The global price of Nitrogen fertilizer will be driven down by increased capacity in the US and China’s new low-growth policy, while in the phosphate market added-value products will increase in volume at 3 times the rate of conventional phosphate fertilizer by over 8 million tonnes by 2030.

These predictions come from fertilizer market analyst house Fertecon which is part of Informa’s Agribusiness Intelligence, the leading provider of news, data, analysis and forecasts across the agricultural and commodities value chain.

US imports of nitrogen fertilizer will decrease as a result of strong domestic capacity coming online. Informa’s Agribusiness Intelligence is the leading provider of news, data, analysis and forecasts across the agricultural and commodities value chain and has revealed predictions for the fertilizer market in the years ahead.

Over-supply and depressed pricing have dogged the fertilizer industry in recent years, with new investments driving sweeping changes in markets and trade, while China’s adjustment to a new low growth context limits future market potential. In response, many producers are looking to value added products as a means to protect margins - in the nitrogen sector, products which enhance nutrient efficiency have been developed in response to environmental concerns, and advanced complex NPK’s incorporating micronutrients have seen impressive growth. Interest is also turning towards Sub-Saharan Africa, where the market seems on the cusp of change, with the potential for dramatic growth in the coming years.

High levels of Chinese and US Nitrogen capacity drive down prices 

The nitrogen fertilizers industry has seen some dramatic changes in recent years – the remarkable growth in Chinese production, and exports, of urea; structural shifts in gas markets which have fundamentally altered cost profiles in different regions, with huge investment in the US as a result, and changing demand patterns worldwide. The coming years are set to see some further seismic shifts as China adjusts to a low growth environment and new capacity comes on-stream in the US, altering trade patterns globally, while in Sub-Saharan Africa, the market is on the cusp of change with the potential for dramatic growth in the coming years. Meanwhile, low energy prices have flattened cost curves, with implications for low and high cost producers alike.

Fertecon has identified some of the key factors influencing this market now and in the year ahead, including:

• Between 2015 and 2018, over 11 million tonnes of nitrogen fertilizers capacity will enter the US market (3.6 million tonnes ammonia, 4.9 million tonnes urea and 2.9 million tonnes UAN)
• Ammonia exports from Trinidad to the US have been displaced to markets in Europe, North Africa and even Asia, while Russian exports to the US have dropped sharply
• In China, concerns over pollution of waterways arising from over-application of fertilizer have led the government to target a reduction in growth to 1% per annum to 2020, with 0% as the long-term target.
• Conversely, in Sub-Saharan Africa, fertilizer demand in has grown at almost 9% per annum on average, and strong growth is forecast to continue, increasing regional fertilizer consumption by over 4 million tonnes over the coming decade.

Subsidy reductions moderate outlook for Potash

The key potash demand development recently has been the drive in China for fertilizer use efficiency and the Government’s desire to see no growth in nutrient use from 2020. This, coupled with the reduced levels of subsidy in India has moderated the outlook for potash in the medium to long term, in spite of good demand in other world markets. With new mine capacity coming on stream in both Russia and Canada further supply-side adjustments can be expected in the short to medium term.

Phosphate market dominance forces smaller players toward value add strategies

The Phosphate market continues to be dominated by players in Morocco and Saudi Arabia as they invest strategically in down-stream processing capacity to supply export markets with phosphate fertilizers. This has forced producers in other countries to look at more value-add ways to drive margins, such as the production of complex NPKs and products incorporating micronutrients, which will become more common in 2017 and beyond. Fertecon expects growth rates in added-value products to be at over three times the rate of conventional phosphate fertilizer, and will increase in volume by over 8 million tonnes by 2030.

Alan Pickett, Principal Consultant at Fertecon commented: “With the global fertilizer market experiencing lower prices across the board in the wake of capacity investments made over the last five years, the less efficient producers are being pushed out while others are developing new products to counteract the resulting decline in margins. The restructuring trends are set to continue for the foreseeable future, but the fertilizer industry is cyclical and prices are expected to recover in the years ahead when the impact of recent investments has been absorbed.”