Back to the Future: The Outlook Post-Boom Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FAI Meeting February, 2009
Mar 31, 2015
Back to the Future: The Outlook Post-Boom
Bernard Brentnall, DirectorFertilizer & Chemical Consultancy Ltd
FAI MeetingFebruary, 2009
Top-5 Urea Producers, 2007
Source: IFA/FCC
Top-5 Urea Exporters, 2007
Source: FCC/IFANote: China includes adjustment for cross-border sales to Vietnam
Top-5 MAP/DAP Producers, 2007
Source: IFA
Top-5 MAP/DAP Exporters, 2007
Source: IFA
What Now (1)?The normal post-boom symptoms:
• Stocks of high-cost material• Inability to purchase until stocks are sold• Nervousness amongst those purchasers in a
position to purchase new product• Hand-to-mouth trading and purchasing• Doubts as to the viability/reliability of
importers/merchants
What Now(2)?Post-boom peculiarities in 2009:
• The gumming up of the financial and credit systems: LCs, collateral, trust.
• No build-up of grain and food stocks• Bio-fuels are built into the system• A rapid response in production cut-backs• All quiet on the project front – capital costs
have risen by 50-100% during the last cycle.
What Next?Is looking back a guide to the future?
• All nutrients were in chronic oversupply. Now they are not.
• A new cost structure has been established.• There are differences between the nitrogen
and extractive industries based on the distribution of resources
Nitrogen
Prilled Urea fob Middle EastCurrent US$/t
High Low1974-75 390 401985-86 200 801995-96 240 632008-09 815 240
…and the end of a Super-Cycle (since 1973).
Source: FMB/FCC/IMF
Ukraine: New Feedstock Situation (from January 2009) Costs to fob, 2010Oil Price US$ per bbl
AmmoniaUS$/t
UreaUS$/t
@40 225-310 170-215@70 330-430 245-300@100 435-565 320-385
Note: Effective oil input price (given lag mechanism) 2009 Average= c. US$75 per bbl
Urea Project Outlook
UREA Total 2008 2009 2010 2011/2012
Incremental Capacity (Excl.China)
19.6 2.7 4.6 3.1 9.2
Total Urea market (2007) 141.1
Proportion 13.9%
China: Incremental Urea Capacity
• +16.8 million t/a new urea capacity due 2008-11• But will feedstock be available/suitably priced? − Natural gas remains subsidised at US$2.5-3.5 per MMbtu− Reports of closures of coal-based nitrogen units (total existing
capacity c.12-15 million tonnes N)
Phosphates
DAP US Gulf fob Bulk
Source: FMB
Phosphate Rock Reserves(billion tonnes)
Reserves % ShareWorld 18.0 100%Of which:China 6.6 37%OCP 5.7 32%Others 5.7 31%
Source: US Geological Survey
Potash
Average Standard MOP fob Vancouver
Source: FMB
KCL Production and Exports, 2007
Source: IFA
Whither Potash?• The only obvious locations for new mines are
Canada, Russia and, perhaps, Belarus.• Grassroots projects cost up to US$ 2.5 billion for
2 million t/a. Uralkali was looking at a breakeven of US$ 500/t KCl at a new mine.
• Savings of about 30% can be made using an existing location – PotashCorp and Mosaic.
• Supply management has a 30 year history. The need for cash-flow is the one weakness.
Thank you for your attention
Bernard Brentnall, DirectorFertilizer & Chemical Consultancy LtdFMB House, 6 Windmill Road, Hampton Hill, Middlesex TW12 1RH, UKTel: +44 20 8979 7866; Fax:+44 20 8979 4573Email: [email protected]
www.fertchem.co.uk