Fertilizer International 514 May-Jun 2023
31 May 2023
CRU Phosphates 2023
CONFERENCE REPORT
CRU Phosphates 2023
More than 370 delegates from over 160 companies and 40 countries gathered at the Hilton Bomonti Hotel, Istanbul, Turkey, 27 February to 1 March, for CRU’s Phosphates 2023 conference.
We report on the main keynote and market outlook presentations given at CRU’s 15th Phosphates International Conference and Exhibition held in Istanbul in March.
Privilege to be in Istanbul
Nicola Coslett, the CEO of CRU Events, opened the event with a heartfelt message for the victims of the magnitude 7.8 Turkey-Syria earthquake that took place on the 6th February, several weeks before the conference opened:
“Devastating earthquakes in Turkey and Syria have killed thousands of people and destroyed hundreds of buildings. We offer shared condolences and strength to the many people affected. CRU has donated a significant amount to the urgent rescue efforts through the Disasters Emergency Committee.
“We feel it is a great privilege to be holding the 15th Annual Phosphates Conference here in Istanbul. We’d like to open the conference with a brief reflection, a poem commissioned for this occasion written by British writer Ben Michaels.”
This moving poetry reading was followed by a two-minute silence for everyone affected by the earthquake – the victims, their families and rescue workers alike.
Amanda Whicher, portfolio director at CRU Events, also welcomed delegates to Istanbul for Phosphates 2023:
“Despite the tragic recent events, we are pleased to be able to run the event in Turkey for the first time. It also marks our first phosphates comeback in Europe since 2016.
“The event is now in its 15th year and on behalf of CRU I’d like to thank all of you for your continued support of the event. It’s a great pleasure for me to warmly welcome back old friends as well as new faces to the event.
“We’re pleased that 2023 marks another successful year for the event with 370 delegates registered to meet in Istanbul in the next few days. Our audience represents the multifaceted nature of the global industry – with delegates representing engineers, operators, buyers, sellers and solution providers from over 160 companies and 40 countries worldwide.”
Prices still moving downwards
Phosphate fertilizer prices look set to decline further in 2023, as supply limitations ease. That was the key message from CRU’s Humphrey Knight in his global market outlook presentation.
Agricultural fundamentals remain supportive of high crop prices, Knight said. Currently, these are double what they were three years ago, this being linked to very tight stock-to-use ratios. As a consequence, crop prices have stayed persistently high in 2022 and will remain well above historical norms in 2023, Knight predicted.
Diammonium and monoammonium phosphate (DAP/MAP) shifted from the affordable to unaffordable last year as prices trebled/quadrupled. As a result, annual DAP/MAP demand fell by nine percent globally in 2022. This was the biggest year-on-year drop in the 21st century, said Knight, taking global phosphate fertilizer demand back to 2014 levels.
DAP/MAP affordability has improved since, although not by enough to provoke an across-the-board demand uplift. Demand recovery in the phosphate market still faces headwinds, currently, such as middling affordability – which Knight described as “not great, not terrible” – and a stock hangover from 2022.
CRU therefore expects global DAP/ MAP demand to recover by 7-8 percent to around 63 million tonnes in 2023. Regionally, the recovery is forecast to be patchy with surges in year-on-year (y-o-y) demand in the US (+25.0%) and Brazil (+18.4%) partly offset by downward corrections in China (-7.6%) and India (-3.5%).
On the supply side, annual DAP and MAP exports from China (-45%) and Morocco (-8%) were down in 2022 – although supply remained ample despite these limitations. Much the same is expected this year, suggested Knight, with China likely to ease its major export reductions from April onwards. Morocco is also expected to relax its supply management measures this year in response to lower pricing.
Overall, CRU expects phosphate fertilizer prices to remain under pressure throughout 2023, with supply availability outweighing demand. Price falls for the phosphate sector’s two key raw materials, sulphur and ammonia, will also push the industry’s cost floor lower.
Phosphate rock pricing, in contrast, has followed a divergent trend in the last 12 months due to a large shift in trade patterns. Exports of high-grade rock shrunk as Russian output slowed sharply. The supply of lower-grade rock, meanwhile, remained ample with both Jordan and Egypt increasing their export volumes.
Looking further ahead, phosphate fertilizer prices are set to hit the cost floor next year before rebounding, with CRU forecasting an average DAP price (f.o.b. Morocco) of $477/t in 2024. At the same time, the price disparities between high- and low-grade phosphate rock should gradually close.
“Over the short term, we have further declines in DAP/MAP prices with demand recovery expected to be outweighed by the easing of supply limitations,” summed up Humphrey Knight. “Over the medium term, after hitting a bottom dictated by the industry cost floor, we expect prices to rebound – given that the project pipeline is busy but not too crowded.
“Then there are a few things to watch out for over the longer term – China’s inward focus, the niche use of LFPs [batteries] and finally increasing interest in low emissions ammonia from the DAP/MAP sector.”
China’s phosphate contracts and restructures
Dr Lee Bo of the China Phosphate and Compound Fertilizer Industry Association (CFFIA) highlighted the changing face of China’s phosphate industry. She listed a plethora of problems and pressures facing the industry in China, including:
- Declining demand
- Surplus production capacity
- Environmental protection measures
- Fast changing trade patterns
- Drawing down of phosphate rock reserves.
In response, China’s phosphate industry is undergoing a structural readjustment – the aim being to increase the production and use of more functional and higher efficiency products. This is linked to a national agricultural action programme designed to drive down fertilizer usage and improve fertilizer efficiency by 2025. This programme is promoting new technologies such as fertigation, and the speciality fertilizers associated with these such as water-soluble fertilizers (WSFs) and micronutrient enriched products.
At the same time, the country’s industrial policies are restricting domestic DAP/ MAP production capacity and driving up the utilisation rates for phosphogypsum – a phosphate industry by-product that is generated on a vast scale in China and elsewhere globally. Assessments of commercial phosphate rock reserves are also needed to ensure consistent domestic supply and stable prices.
China remains a global phosphate industry colossus. The country is the world’s largest phosphate fertilizer producer with 21.4 million tonnes (P2 O5 ) of production capacity – 36 percent of the global total – although this has fallen by 3.3 million tonnes since 2016.
The country’s DAP/MAP production capacity accounts for 86 percent of domestic phosphate production, or 46 percent on a global basis. Unsurprising, given these production strengths, China has generally exported phosphate fertilizers on a very large scale, with DAP and MAP exports each accounting for 35-40 percent and 19-24 percent of global trade, respectively.
China’s farmers also consume 11.3 million tonnes of phosphate as an agricultural nutrient (P2 O5 ) – some 23 percent of world demand.
Chinese phosphate production is, however, in long term decline, having fallen every year since 2015 (except for 2021). Domestic production last year was below 15 million tonnes (P2 O5 ), down 12 percent on 2021. On a product basis, Chinese DAP and MAP production in 2022 fell by 13 percent y-o-y to 27 million tonnes.
A combination of sharp export falls, high prices and tight phosphate rock supply was behind last year’s major contraction in phosphate production, suggested Lee Bo.
Mosaic’s main markets
The Mosaic Company’s Andy Jung gave an update on the company and the state-ofplay in its primary markets – North America, Brazil, India and China.
Mosaic is the largest supplier of phosphates to the large, mature North American market, with a market share of more than 40 percent. Annual phosphate shipments (DAP/MAP/NPS/TSP) to North America are forecast to rebound in 2023 to exceed nine million tonnes, having contracted sharply last year. Jung noted the increasing focus on sustainability and efficiency as a driver of investment in new products and technologies in North America. The trend for digitalisation is also accelerating throughout the whole of agriculture in this region.
In Brazil, meanwhile, wholly owned subsidiary Mosaic Fertilizantes made total fertilizer product sales of 9.4 million tonnes last year. Mosaic has a leading production and distribution position in what is one of the world’s largest and fastest-growing fertilizer markets. Brazil, as a global agricultural powerhouse, has seen consistent rises in both the area planted to crops and crop yields. Fertilizer shipments to the country of 45 million tonnes or more are anticipated this year.
In China, structural changes to the phosphate industry are expected to continue to constrain export volumes, Jung suggested. He linked this to China’s national priorities in three areas: domestic supply in support of higher crop yields; the rationalisation of inefficient capacity along with a reduction in the environmental impacts of production; investment in industrial (non-fertilizer) production segments.
India is emerging as a bright spot for 2023 global phosphate demand, in Jung’s view. Although this market remains heavily influenced by subsidy changes and the strength of Monsoon rains, a more balanced approach to crop nutrition is supporting a solid future for phosphates demand on the subcontinent. Consequently, Mosaic is forecasting Indian DAP shipments of more than 10 million tonnes this year.
US phosphate demand set to rise?
On the basis of farm profitability, demand for phosphate fertilizers from US farmers in 2022/23 should be high. Total usage should also increase due to a rise in the planted area. Those were two of the conclusions reached by Ryan Doyle of Itafos in his US phosphate market outlook.
US famers have benefited from a series of highly profitable consecutive years, said Doyle, and are expected to have “another big year” in 2023. Profitability has been driven more by crop prices, suggested Doyle, not by the costs of inputs such as fertilizers.
The combined US corn, soybean and wheat acreage is likely to rise by 7-8 million acres in 2022/23 – an annual increase of around 3.5 percent. The planted area has been boosted by factors such as sustained crop prices, fewer pandemic-related problems and better spring weather.
Annual US phosphate fertilizer use is expected to rise by nine percent to reach 3.85 million tonnes (P2 O5 ) in the current fertilizer year 2022/23 ending on 30th June. This follows the sharp 18 percent decline to 3.53 million tonnes seen in the previous 2021/22 year.
On a product basis (DAP/MAP/NPS/ TSP), US farm use of phosphate fertilizers is projected to increase by seven percent to 7.82 million tonnes in 2022/23. Meeting greater US consumption levels in 2022/23 should require higher import demand, given that US phosphate exports and domestic phosphate production have remained roughly flat. Higher imports have, however, yet to materialise.
Total US phosphate fertilizer imports (DAP/MAP/NPS/TSP) during the first six months of the 2022/23 fertilizer year were down 993,000 tonnes – a 31 percent decline on a year ago. While these are still projected to pick up this spring, it is unclear whether imports will be lower or flat compared to last year.
“Higher demand for imports is required, but we’ve had less imports in the year-todate versus last year,” concluded Doyle. “This means more tonnes should still be required – although we are very close to the spring application season!”
This situation has raised concerns about the ability to move enough product into the US agricultural system ahead of spring. The other question mark is whether there will be some cutbacks in overall phosphate fertilizer use in the US market – either because of price or a lack of availability.
Bulgaria and Romania’s speciality fertilizer market
The market for complex NPKs and speciality fertilizers has taken off in Bulgaria and Romania over the last five years, explained Philippe Rombaut of Agropolychim. This has largely been at the expense of the commodity phosphates DAP and MAP.
Agropolychim, which operates a fertilizer production plant at Devnya in northeastern Bulgaria close to the Black Sea port of Varna, has seen a rise in the popularity of the following products:
- NPKs (15:40:10)
- NP+S (15:25 + 12S, 20:20 + 13S)
- NP+S+Zn (18:38 + 5S + 0.3Zn)
- NPK+S (16:16:8 + 12S, 15:15:15 + 10S)
- Urea ammonium nitrate plus sulphur (UAN+S) liquid
- Urea with nitrification and urease inhibitors.
Combined Romanian and Bulgarian sales of these products grew from 105,000 tonnes to 123,000 tonnes between 2018 and 2021, to finally reach 170,000 tonnes last year. One reason behind their substitution for DAP/MAP is the ability of these speciality products to provide essential potassium and sulphur – as well as micronutrients such as zinc for wheat, barley and corn.
Boron-enriched foliar sprays are also being favoured by local rapeseed and sunflower growers. In general, the region’s famers have simply found DAP and MAP too expensive, compared to these competitor products, when applied to crops at the same application rates.
Foliar fertilizer sprays, including liquid UAN products, are now a e20 million market in Bulgaria, having experienced average annual growth rates of five percent since 2015. They are now applied to 47 percent of the country’s crop area, with half of the foliar sprays used by Bulgarian growers containing multiple components.
Technical presentations
Summaries of key presentations from this year’s excellent technical programme can be found in the CRU Phosphates 2023 preview in our January/February magazine (Fertilizer International 512, p32).
Market information
Please note that market information and commentaries reported here date from the time of event in late February and early March 2023. These should therefore be interpreted with caution.
