mapping fertilizer trends in major import markets...nexant is a global advisor to the energy,...

Mapping fertilizer trends in major import

markets

26 September 2019

Thomas Heinrich

210th GPCA Fertilizer Convention - Muscat 2019 26 September 2019

Nexant is a global advisor to the energy, downstream oil & gas and

fertilizer sectors

SECTOR COVERAGE

Technology Economics

Downstream PowerChemicals &

Fertilizers

CORECOMPETENCIES

Technology Economics

CommercialStrategic Planning

Financial

SPECIFIC AREAS OF EXPERTISE

Technology Positioning

R&D Management

M&A Support R&D Planning

Technology Demonstration

Performance Modelling

Project Finance Support

Business Plan Development

Technology Implementation

Feasibility Studies

Masterplanning

EmissionsReductions

Market Assessment

Market Entry

Competition Assessments

Cost Benchmarking

Introduction

Trends in major import markets

Conclusion

Agenda


Introduction

Most fertilizers produced in the GCC are highly commoditized products

(ammonia, urea, DAP) with minor exceptions

Commodities are characterised by low variation in specifications

Investment decisions into new capacity are based on various factors:

Availability and cost of raw materials

Proximity to end-use markets

Capital requirements / availability etc.)

The GCC producers are well established companies focused on exports

based on (relatively) low raw material costs


Exporting products is the main business of GCC fertilizer producers

The Middle East is one of the few

truly global fertilizer export hubs

Its strategic central location and

(relatively) low feedstock costs

enables competitive supply of

fertilizer east to Asia and west to

Africa, Europe, and the Americas

Access to (low cost) raw materials is

increasingly available in (traditional

& potential) import markets

Other markets are moving towards

alternative growing methods


Changing trade patterns are of upmost importance to ME producers

West Europe

1%

C&E Europe

0%North

America15%

South America

10%

Africa8%

Middle East3%

South Asia33%

East Asia20%

Oceania10%

ME’s global export destinations - urea

Brazil, Thailand and South Africa

accounting for 25% of ME exports, are

expected to continue relying heavily

on imports

However, changes in India, US, and

Australia are underway

Could Africa be the answer?

Trade patterns may change and

business models may have to be

adopted


The top 6 importers account for 74% of all imports from the ME

ME’s major export destinations - urea

0

1000

2000

3000

4000

5000

6000

7000

8000

Top 6 Importers OthersT

hous

and

tons

India USA Thailand

Brazil Australia South Africa

Others

Major Import Markets

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ME’s largest customers are distributed around the world, underlying

the strategic location and importance as a global export hub

60%

80%

100%

0

2000

4000

6000

8000

10000

12000

14000

16000

2005 2010 2015 2020

Operating rate

Tho

usan

d to

ns

Production Consumption Capacity Operating Rate

US used to have higher

gas costs than Western

Europe in early 2000s

Shale gas in the US has

let to a range of

fertilizer projects

While not all

materialized the US’

net-imports will have

decreased by 4.4 mtpa

to 3 mtpa in 2020

Net-imports may not

completely vanish but

new markets have to be

found1010th GPCA Fertilizer Convention - Muscat 2019 26 September 2019

While the topic seems outdated, shale gas continues to dictate the

direction of trade in the US

US urea supply, demand, and trade

80%

100%

120%

0

5000

10000

15000

20000

25000

30000

35000

40000

2005 2010 2015 2020

Operating rate

Tho

usan

d to

ns


A similar trend can be

seen in India

Reforms to the natural

gas pricing system and

desire to (return to)

lower dependency on

imports prompted

many new projects

Net-imports in India

increased from ca. 2.3

mtpa in 2005 to 10.6

mtpa and by 2020 again

down to 3.9 mtpa

Net-imports not

expected to vanish1110th GPCA Fertilizer Convention - Muscat 2019 26 September 2019

Capacity addition in India will significantly reduce its net-import

requirements

India urea supply, demand, and trade

0%

20%

40%

60%

80%

100%

120%

0

500

1000

1500

2000

2500

3000

2005 2010 2015 2020

Operating rate

Tho

usan

d to

ns


Australia’s net import

requirements are

around 2-2.5 mtpa

Australia has

significant natural gas

and coal reserves and

could potentially build

significantly more

capacity

Perdamen is expected

to produce 2 mtpa


Australia could be a sleeping giant - when Perdamen starts

production almost all net-import requirements are lost

Australia urea supply, demand, and trade


Sub-Saharan Africa has clear potential for fertilizer applications

0%

20%

40%

60%

80%

100%

120%

140%

0

2000

4000

6000

8000

10000

12000

14000

2005 2010 2015 2020

Operating rate

Tho

usan

d to

ns


Urea demand in Africa

has grown by 58% in 15

years

Production is in the

north but demand in

Sub-Sahara

As a region Africa is

now a significant net-

exporter and position

will grow

North & west will

continue to also target

WE and Americas


Africa is blessed with both large demand development potential and

natural resources to be self-sustainable in fertilizer production

Africa urea supply, demand, and trade


Africa has always been the new frontier - demand in Africa is set to

grow … but will net-import requirements?

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Firm Capacityuntil 2021

2018 Demand

Africa urea supply & demandAdd. capacity existing

producers

Existing producers

Potential new

producers

Conclusions

The Middle East continues to enjoy (relatively) low feedstock costs

Producers are experienced, plants well-run and location favourable for

exports anywhere in the world

Some import markets continue to be promising export destinations incl.

Brazil, South Africa, Thailand

Other traditional import markets are developing own capacity – US, India,

Australia

Africa is somewhere in the middle with excellent growth potential but an

equally good natural resource basis

Finding export destinations will become tougher in the future – some relief

may come from plant closures in China


The ME has a strong export position but competition in key current

and future import markets is growing

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