asia, together accounting for 80% of the net increase.
Growing global phosphoric acid and processed phosphates capacity, with large increases in two countries in particular
Global phosphoric acid capacity in 2021 is projected to expand by 12% over 2016, to 64.1 Mt P2O5 in 2021. Global capacity of the main processed phosphates would grow by 6.9 Mt P2O5 to 52.5 Mt P2O5 (110.7 Mt products) in 2021. Large capacity additions are expected in Morocco and Saudi Arabia.
The global supply of phosphoric acid would increase by 2.4% p.a. compared with 2016, while demand would grow at 1.8% p.a., pointing to a rising potential surplus from 2017 to 2019, and then stabilizing until 2021.
Potash Outlook
Large capacity projects to add 17 Mt of MOP capacity between 2017 and 2021
Global potassium capacity is forecast to grow by an overall 20% compared with 2016, to 65.5 Mt K2O in 2021, thanks to new projects in Canada, Russia, Turkmenistan, Belarus, and China. In product terms, global potassium capacity in 2021 would reach 111.2 Mt products, expanding by a net 19 Mt over 2016, of which MOP would contribute 17 Mt.
Potash Outlook Large capacity projects to add 17 Mt of MOP capacity between 2017 and 2021
Global potassium capacity is forecast to grow by an overall 20% compared with 2016, to 65.5 Mt K2O in 2021, thanks to new projects in Canada, Russia, Turkmenistan, Belarus, and China. In product terms, global potassium capacity in 2021 would reach 111.2 Mt products, expanding by a net 19 Mt over 2016, of which MOP would contribute 17 Mt.
North America and EECA to account for 97% of world incremental potash supply
Global potassium supply would increase to 53.3 Mt K2O in 2021, representing a net increment of 9.1 Mt (+21%) and a growth of 4% p.a compared with 2016. In terms of MOP equivalent, global potash supply would be 89 Mt MOP in 2021.
On a regional basis, North America will be the region with the largest potential supply in 2021, (35% global share), followed by EECA (34%), East Asia (14%), and other regions (17%).
Moderate potash demand growth, leading to rising trade volumes amid larger surpluses
Global demand for potassium would grow by 11% (2.1% p.a.) compared with 2016 and reach 45.6 Mt K2O in 2021. Global supply/demand conditions show growing potential surplus, exceeding 6.3 Mt in 2018 and reaching 7.7 Mt K2O in 2021 (14% of potential supply). This growing imbalance is essentially driven by large capacity increments against moderate demand growth. Import demand is projected to increase in East Asia, South Asia, Latin America and Africa. - IFA -