CRU Phosphates 2021

CONFERENCE REPORT

CRU Phosphates 2021

More than 560 delegates participated in CRU’s Phosphates 2021 Virtual Conference, 23-25 March 2021. To highlight this successful event, we report on keynote and selected commercial and technical presentations.

Phosphate market outlook

Glen Kurokawa gave the CRU view on phosphate market developments. He attributed the strong upward phosphate price sentiment of recent months to a host of supply- and demand-side factors, including:

• High crop prices
• Big demand increases in the US, Brazil, India and China
• Low stocks, e.g. in the US and India
• Impact of Covid-19 on supply (China, India, Peru)
• Production issues in Saudi Arabia.

The imposition of US import duties on Moroccan and Russian phosphate fertilizers has also had a major market impact, both on the US market and global trade flows. Both Russia and Morocco have essentially stopped exporting to the US, causing domestic phosphate shortages and price hikes.

To make up the domestic shortfall, the US is expected to import more phosphate products from producers in Saudi Arabia, Australia, Mexico, Jordan and Egypt in future.

“US countervailing duties are likely to remain through 2025, perhaps longer, and phosphate trade will consequently remain disrupted,” commented Kurokawa.

On the back of strengthening demand, Brazilian phosphate prices have risen extremely fast compared to other benchmarks – a situation that is likely to continue throughout 2021 and beyond, says Kurokawa.

Meanwhile, despite recent increases, Chinese phosphate demand is expected to eventually resume its downward trajectory. “Chinese phosphate demand will likely continue declining, after rising in 2020 and 2021, reverting to that long term trend because its phosphate application rates are very, very high,” Kurokawa predicted.

Summing up the outlook, Kurokawa concluded:

“Prices are expected to decline in 2021 and into 2022, but generally rise after that to 2025. There will be cost inflation, with costs like energy and wages rising, in addition to raw materials price hikes, helping push up phosphate prices to 2025.”

Outlook for global agriculture

Crop prices globally have improved significantly due to below-trend crop production and strong demand in China, explained Nutrien’s Robert Mullen.

Expectations on crop prices have shifted enormously over the last 6-8 months, said Mullen:

“I recall the expectation that corn could fall below three dollars [per bushel]. I can’t believe that I’m even admitting that I was saying that late last summer. But that was the trajectory of commodity prices at the time. Now we’re talking about prices that we haven’t experienced in a little under a decade. If you’re looking at the 2021 crop corn, today we’re trading at 4.75 [dollars per bushel].”

In his view, price expectations for corn and soybean have been primarily driven by historically tight supply/demand balances, as shown by low stocks-to-use ratios:

“The run up to soybean was even more impressive than what we experienced in corn. It’s not just those two commodities either. We’ve seen a pretty good appreciation in the cotton price. Wheat has experienced a pretty good bump in price too.”

This was not just a US domestic phenomenon either, Mullen added:

“We’ve also experienced this internationally. Brazil has had a tremendous run up in [soybean] prices. Palm oil is moving up to record levels. That’s an impressive run in last 6-8 months – corn, soybean, wheat, cotton, palm oil, and canola too for our neighbours in the north [Canada].”

The soybean trade is emblematic of the wider agricultural market conditions, with very tight supply due to Chinese demand. In Brazil, for example, record soybean exports in 2020 – with 73 percent destined for China – forced the country to increase imports from Paraguay and Uruguay to meet its own internal demand. Brazil’s 2021 soybean exports are expected to reach near-record levels again.

New EU FPR regulation

The European Commission’s Johanna Bernsel provided an update on the introduction of the EU Fertilising Products Regulation (FPR). This will enter into force in July next year.

Bernsel highlighted the main implications for the European fertilizer market:

“When we talk about an EU fertilising product – [I mean] a fertilising product that is compliant with the FPR and is CE marked. This is a new concept we have introduced in the FPR.”

“A fertilising product is not only a plant nutrient, it’s a wider concept that encompasses many categories. Not only will we open the market for secondary raw materials, it will also include a much broader portfolio of categories of products.”

These categories will include biostimulants for the first time.

Bernsel also emphasised that introducing mandatory limits for critical contaminants and pathogens was a big step forward for protecting EU citizens:

“In the future there’s going to be mandatory cadmium limit values for phosphate fertilizers – it’s going to be at 60 ppm.”

In advance of the regulation’s introduction, the European Committee for Standardization (CEN) is developing harmonised standards for fertilising products. Bernel expect these to be ready by next spring.

China ag market spotlight

Developments in Chinese agricultural commodities markets were outlined by Rosa Wang of Shanghai JC Intelligence.

China’s food strategy is based on absolute self-sufficiency in food grains and high self-sufficiency in other grains. Because of this, the country takes precautions by maintaining high stocks.

In terms of production of the three major grains in China, the current policy aims are to expand the corn acreage – which previously fell from 44.5 million hectares in 2016 to 40.2 million hectares in 2019 – while stabilising soybean and paddy rice acreages.

While Chinese wheat planting has increased in recent years, high-quality wheat acreage still represents less than 10 percent of the total, leaving the country with a significant supply gap. Wheat is mainly used for flour-making in China, although more is being used in animal feed due to the hike in the corn price.

Chinese grain demand continues to grow too, as Wang pointed out: “China imported over 10 million tonnes of corn in 2020, far exceeding its tariff-rate import quota of 7.2 million tonnes.” The country imports corn from multiple sources although the Ukraine and the US account for 56 percent and 38 percent of imports, respectively.

Looking ahead at price trends in 2021 and 2022, Chinese grains are now at the bottom, concludes Wang:

“The price trend is to go up, particularly in grains for food consumption. The hike of government prices for wheat and paddy rice stockpiling provides a barometer for price trends. Corn, after a hike of over 60 percent in 2020, will stay at high level in 2021.”

Risks and challenges in China

CRU’s Isabel Chen highlighted some of the risks and challenges in the Chinese phosphates market.

On the demand-side of the equation, Chinese demand did recover in 2020-2021, although this is likely to prove a short-term respite, explained Chen: “Chinese phosphate demand will continue to rise in 2021, amid a longer term declining trend. It is expected to revert back next year.”

On the supply-side, China is facing a combination of near-term shortage and medium-term oversupply. 2020 domestic phosphates production was down by one million tonnes due to production cuts by major producers – the so-called 6+2 group – and Covid-19 stoppages last spring.

The 6+2 group operates 65 million tonnes of China’s total phosphates production capacity of 212 million tonnes. These larger, lower cost producers are leading the way due to their operational flexibility and price discipline. The big are also getting bigger, said Chen, with the 6+2 producers increasing their market share:

“Benefiting from a much tighter global market, Chinese producers are likely to remain highly profitable this year. But over the longer term, oversupply will still be the key risk and challenge for Chinese producers – and keep pushing them to figure out solutions for survival and development.”

Chinese industry reforms are partly regulatory driven, suggested Chen: “Environmental regulations are expected to remain strict. So the cost of producers to comply with requirements will be higher and will still be an important driver for capacity changes in the near-term.”

With domestic demand contracting, the shift away from commodity phosphates (TSP, DAP and MAP) to value-added products – such as industrial- and food-grade phosphates and water-soluble fertilizers – will be vital, Chen concluded:

“Phosphates producers will need to do more on diversification of their downstream to remain competitive, especially as the fall in domestic fertilizer demand is irreversible. More value-added fertilizer products in their capacity list will be the key for profitability in the Chinese phosphates industry.”

Selected technical programme highlights

Gary Fowler and James Byrd of JESA Technologies explained the potential for synergies between beneficiation plant and phosphoric acid plant design.

Phosphoric acid pilot testing, for example, does not usually consider the grade-recovery or capex/opex optimisation of the beneficiation plant. Beneficiation plants, meanwhile, usually maximise phosphate recovery for a client-set phosphate grade. However, treating phosphate rock grade as a variable instead would provide more scope for optimising phosphoric plant design for a given feed source – by looking back to the beneficiation plant for improvements.

Both presenters concluded that, when beneficiation plant and phosphoric acid plant designers collaborate, a larger picture emerges that benefits the economics of both plants. By working together to common goals, an integrated design approach can offer phosphate project clients substantial benefits, in their view.

Yariv Cohen and colleagues from Easy Mining updated delegates on the progress of Ash2Phos, ® a value-added process that recycles phosphorus from incinerated sewage sludge.

The process dissolves ashes containing around 10 percent P2 O5 in acid, recovering 90-95 percent of available phosphorus while eliminating more than 96 percent of the heavy metals present. Phosphorus is recovered as ‘clean’ precipitated calcium phosphate (PCP). Typically, the process can generate around 15,000-45,000 tonnes of PCP from 30,000-90,000 tonnes of ash.

Several Ash2Phos ® pilot projects are currently underway in Europe, including a 30,000 t/a capacity project for Gelsenwasser in Germany. This project is expected to enter commercial operation in 2024. A similar pilot is also at the basic engineering stage in Helsingborg, Sweden. Ash2Phos ® production at 300,000 t/a scale is expected in Germany by the end of this decade.

Ricardo Sepulveda of PegasusTSI outlined the potential for green methanol and green ammonia production via carbon capture and hydrogen generation at phosphate fertilizer production sites.

A typical one million tonne capacity phosphoric acid plant, for example, will generate 150,000 t/a of CO2 .

Flue gas from these plants contain 4-10 percent CO2 , while fertilizer granulation plant flue gas also contains 0.3 percent CO2 . Carbon dioxide can be captured from these gases by CO2 absorption in amine solution using proprietary systems such as CANSOLV.

Waste heat from on-site sulphuric acid production, meanwhile, can also be captured and converted to medium pressure steam with a heat recovery system (HRS) – and then used to generate electricity. This, in turn, can generate hydrogen from water using an alkali electrolysis unit.

These two recovery processes can provide feedstocks for two different production routes. Firstly, captured carbon dioxide and electrically generated hydrogen can be combined to manufacture green methanol. Alternatively, hydrogen can be combined with nitrogen in ammonia synthesis to manufacture green ammonia. Pegasus TSI has calculated investment costs and the revenue potential for both routes.

Further reading

A set of abstracts highlighting key conference technical presentations can be found in the CRU Phosphates 2021 preview in our January/February issue (Fertilizer International 500, p33).