The International Fertilizer Industry Association released to the public today its Medium-Term Fertilizer Outlook 2012-2016. This report shows that demand for fertilizer is steadily increasing in response to supportive agricultural market fundamentals, while expansion of supply is still delayed because of schedule slippages for about half of projects.
On the demand side, tight market conditions for corn and oilseeds provide strong incentives for farmers to increase productivity and optimize their return. In this connection, world fertilizer demand is seen as up by 2.8% in 2011-12, and by another 2.5% in 2012-13, to reach 181 million tons of nutrients (nitrogen, phosphate and potassium). When compared to 2007-08 – the last campaign before the economic downturn – world fertilizer demand is anticipated to have fully recovered by 2012-13, including for potash. During this five-year period, South Asia alone is forecast to account for approximately 60% of the net increase in global demand.
"In the next five years, reduced inventories and strong crop prices are expected to persist in the agricultural commodity markets because of the need to supply the fast-rising food, feed, fiber and bioenergy markets. This is anticipated to stimulate fertilizer demand, but high crop price volatility could result in significant year-on-year variations," says Patrick Heffer, Director of the IFA's Agriculture Service. World demand is projected to reach 193 million tons by 2016-17, corresponding to a compound annual growth rate of 2.1% over the average of the 2009/10 to 2011-12 campaigns. Average annual growth is seen as stronger for potash ( up 3.7% per year) than for phosphates ( up 2.3%) and nitrogen ( up 1.5%) because the nitrogen and phosphate markets have recovered faster than the potash market, and because there is an urgent need to rebalance fertilization to the benefit of potash in several developing countries.
Contrary to historical trends, Asia's weight in regard to global growth is progressively declining, while Latin America is seen as reinforcing its position as an engine of future expansion. Demand is anticipated to rise firmly in Eastern Europe and Central Asia, as well as in Africa. In volume terms, East Asia, South Asia and Latin America together would account for three-quarters of the increase in world demand during the next five years. The outlook for world fertilizer demand remains subject to major uncertainties, especially the evolution of the world economy.
On the supply side, global total nutrient sales for all uses reached 221 million tons of nutrients in 2011, increasing 4% compared with 2010, due to firm demand in the fertilizer sector and a gradual recovery in the industrial segments. World total nutrient sales in the fertilizer and industrial sectors in 2016 are forecast to grow at an average annual rate of 1.8%, to 245 million tons of nutrients in 2016.
"The fertilizer sector will soon reap the benefit of massive investments in new capacity," states Michel Prud'homme, Director of IFA's Production and International Trade Service. Close to 250 new fertilizer plants are projected to come on stream over the next five years, corresponding to a total investment in excess of $90 billion. However, about half these projects have faced delays of 6 to 18 months. Schedule slippages have slowed down the projected growth of capacity and have led to more balanced market conditions in the short term, while lowering the levels of potential surpluses in the near term.
Global nitrogen capacity is projected to expand 17-25% compared with 2011, leading to large potential surpluses by 2015. Phosphoric acid and phosphate fertilizer capacity would expand by 20%, but global phosphate demand is projected to grow at similar rates, thus absorbing most of the projected incremental supply. In the potash segment, world capacity may increase by 42% while demand expands by 14%; however, most potash projects suffer from delays, slowing down the emergence of massive surpluses in the short to the medium term.
In the near term, trade prospects appear strong for most products. Between 2011 and 2016, global trade would expand by 15-20% for seaborne ammonia, potash and processed phosphates. Sulphur trade may increase 20-25%, due to strong demand projected in the fertilizer sector and in ore leaching operations. Urea exports may grow by an overall 15-30%, depending on India's import demand and capacity developments.
For more information on production, trade and sales conditions in 2012 and prospects for 2016, please consult IFA's Market Outlook Summary.