IFFCO, Rakesh Kapur
Transcript of IFFCO, Rakesh Kapur
Regional Demand Outlooks -India Outlook
• Rakesh Kapur
Joint Managing Director, Indian Farmers Fertiliser Cooperative Ltd.
and
Chairman, Fertiliser Association of India
Organization logo to appear here
• Urea - accounts for more than
50% of the fertilizer consumed.
• Urea Units in the country -30.
• No Investment for fresh
capacity creation in Urea since
2000.
• Domestic Production of Urea
growth 0.8% CAGR since 2000-
01.
• Urea Consumption growth
3.5% CAGR since 2000-01.
21.1 20.8
19.8 19.8 19.7 20.0 20.0 20.0
20.8
21.6 21.6 21.6
22.7 23.5 23.5 23.5
19.2 19.9
18.5
19.8
20.7
22.3
24.3
26.0 26.7 26.7
28.1
29.6 30.0
30.6 30.9 31.4
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6 E
Mill
ion
MT
Urea Capacity Consumption
Source : FAI
New Investment Policy (NIP) – Effective from 04th Sept 2008 till 31st May 2015
Investment linked to Import Parity Prices of Urea with floor and ceiling prices based on gas price of US$ 4.88 per MMBTU.
85% of Import Parity Price (IPP) considered for reimbursement from Revamped production.
Prompted Investment in fertilizer sector - Around US $ 700 Million invested on Revamp of capacities.
Limited Capacity Addition of 2.8 Mill MT through Revamp/ Debottlenecking.
Policy not very conducive for Capacity addition and Revamped Production due to doubling of Gas price.
Companies curtailed additional Production beyond 100% Capacity last fiscal due to depressed level of Urea IPP & higher RLNG prices.
Policy effective from 02nd January 2013 but tweaked with certain amendments on 07th October 2014.
Floor-Cap prices of Urea in line with the gas prices till US$ 14/MMBTU and Floor price thereafter.
Implicit pass through of Gas price for Greenfield / Revival & Brownfield projects.
Subsidy on domestic sale for a period of 08 years from production.
Production to start within 05 years.
Policy seeks Bank Guarantee of US$ 50 Mill from companies interested in setting up Project.
Policy aims to boost Indigenous Urea Production and reduce import dependency.
Extra Urea production beyond 10% from existing Revamp capacity recognized under NIP-2012.
Additional amount of US$10 per Tonne allowed in the Floor and Ceiling Price for producing Granulated Urea.
GOI w.e.f 25th May 2015 has made it mandatory to produce 100% Neem Coated Urea (NCU).
Neem Coated Urea is a “slow release” fertilizer and its application reduces Urea consumption by 10-15% (Likely impact of reduced Imports).
An additional 5% / 10% price loading on Maximum Retail Price (MRP) allowed for Neem Coated / Zincated Urea.
32.9 33.7 33.8
34.5
10.4 11.2 11.3
12.0
2015-16 E 2016-17 E 2017-18 E 2018-19 E
MIL
LIO
N T
ON
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Demand Import
• Urea Import currently in the
range of 7-8 Million MT.
• Steady increase @CAGR of
2.7% anticipated in Urea
Demand.
• Import dependence may
increase to 12 Million MT per
annum in medium term if
Urea Retail Price is not
increased to arrest its over
usage. Source : WGR
• Natural Gas - Highest Priority allocated to fertilizer
sector so far.
• Domestic Natural Gas Price Guidelines notified on
October 10, 2014.
• Weighted Average gas price in gas-surplus economies of
US, Canada and Russia are the basis.
• Natural gas prices prevailing at US$ 4.66 per MMBTU
valid till 31st October 2015.
• Natural gas prices likely to reduce from 1st November
2015 due to low Crude and LNG prices globally.
• RLNG price not regulated. Higher Cost of Imported LNG.
• Distorted Gas Price signals were affecting investment
choices in markets and access to Energy baskets.
• Multiple Gas prices. Variations for individual units - US$ 4.66
- 13.5 per mmbtu.
• Gas Pooling Policy effective from 01st June 2015.
• GAIL (India) Ltd. is the Pool Operator for the fertilizer sector.
• Policy alters the dynamics by levelling gas costs for all 25
existing gas-based units and New Planned Units.
• Policy aims to incentivise Urea production at healthy Energy
efficiency.
Greenfield /Revival of Closed HFCL & FCIL Projects
• Delivered Gas Price – US$ 6.5 per MMBTU
• Floor Price - US $ 305 per MMBTU
• Ceiling Price -US $ 335 per MMBTU
• Urea recognized at rate of 95% of IPP.
Expansion of Brownfield Projects
• Delivered Gas Price – US$ 6.5 per MMBTU
• Floor Price - US $ 285 per MMBTU
• Ceiling Price -US $ 310 per MMBTU
• Urea recognized at rate of 90% of IPP.
Revamp Projects
• Delivered Gas Price – US$ 7.5 per MMBTU
• Floor Price -US $ 245 per MMBTU
• Ceiling Price - US $ 255 per MMBTU
• Urea recognized at rate of 85% of IPP.
Joint Venture Projects - Overseas
• Floor price equivalent Greenfield Projects at a gas cost of USD 6.5 per MMBTU.
• Sick Urea Units of erstwhile PSUs namely, Fertilizer
Corporation of India (FCIL) and Hindustan Fertiliser
Corporation Limited (HFCL) were closed prior to 2002.
• GOI planning to revive FCIL/HFCL Units.
• FCIL (Talcher and Ramagundam) Units revival on Nomination Basis.
• FCI (Gorakhpur, Sindri & Korba) Units and HFCL (Durgapur, Haldia, Barauni) Units revival through Bidding route.
• FCI (Gorakhpur, Talcher, Ramagundam, Sindri) and HFC Barauni initially targeted.
• Gas transporters to lay pipeline by December 2018.
• Revival expected to increase Urea capacity by 10.16 Million MT ???.
• India- Iran negotiations to set up a US$ 1 Billion Urea
plant of 1.3 Million MT per annum capacity in the Gulf.
• RCF, GNVFC and GSPC- Nominated Consortium from India.
• IFFCO planning to set up a 1.3 Million MT per annum Urea plant in Quebec province of Canada.
Brownfield/ Greenfield Cap.
Indo Gulf‐ Jagdishpur, U.P. 1.155
RCF, Thal, Maharastra 1.155
CFCL, Gadepan III, Rajasthan 1.155
NFCL, Kakinada 1.270
Matix Ferts.& Chems. Panagarh, West Bengal (CBM based)
1.300
GNVFC, Bharuch 1.270
GSFC, Vadodara 1.270
FACT, Kochi 1.270
Bharat Coal Chemicals Ltd, Odisha (Coal Gasification)
0.495
Total (Million MT) 10.34
Bank Guarantee not yet submitted by interested Parties. These capacities will not come up in next 03 years?
Financial Viability and Bankability of New Investment proposals will be an important concern.
RLNG share to increase due to less domestic gas supply.
RLNG Prices to take the Pool Gas price average upwards from US$10/MMBTU.
Price Viability of New Urea Projects based on RLNG, if Long Term Urea Price Forecast @ US$350-375 PMT??.
NIP- 2012 (New Projects)
Existing Pool Price
Pool Price New
Projects
Natural Gas (US $/MMTBU)
10 11.5
Natural Gas cost (US $/MT Urea)
260 250
Other Costs (US $/MT Urea)
50 150
Cost of Production (New Capacity) (US $/MT Urea)
310 400
Additional Requirement
2016-17
2020-21
Naphtha based units
8.12 8.12
Greenfield/Brownfield Units
0.00 16.8
Closed units 0.00 17.60
Revamp units 2.45 2.55
Total 10.57 45.07
Current requirement of existing gas based units : 42 MMSCMD.
RLNG constitutes 20-25% of Gas consumption by fertiliser sector.
All fertilizer plants to switch over to natural gas by 2016-17.
Natural Gas requirement is 2.4 MMSCMD for a 01 Million MT Urea production Unit.
Gas requirement for fertilizer sector to increase to 87 MMSCMD by 2020-21.
• Subsidy differential to increase on account of increase in Pool
Price and low IPP.
• Higher the Floor Price for new Investments, higher the Subsidy
amount.
• Adequate Subsidy Budget Allocations.
• Existing companies’ profitability already hit on account of
Delayed Subsidy payments.
• Price Competitiveness after Eight year Period ??
• Whether Farm Gate price of Urea will remain constant at
current level of Rs 5310 per Tonne for next couple of years???
• Global Urea Capacity projected to increase to 252 Million MT by 2019 (44 Million MT – 20% increase over 2014).
• Major Capacity addition of 9-11 Million MT in China (20 New Units) and USA (7 Million MT).
• Incremental Capacity to occur in countries with NG reserves.
• Global Supply to increase by 6.4% p.a. over 2015.
• Global Demand to increase by 5.3% over 2015.
177
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186
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205
211
2015 2016 2017 2018 2019
Demand Supply
Potential Surplus to increase from 8.3 to 12.7 Million MT.
Source : IFA
• Middle East and China region have strategic advantage on account of low feedstock prices and Export Policies.
• China currency devaluation against US $.
• Weaker Yuan to imply export competitiveness and aid export performance.
• China’s imposition of VAT on all fertilizers from 1st Sept. 2015.
• VAT impact may get neutralized by Currency Devaluation.
• China edging towards Zero Consumption growth in fertilizers.
• Incremental capacity to put pressure on International Urea Prices.
Rainfall was excess/normal in 18 States and Deficient in 18 out of 36 States.
Average rainfall of 677.4 mm against normal rainfall of 808.1 mm (16% below the LPA).
Approaching spell may bring down cumulative rainfall deficiency figures of the entire country.
Normal/Excess rainfall in June at all the broad homogenous regions helped boost initial phase of sowing.
Govt. increased Minimum Support Prices for Kharif Crops by Rs. 50-200 per quintal to increase acreage.
Crop Sown area increased by 2% (99.9 Mill ha) over previous year.
Drop in Food grain output in 2014-15 : 251 Mill MT (2013-14 : 265 Million MT).
Good Kharif crop output expected in 2015.
Nutrient Based Subsidy for P&K fertilizers at same level as of last fiscal year.
Fertilizer Demand remained relatively strong with assured availability.
Stable/lower International prices of fertilizers improved overall availability.
India on course for another increase in fertiliser consumption this year.
Capacity Utilization of Indigenous Urea manufacturers expected to improve on account of New Urea Policy.
• Port inventories in China for export started building since July.
• IPP has gone down this fiscal.
• Average Urea Price has gone down by US$ 30 per MT since last fiscal.
• Ammonia prices witnessed a major drop of US$ 110 per MT since last fiscal.
• DAP/MOP prices more or less stable.
• Chinese and Saudi producers finding better netbacks than pursuing DAP sales in Latin America.
Source : FMB/FW/Fertecon
515
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494 504
525 525 518
500 506 508 504 499 497
528 524 523 523 536
571
604 618
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440 435 438 443 448 455
315 314 315 314 317 318 317 316 326 321 320 322 322 323 327 331
295 284
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Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15
CFR
IND
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E U
S $
PER
MT
DAP
Ammonia
MOP
Prilled Urea Bulk
% Variation (Est.) UREA DAP MOP COMPLEX
(2015-16 vs 2014-15) 1.3 22.3 1.4 4.5
Source : FMS
12.6
14.0 13.6
15.1
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16.5
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UREA Kharif Rabi
6.1
4.9
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4.8 5.3
5.1
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DAP Kharif Rabi
2.0
0.8
1.1 1.1
1.4
1.4
1.9
2.2
1.0 1.0
1.4
1.4
0.5
1.0
1.5
2.0
2.5
10-11 11-12 12-13 13-14 2014-15 2015-16 E
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MOP (Direct) Kharif Rabi
4.9
5.2
3.7 3.3
3.9
4.4
5.0 5.1
3.6
4.0
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10-11 11-12 12-13 13-14 2014-15 2015-16 E M
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on
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Complex
Kharif Rabi
2351 3059 2760 2760 3321 3321 3321 3662 4002 4600 4600 4830 4830 4830 4830 4830 4830 4830 4830 4830 5310 5310 5310 5310 5310 5310
2682 3482 5718 5920 6688
8501 7802 6868 6868 6734 7098 7098 7461 7567 7461 7461 7461 7461 7461 7461
8671
18221
24000 22500 22500
23500
0
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30000 1
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Rs
pe
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Urea MRP
DAP MRP
4.2 4.5 4.1 3.5 3.6 3.5 3.6 5.4 5.8 6.9 5.9 6.2 5.5 5.6 6.3 6.8 7.4 7.5
9.2 10.5 10.9 10.2 9.2 7.4 7.5
9.5
14.1 14.0 14.9 15.8 17.1 17.9 19.0 19.6 20.4 20.3 19.2 19.9 18.5 19.8 20.7 22.3
24.3 26.0 26.6 26.7 28.1 29.6 30.0 30.6 30.9 31.4
0 5
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199
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199
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2-93
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000
200
0-01
200
1-02
200
2-03
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9-10
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2015
-16
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DAP Consumption Urea Consumption
Source : FAI/FMS
DAP – 4.9 Million MT Imports tied up (April till Sept’15).
Adequate DAP Stocks at the end of Kharif 2015-16. Import requirement for Rabi Season???
Domestic demand for Phosphate fertilizers in China is over this season. Exporters targeting Indian market.
High Volatility in US$-INR parity.
INR- USD Exchange variation may put pressure on DAP Prices in case Farm Gate Prices are to be maintained for DAP/ NPKs.
301 313
323
344
113 119 153 160
188 194
170 184
100
150
200
250
300
350
400
2015-16 2016-17 2017-18 2018-19
MM
SCM
D
Demand Domestic Supply Gap
• Demand - Highly price elastic.
• Demand to outpace Domestic supply.
• Deficit to necessitate higher dependence on LNG.
• Demand deficit to reduce in 2017-18 owing to incremental capacities.
• Gas supply to fall short by 184 MMSCMD by 2018-19.
• LNG Terminal Capacity estimated to increase to 63 Mill MTPA (239 MMSCMD).
• Back to Back RLNG contracts and timely commissioning of LNG terminals - a critical factor.
Source : India Infrastructure
• Major Gas companies targeting
production in the next 3-6 years.
• Incremental Gas Supply of 49
MMSCMD expected by 2018-19.
• ONGC Gas Blocks to add 30
MMSCMD.
• RIL’s KG D-6 to yield additional 11
MMSCMD.
• CBM blocks to add 8 MMSCMD.
• Projected Incremental flow may
be affected by technical
complexity and pricing issues.
25
5 3
3.5
9
2
3.08 1.2 3.5
2.43
0
5
10
15
20
25
30
35
40
2015-16 2016-17 2017-18 2018-19
MM
SCM
D
Gas Supply Incremental
ONGC ONGC (Uran) OIL RIL
GSPC Essar Oil RIL CBM GEECL CBM
Source: MOPNG
India – 4th largest importer of LNG Globally.
Existing Terminal Capacity -23.6 Million MTPA.
Import from existing Terminals – 64 MMSCMD.
Terminals Capacity to improve. Private/State companies setting up their Terminals.
Expansion of existing Terminals to account for 30 Million MTPA by 2016-17.
Greenfield Terminals on East/ West Coasts projected to add 33 Million MTPA Capacity.
Total Supply from RLNG Terminals projected at 240 MMSCMD by 2018-19.
23.6
1.8
7
13.5
9.5
5 5
0
5
10
15
20
25
Existing/ Expansion East Coast
Existing West Coast
Proposed/UC East Coast
Proposed/UC West Coast
MTPA
2015-16 2016-17 2017-18 2018-19
Source: MOPNG
Normal/Excess Rainfall in June 2015 led to increased sowing. Kharif Output expected to be higher.
Adequate DAP availability – may meet the Rabi Season demand.
GOI commitment to revive Closed Units and increase Domestic Urea production Capacity.
Pooling of Gas provides platform for further reforms in Urea sector including Direct Transfer of Subsidy to Farmers.
Global Surplus Capacity of Urea, Devaluation of Yuan, Zero Consumption Growth of fertilizers in China would keep Urea IPP under check.
Organization logo to appear here