Presentation on theme: "Back to the Future: The Outlook Post-Boom Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FAI Meeting February, 2009."— Presentation transcript:
Back to the Future: The Outlook Post-Boom Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FAI Meeting February, 2009
The OPEC Macro-Cycle A 30-year cycle reaching its end? Initiated by population growth and famine Nirvana = self-sufficiency in food Government driven investment (plus IBRD, Détente,etc) The fight for processing value The dying days of colonial imperialism and the fight to resist change
Arab Gulf (N)Indonesia (N, P 2 O 5 ) Brazil (N, P 2 O 5, K 2 O)Mexico (N, P 2 O 5 ) Bangladesh (N, P 2 O 5 )Morocco (P 2 O 5 ) China (N, P 2 O 5, K 2 O)North Africa (N, P 2 O 5 ) East Europe (N, P 2 O 5 )Malaysia (N) India (N, P 2 O 5 )Pakistan (N, P 2 O 5 ) Government-Inspired Fertilizer Investment Programmes
What Now (1)? The normal post-boom symptoms: Stocks of high-cost material Inability to purchase until stocks are sold Nervousness amongst those purchasers in a position to purchase new product Hand-to-mouth trading and purchasing Doubts as to the viability/reliability of importers/merchants
What Now(2)? Post-boom peculiarities in 2009: The gumming up of the financial and credit systems: LCs, collateral, trust. No build-up of grain and food stocks Bio-fuels are built into the system A rapid response in production cut-backs All quiet on the project front – capital costs have risen by 50-100% during the last cycle.
What Next? Is looking back a guide to the future? All nutrients were in chronic oversupply. Now they are not. A new cost structure has been established. There are differences between the nitrogen and extractive industries based on the distribution of resources
Prilled Urea fob Middle East Current US$/t HighLow 1974-7539040 1985-8620080 1995-9624063 2008-09815240
…and the end of a Super-Cycle (since 1973). Source: FMB/FCC/IMF
Ukraine: New Feedstock Situation (from January 2009) Costs to fob, 2010 Oil Price US$ per bbl Ammonia US$/t Urea US$/t @40225-310170-215 @70330-430245-300 @100435-565320-385 Note: Effective oil input price (given lag mechanism) 2009 Average= c. US$75 per bbl
Swing Export Capacity (1) 2007 Exports (thousand tonnes) AmmoniaUreaANUAN Ukraine1,4503,025961111 Romania8776308231 Bulgaria20-24390 Subtotal1,4783,8011,208342 World Trade19,17237,08818,6976011 Share of World Total 7.7%10.2%6.5%5.7% Source: FCC/IFA
Urea Project Outlook UREATotal2008200920102011/2012 Incremental Capacity (Excl.China) 220.127.116.11.19.2 Total Urea market (2007)141.1 Proportion13.9%
China: Incremental Urea Capacity +16.8 million t/a new urea capacity due 2008-11 But will feedstock be available/suitably priced? Natural gas remains subsidised at US$2.5-3.5 per MMbtu Reports of closures of coal-based nitrogen units (total existing capacity c.12-15 million tonnes N)
Phosphate Rock Reserves (billion tonnes) Reserves% Share World18.0100% Of which: China6.637% OCP5.732% Others5.731% Source: US Geological Survey
The Build-up of Chinese Ammonium Phosphates Capacity (million tonnes) 20052012Change Total9.9119.01+9.10 DAP7.8814.42+6.54 MAP2.034.59+2.56 Source: FCC
Whither Merchant Rock? OCP exported 14 million/t rock out of 31 million/t in 2007- ±50% of acid-grade rock. Most rock exporters are focusing on captive processing at the expense of exports. The only new supply of rock under construction is Bayovar, Peru – 3 million t/a. No wonder Yara bought Kemira!
Whither Potash? The only obvious locations for new mines are Canada, Russia and, perhaps, Belarus. Grassroots projects cost up to US$ 2.5 billion for 2 million t/a. Uralkali was looking at a breakeven of US$ 500/t KCl at a new mine. Savings of about 30% can be made using an existing location – PotashCorp and Mosaic. Supply management has a 30 year history. The need for cash-flow is the one weakness.
Thank you for your attention Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FMB House, 6 Windmill Road, Hampton Hill, Middlesex TW12 1RH, UK Tel: +44 20 8979 7866; Fax:+44 20 8979 4573 Email: email@example.com www.fertchem.co.uk