OUTLOOK '10: Fertilizer producers expect big rebound

24 December 2009 19:00  [Source: ICIS news]

Fertilizer makers expect reboundHOUSTON (ICIS news)--The world’s fertilizer producers, disappointed by 2009's severe drop in demand, anticipate broad-based recovery in 2010 across the three major nutrient segments of nitrogen, phosphorus and potassium.

Global demand for fertilizers is expected to grow by 4% in 2010 over 2009 levels, the International Fertilizer Industry Association (IFA) said in its outlook for the new year.

IFA data indicated that global consumption of nitrogen (ammonia), phosphate and potash (potassium) fertilizers in 2008/09 fell by 6.7% to 156.4m tonnes, with the contraction sharper for phosphates and potash (-10.5% and -19.8% respectively) than for nitrogen (-1.5%).

The situation in 2010 should see a major reversal, with a significant 4% growth in global demand and a strong 7% rebound on the total sales of the mainstream products, the IFA said.

A revival of global economic growth and the increased use of grains and oilseeds for food and biofuels will spur greater use of fertilizers, said Jim Prokopanko, chief executive of fertilizer producer Mosaic.

Farm economics resulting in $4.50/bushel corn and $10.00/bushel soybeans for the next several years mean that “farmers won’t take their foot off the [production] accelerator”, Prokopanko said.

Prokopanko said prices for potash and phosphate in 2010 will adjust to levels that will allow farmers to economically use fertilizers at full rates.

The prices for phosphate fertilizers will firm in 2010, and the market for sulphur will become tighter, he added.

Urea, diammonium phosphate (DAP) and potash trade demand in 2010 is projected to expand 5%, 5% and 50% respectively, according to the IFA.

Farmers in a number of countries postponed their applications of phosphorus and potassium in 2009 because of the volatility of agricultural commodities and input prices, the IFA said.

Although application rates fell well below crop requirements in 2009, farmers in the United States were expected to harvest a bumper corn crop, and farmers in France enjoyed record wheat yields this year.

Rather than apply fertilizers, farmers mined their soil reserves for nutrients.

The IFA said this practice was not sustainable in the long-term.

A return to sustainable fertilization practices would probably be triggered by more stable and predictable crop prices, the IFA said.

The weakness in demand in 2009 impacted global nutrient production and the industry’s operating rates, but at different intensities between the nutrients, the IFA said.

In the nitrogen sector, ammonia production was rather stable while urea output expanded moderately. Phosphate acid production declined marginally in 2009 in response to a drop in the mining of phosphate rock.

The world potash market collapsed in 2009, as international import demand dropped to its lowest level of the past 30 years.

Potash production plunged due to a combination of depressed demand worldwide and large stock carry-overs in key importing countries, the IFA said.

The IFA forecast a 13.5% rebound in demand for potash, while demand for nitrogen and potassium would continue to recover, increasing by 2.6% and 6.2%, respectively.

Trade prospects in 2010 for ammonia and potash are very positive, the IFA said.

Cost pressures will persist on Ukrainian nitrogen exporters, while strong urea and phosphate import demand was expected in the United States, south Asia and Latin America.

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