Fertilizer International 498 Sept-Oct 2020
30 September 2020
Southeast Asia’s fertilizer market
REGIONAL REPORT
Southeast Asia’s fertilizer market
The two agricultural products most strongly associated with the economies of Southeast Asia are the food staple rice and export commodity palm oil. We explore the link between the region’s agricultural productivity and its fertilizer consumption.
Southeast Asia is a dynamic and diverse region, economically, culturally and geographically. This cluster of mainland and island nations is strategically located at the crossroads between Asia’s two competing giants, China to the east and India to the west.
To enhance their economic clout and international influence, 10 regional countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam – form the Association of Southeast Asian Nations (ASEAN), an intergovernmental alliance that dates back to 1967.
Southeast Asia has been a rising star of the world economy over the last two decades, establishing itself as an economic stalwart that contributes six percent to global GDP. Since the start of the millennium, the region has powered ahead with robust annual economic growth averaging almost five percent.
While the rise of ‘Factory Asia’ has made Southeast Asia an influential player in world manufacturing, the region is also responsible for nine percent of global agricultural production.
Rice cultivation remains the region’s central farming activity – its production in Southeast Asia delivering more value than any other agricultural commodity. The importance of rice revenues for the region is on the wane, however, declining from 40 percent of total agricultural production value in the early 1990s to close to 30 percent by the early part of the last decade.
The relative decline in rice revenues has been driven by the increasing contribution that palm oil – a much higher value product – makes to agricultural production in the region. This shift towards palm oil – which has crowded out rice and other types of crop production – has been most pronounced in Malaysia. The Philippines, meanwhile, has bucked this trend, being the only Southeast Asian country where rice’s production value has increased.
In the following article, we concentrate on the fertilizer market in five leading Southeast Asian nations – Indonesia, Malaysia, Philippines Thailand and Vietnam. These countries collectively provide a lucrative 35 million tonne market for fertilizer products annually – with more than 60 percent of this requirement coming from imports (Figure 1).
Agricultural overview
Rice remains Southeast Asia’s main crop, in terms of both cultivated area and production (Figures 2 and 3). The region produced well in excess of 150 million tonnes of rice in 2017. With the exception of Malaysia, maize is the other most commonly cultivated cereal. The starchy root vegetable cassava is also widely grown regionally as a carbohydrate food staple.
Oil palm plantations are central to both Malaysia’s and Indonesia’s agricultural economies and the global production of crude palm oil (CPO). Together, the two countries have a pre-eminent market position, collectively producing 85-90 percent of the world’s palm oil. The scale of the industry is enormous. Plantations in Indonesia and Malaysia – covering 10.6 million hectares and 5.8 million hectares, respectively – produced 63 million tonnes of palm oil in 2017.
Around 70 percent of Indonesia’s oil palm plantations are located on the island of Sumatra, while the remaining 30 percent are situated in Kalimantan on the island of Borneo. The 26.4 million tonnes of COP exported by Indonesia in 2014, generated a massive $15.4 billion in export revenues. China, India, Pakistan, Malaysia and the Netherlands were the main export destinations.
The scale of oil palm cultivation makes plantation owners key end-users in the Southeast Asian fertilizer market, given that consumption by oil palm accounts for two-fifths of Indonesian fertilizer use and four-fifths of Malaysian fertilizer consumption. Urea, superphosphate, rock phosphate, ammonium sulphate (AS), muriate of potash (MOP) and kieserite are the main fertilizers used on oil palm plantations. Compound or blended NPK, NP, and PK fertilizers are also applied (Fertilizer International 479, p14). Oil palm fertilizer applications are heavily skewed towards potash, making both countries key destinations for major European and Canadian MOP exporters.
Both Thailand and Indonesia are worldleading producers of natural rubber, producing 4.9 million tonnes and 3.6 million tonnes respectively in 2017 (Figure 3). Large rubber plantations covering some 3-4 million hectares are a notable feature of both countries (Figure 2). Indonesia and the Philippines, meanwhile, both grow bananas – another plantation crop – on a large scale, producing 7.3 million tonnes and 9.2 million tonnes, respectively, in 2017.
Commercial coconut production is also highly concentrated in Southeast Asia, with the Philippines and Indonesia combined accounting for around three-quarters of global copra production. Indonesia is the world’s top coconut producer, while the Philippines is the largest coconut exporting country globally. Both countries dedicate more than three million hectares of their land area to this major tree crop (Figure 2).
Indonesia – with almost 44 million hectares devoted to growing crops – is Southeast Asia’s agricultural powerhouse. The scale of cultivation on this vast archipelago allows Indonesia to easily out-produce its regional neighbours when it comes to rice, palm oil and maize. It is the most agriculturally diverse country in the region too, growing and producing cassava, bananas, coconuts, mangoes, oranges and sugarcane at scale. Malaysia – due to a dominance of rice growing and plantation crops (oil palm and rubber) – arguably has the region’s least diversified agricultural sector (Figures 2 and 3).
Indonesia
Indonesia is the world’s largest producer of cloves and cinnamon, as well as being among the world’s top producers of natural rubber, cassava, coconut oil and nutmeg. Additionally, the country is a major producer of coffee, cocoa, rice, tobacco and tea.
Indonesia is the world’s fifth-largest fertilizer market, according to the International Fertilizer Association (IFA), accounting for around three percent of total global consumption. The country’s domestic fertilizer demand more than doubled between 2000 and 2012 and currently stands at around 15-16 million tonnes (Figure 4).
Oil palm is the country’s main fertilizer-consuming crop, accounting for two-fifths of Indonesia’s total fertilizer consumption – this share having risen quickly in tandem with the fast expansion of oil palm plantations. Cereals, mostly rice supplemented by maize, are responsible for another two-fifths of domestic fertilizer applications (Figure 5). Applications rates for major crops are shown in Table 1.
Indonesia consumes 15-16 million tonnes of fertilizer annually. Urea, NPKs and potash are preferred products, accounting for around three-quarters of total consumption (Figure 6). Phosphorus requirements are met through the use of direct application phosphate rock (DAPR) and superphosphate. DAPR is valued by Indonesian (and Malaysian) oil palm growers as a soluble phosphorus source, particularly during the establishment of younger palms. The country’s high demand for DAPR is met through the import of 2.6 million tonnes of phosphate rock annually (Figure 7). Rock is also used as a raw material in NPK blends.
Domestic product consumption in 2018 (15.1 million tonnes) was as follows, based on Pupuk Indonesia estimates:
- Urea: 6.7 million tonnes
- NPKs: 2.9 million tonnes
- Ammonium sulphate (AS): 1.1 million tonnes
- Superphosphate (SP-36): 0.9 million tonnes.
Indonesia consumes more than six million tonnes of urea annually almost half of regional urea demand, and is far and away Southeast Asia’s largest urea consumer. Thailand and Vietnam are also significant urea consumers, each having annual requirements in excess of two million tonnes, while more moderate consumption levels are typical of Malaysia and the Philippines (Figure 4).
Indonesia is a major fertilizer producer (Figure 8). The country’s nitrogen industry is the largest in the region by some margin – an unsurprising fact given the size and maturity of its oil and gas industry. State-owned holding company Pupuk Indonesia is a large-scale manufacturer of ammonia, urea, NPKs and superphosphate. Its production base is distributed across five main sites on Sumatra, Java, and on the east coast of Kalimantan, Borneo (Fertilizer International 486, p34):
- PT Pupuk Kalimantan Timur (Kaltim), Borneo
- PT Petrokimia Gresik, East Java
- PT Pupuk Kujang, West Java
- PT Pupuk Sriwidjaja Palembang (Pusri), south Sumatra
- PT Pupuk Iskandar Muda (PIM), north Sumatra.
In 2018, Indonesia manufactured 9.3 million tonnes of urea – for both fertilizer and industrial use – together with 3.1 million tonnes of NPKs, according to Pupuk Indonesia. Indonesia is more than self-sufficient in urea, exporting a 1.1 million tonne surplus in 2018.
The country does, however, rely entirely on imports to fulfil its potash requirements. These totalled 3.7 million tonnes in 2018. Muriate of potash (MOP, KCl) imports have expanded nearly three-fold since 2005, making the country the world’s fifth largest MOP importer.
Malaysia
Malaysia cultivates crops over a land area of around eight million hectares. Malaysian agriculture is less diverse than in neighbouring countries with large tracts of land devoted to oil palm and rubber plantations (Figure 2). Rice is the country’s main cereal crop and is also grown at scale. Agricultural output is focussed on these three principal crops with Malaysia producing 20.0 million tonnes, 2.4 million tonnes and 0.7 million tonnes of palm oil, rice and rubber, respectively, in 2018 (Figure 3). Coconut, banana, cocoa, pepper, mango coffee, sugarcane and tobacco are also grown commercially, although cultivation of many of these has declined over the last decade.
Oil palm accounts for more than fourth-fifths of fertilizer use in Malaysia – unsurprising, given the predominance of oil palm plantations – with rice consuming another eight percent of domestically-applied fertilizers (Figure 9). Potash alone accounts for more than 50 percent of Malaysian fertilizer consumption, making MOP the country’s main product preference. NPKs, ammonium sulphate and urea are also popular products with Malaysian farmers (Figure 10).
The Malaysia fertilizer market has varied between 5.0-5.5 million tonnes in recent years (Figure 4). Fertilizer consumption is highly import dependent with the country importing, on average, around four million tonnes of fertilizers annually (Figure 7). MOP is imported in large volumes (2.2 million tonnes), as is ammonium sulphate (0.8 million tonnes) and phosphate rock (0.5 million tonnes).
Malaysia does, however, benefit from a large export-oriented nitrogen industry. The country produced 1.8 million tonnes of urea in 2018 (Figure 8) – exporting almost 80 percent of this volume, mainly to Asia-Pacific region countries.
The ASEAN Bintulu urea plant on the northwest coast of Borneo has a capacity of 540,000 t/a, while Malaysian state oil company Petronas operates the 595,000 t/a capacity Gurun, Kedah, urea plant. Petronas also commissioned the 1.2 million t/a capacity SAMUR urea plant at the Sipitang Oil & Gas Industrial Park, Sabah, in 2017 (Fertilizer International 486, p34).
Thailand
Thailand has a diverse and productive agricultural sector. The country devotes around 20 million hectares to agriculture with 60 percent of this area (11.4 million ha) being dedicated to rice cultivation (Figure 2). Paddy production is important and around 4.5 million hectares of agricultural land in Thailand is irrigated currently.
Thai agriculture produced around 190 million tonnes of food commodities in 2018. Its main commercial crops include rice, cassava, palm oil, maize, rubber, banana and sugar cane (Figure 3). The country is one of the largest rice producers globally – producing 34 million tonnes in 2018. Rice is a major export earner for Thailand and the country competes, along-side India and Vietnam, for the position of world’s top rice exporter.
More than half of the fertilizers used in Thailand are applied in rice cultivation, a reflection of its importance to the country’s agricultural sector. Fertilizer applications to fruit and vegetables, sugarcane, rubber, oil palm, maize and cassava make up much of the remaining consumption (Figure 11). Urea, MOP, NPKs and ammonium phosphates (DAP/MAP) are the main product preferences in Thailand, these collectively accounting for almost 90 percent of the country’s fertilizer usage (Figure 12).
Thailand consumed 5.3 million tonnes of fertilizers in 2018 (Figure 4). The country is almost completely import dependent for its fertilizer supply. Urea requirements – around 2.6 million t/a in 2018 – have expanded by more than 70 percent since the mid-2000s. MOP and diammonium phosphate (DAP) import volumes are also significant (Figure 7).
NPK imports are supplemented by locally produced products. Thailand has the capacity to manufacture 1.7 million t/a of compound NPKs, using imported fertilizers and fertilizer raw materials. These are also used to prepare NPK bulk blends. Thailand also possesses 540,000 t/a of domestic ammonium sulphate (AS) capacity. AS is used both as straight fertilizer in Thailand and as a raw material for compound NPKs and NPK bulk blends.
Vietnam
Vietnam cultivates crops on around 13-14 million hectares of land. Two-thirds of this are is dedicated to growing the cereal crops rice (7.7 million ha) and maize (1.1 million ha). Fruit and vegetables, rubber, coffee and cassava – as well as cashew, pepper and tea – are other important commercial crops (Figure 2).
Vietnam, similar to Thailand, is a leading global producer and exporter of rice. Unsurprisingly, therefore, rice production – 42.8 million tonnes in 2018 – is Vietnam’s main agricultural commodity and a major export earner. The country’s diverse ag sector also produced large quantities of cassava (10.3 million tonnes) and maize (5.1 million tonnes) in 2018 together with coffee, rubber and tea (Figure 3).
Vietnam consumed 8.8 million tonnes of fertilizers in 2018, making it the second largest fertilizer market in Southeast Asia after Indonesia (Figure 4). The country is less import reliant than neighbouring countries, but still imported 3.2 million tonnes of fertilizers in 2018 – around one-third of its total needs.
Vietnam’s main import requirements are for AS, MOP, DAP and urea (Figure 7). Import demand for fertilizers – including NPKs – has varied between 3.8-4.7 million t/a over the last decade. In recent times, urea imports have shifted away from China, being mostly sourced from Indonesia, Malaysia, the UAE and Russia instead. DAP imports have largely been sourced from China, South Korea, Morocco and Jordan, while domestic demand for AS continues to be met by supplies from China and Japan.
Vietnam’s domestic fertilizer industry (Table 2) is one of the largest in the region with around 12 plants providing significant capacity for the production of:
- Urea: 2.6 million tonnes
- DAP: 0.5 million tonnes
- NPKs: 2.6 million tonnes.
Vietnam has four nitrogen plants. On paper – with a potential combined urea output of 2.6 million t/a – these plants should meet domestic demand and provide a potential surplus for export.
The country’s two relatively modern gas-based ammonia-urea plants – Phu My and Ca Mau – operate reliably. Both are supplied with gas feedstock from the Nam Con Son basin, developed by BP, PetroVietnam and Conoco. Vietnam’s two other ammonia-urea plants – Ninh Binh and Ha Bac – are based on coal gasification. Located in the north of the country, both plants have been plagued by production problems, serious financial difficulties and poor market conditions (Fertilizer International 486, p34).
Philippines
More than 12 million hectares of land is devoted to agriculture in the Philippines, a vast and varied archipelago set in the South China Seas. Much of this area is given over to growing rice (39%), coconut (30%), maize (21%) and sugar cane (4%). Banana and pineapple are also commercially-important crops.
The Philippines is a two million tonne fertilizer market. The country’s most popular products are NP/NPKs and urea, together with AS and MOP (Figure 13). The most frequently applied NPK and NK grades are 14-14-14 (‘complete’) and 16-20-0 (‘ammophos’). Similar to Thailand, fertilizer applications to rice make up more than half of total consumption in the Philippines. Additionally, fertilizers applied to maize account for almost one-quarter of total usage (Figure 14).
Using imported raw materials, the Philippines manufactures compound fertilizers to supply the domestic market, producing 0.52 million tonnes in 2018, according to the latest government statistics. Founded in 1957, Atlas Fertilizer Corporation (AFC), now a subsidiary of Japan’s Sojitz Corporation, is a long-established local manufacturer of compound fertilizers (NP/NPK/NK products) with a 42 percent share of the domestic NPK market.
AFC’s production plant is located at Toldeo City on the island of Cebu. The company also has an extensive countrywide storage network, owning and operating seven satellite storage warehouses across the Philippines. These are capable of storing more than one million standard-size fertilizer bags.
Luzon-based Soiltech Agricultural Products is another major domestic NP/NPK fertilizer producer (14-14-14, 16-20-0, 6-9-15). Other fertilizer companies in the Philippines include:
- International Chemical industries: SOP
- Philippine Phosphate Fertilizer Corporation: AS, DAP, NP/NPKs
- Tierra Agri Technologies: Blended fertilizers
- Universal Harvester Incorporated: SOP.
Official estimates of fertilizer supply by the Philippines Statistics Authority (PSA) – 2.52.8 million tonnes between 2014 and 2018 – are significantly higher than domestic fertilizer consumption figures reported by the AFC (1.9-2.0 million tonnes), based on the company’s own market research and PSA data.
The PSA reported the following fertilizer market statistics for 2018:
- Production: 517,754 tonnes
- Imports: 2,300,757 tonnes
- Total supply: 2,818,511 tonnes
It is unclear, however, whether the PSA has subtracted imports that end up in domestically-produced NPK fertilizers from total supply to avoid double counting. The PSA separately reported that the Philippines imported 1.5 million tonnes of manufactured (finished) fertilizers in 2018, with more than half of these being sourced from China (Figure 15).
AFC is forecasting that the Philippines fertilizer market will grow modestly to 2.06 million tonnes by 2022, a seven percent increase on 2018.
