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Fertilizer International 524 Jan-Feb 2025

24 January 2025

CRU’s top fertilizer calls for 2025

Editorial

CRU’s top fertilizer calls for 2025

“There is huge risk almost everywhere we look. With that in mind, our predictions for 2025 focus on what we can say with the highest degree of certainty in a very uncertain world.”

As a tumultuous year draws to a close, it has become traditional for CRU’s fertilizer team to make a few predictions for the year ahead.

There is huge risk almost everywhere we look. Events in the Middle East have dominated the headlines over the last 12 months, Russia’s war in Ukraine is ongoing, and a new US President is poised to shake up world trade with blanket import tariffs. With that in mind, our predictions for 2025 focus on what we can say with the highest degree of certainty in a very uncertain world.

No additional duties on Russian fertilizer into Europe. Russian imports into Europe have increased this year. But they remain well within historical norms at around a third of all imports into the EU. We do not think restrictions on Russian fertilizer imports into Europe will be imposed in 2025 – although, with Poland taking on the European Council presidency in January, noise on this topic is likely to increase.

The flood of ammonium sulphate (AS) will continue. The consistent growth in caprolactam-based AS capacity in China has seen the country’s exports rise ever higher at around 20% year-on-year. In 2025, we expect AS exports from China to exceed 17 million tonnes, equivalent to around 80% of total global AS exports.

The new Trump administration will impose US trade tariffs. We do not forecast what those tariffs will be. But we think there will be an impact on fertilizer supply and demand – both in the US market and globally. Tariffs will take a bite out of US fertilizer demand in the second half of this year, in our view. Fertilizer imports into the US will become more expensive as a result, with tariffs also reducing the competitiveness of US agriculture.

China will lower urea export barriers (eventually). We expect China to step back into the urea export market in the second half of the year, with exports resuming once urea’s peak period for spring application has passed. Going forward, we also expect China’s diammonium and monoammonium phosphate (DAP/MAP) exports to be structurally lower in 2025 – although restrictions will not be as tight as those imposed on urea.

More European nitrogen consolidation and closures. Europe’s nitrogen producers will remain under pressure in 2025. Pricing of natural gas and ammonia in Europe will incentivise ammonia imports over production, particularly in the year’s second half. Consequently, some producers will switch off ammonia production in favour of imports.

Phosphate pricing to spur investment. Granular phosphate prices are now so high they have intersected with our long-run marginal cost (LRMC) for DAP. This means they are high enough at present to recover the capex on new production plants, a situation CRU expects to continue for the next two years. This should incentivise producers to invest in new greenfield capacity outside Saudi Arabia and Morocco – with some good reasons to invest in the US and Australia, for example.

China to ramp up its international potash investments. China’s reliance on muriate of potash (MOP) imports is on the rise. Indeed, CRU now has around nine million tonnes of Chinese-backed potash investments in its ‘probable-case’ forecast – with a large chunk of that likely to enter our ‘base-case’ forecast. Chinese-backed investment in Laos, for example, will see the country’s MOP capacity rise to more than five million tonnes from next year, making Laos a bigger producer than both Germany and Israel. China is also looking further afield at potash investments in Thailand, Republic of Congo and even in Spain.

Blue ammonia continues advancing. Greenfield blue ammonia projects will come into production over the coming years in the US and Qatar, along with some brownfield retrofit operations using carbon capture and storage (CCS) in the US. The project pipeline supports our call that blue ammonia will be the focus of investments for the next few years. Green ammonia development will most likely focus on China. CRU thinks many green ammonia cost estimates are too low. Some green ammonia projects currently on the drawing board will therefore not progress in our view.

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Protectionism casts a shadow over the new year

The start of a new year is a traditional time to take stock of the previous 12 months and look ahead to the next. In this regard, CRU’s most recent annual client survey, conducted at the end of December last year, makes interesting reading as to your own concerns for 2025 and beyond. There were numerous responses across commodity and financial sectors, and broadly based worldwide, if slightly skewed towards Europe and North America, but across all of these the key worry for the coming year clearly emerged as trade tariffs and protectionism. This is perhaps unsurprising, given incoming US president Donald Trump’s avowed intent to impose blanket 20% tariffs on all goods entering the US, and up to 60% on China. While most clients did not think tariffs would rise as much as some of Trump’s rhetoric might suggest, most expect rises of 5-10% across the board, and Asian businesses are most concerned. CRU’s most recent position paper on US tariffs highlights some of the internal political and legal challenges in implementing these, but does acknowledge that some rises will be inevitable, and may well produce the kind of reciprocal measures last seen in the previous Trump administration’s trade war with China and the EU in 2018.