IFFCO, Rakesh Kapur

33

Transcript of IFFCO, Rakesh Kapur

Page 1: IFFCO, Rakesh Kapur
Page 2: 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

Page 3: IFFCO, Rakesh Kapur
Page 4: IFFCO, Rakesh Kapur

• 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

18

20

22

24

26

28

30

32

34

200

0-0

1

200

1-0

2

200

2-0

3

200

3-0

4

200

4-0

5

200

5-0

6

2006

-07

200

7-0

8

200

8-0

9

2009

-10

201

0-1

1

201

1-1

2

201

2-1

3

201

3-1

4

201

4-1

5

201

5-1

6 E

Mill

ion

MT

Urea Capacity Consumption

Source : FAI

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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.

Page 6: IFFCO, Rakesh Kapur

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.

Page 7: IFFCO, Rakesh Kapur

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.

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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

NE

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

Page 9: IFFCO, Rakesh Kapur

• 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.

Page 10: IFFCO, Rakesh Kapur

• 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.

Page 11: IFFCO, Rakesh Kapur

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.

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• 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 ???.

Page 13: IFFCO, Rakesh Kapur

• 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.

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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.

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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

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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.

Page 17: IFFCO, Rakesh Kapur

• 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???

Page 18: IFFCO, Rakesh Kapur

• 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

183

189

194

199

186

192

198

205

211

2015 2016 2017 2018 2019

Demand Supply

Potential Surplus to increase from 8.3 to 12.7 Million MT.

Source : IFA

Page 19: IFFCO, Rakesh Kapur

• 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.

Page 20: IFFCO, Rakesh Kapur
Page 21: IFFCO, Rakesh Kapur

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.

Page 22: IFFCO, Rakesh Kapur

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.

Page 23: IFFCO, Rakesh Kapur

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.

Page 24: IFFCO, Rakesh Kapur

• 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

485

507

549 544

520 506

494 504

525 525 518

500 506 508 504 499 497

528 524 523 523 536

571

604 618

603

552

524

503

440 435 438 443 448 455

315 314 315 314 317 318 317 316 326 321 320 322 322 323 327 331

295 284

316 308 308 309

338

360

340 332 330 332

320

294

272

299

314

295 295 284

250

300

350

400

450

500

550

600

650

Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15

CFR

IND

IA P

RIC

E U

S $

PER

MT

DAP

Ammonia

MOP

Prilled Urea Bulk

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% 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

14.0

15.3

15.5 15.5

16.5

15.4

16.9 16.9

10

11

12

13

14

15

16

17

18

10-11 11-12 12-13 13-14 2014-15 2015-16 E

Mill

To

nn

e

UREA Kharif Rabi

6.1

4.9

4.0 3.2 3.7

4.7

4.8 5.3

5.1

3.3 3.9 4.0

2.0

3.0

4.0

5.0

6.0

7.0

10-11 11-12 12-13 13-14 2014-15 2015-16 E

Mill

To

nn

e

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

Mill

To

nn

e

MOP (Direct) Kharif Rabi

4.9

5.2

3.7 3.3

3.9

4.4

5.0 5.1

3.6

4.0

4.7 4.7

3.0

3.5

4.0

4.5

5.0

5.5

10-11 11-12 12-13 13-14 2014-15 2015-16 E M

ill T

on

ne

Complex

Kharif Rabi

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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

5000

10000

15000

20000

25000

30000 1

99

0-9

1

19

91-

92

1992

-93

19

93-

94

19

94-

95

19

95-

96

19

96-

97

1997

-98

19

98-

99

19

99-

20

00

20

00-

01

20

01-

02

20

02-

03

20

03-

04

20

04-

05

20

05-

06

2006

-07

20

07-

08

20

08-

09

20

09-

10

20

10-

11

20

11-

12

20

12-

13

20

13-

14

20

14-

15

20

15-

16

Rs

pe

r M

T

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

10 15 20 25 30 35

199

0-91

199

1-92

199

2-93

199

3-94

199

4-95

199

5-96

1996

-97

1997

-98

199

8-99

199

9-2

000

200

0-01

200

1-02

200

2-03

200

3-04

200

4-05

200

5-06

2006

-07

200

7-08

200

8-09

200

9-10

201

0-11

201

1-12

201

2-13

201

3-14

201

4-1

5

2015

-16

E

Co

nsu

mp

tio

n in

Mill

To

nn

e

DAP Consumption Urea Consumption

Source : FAI/FMS

Page 27: IFFCO, Rakesh Kapur

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.

Page 28: IFFCO, Rakesh Kapur
Page 29: IFFCO, Rakesh Kapur

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

Page 30: IFFCO, Rakesh Kapur

• 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

Page 31: IFFCO, Rakesh Kapur

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

Page 32: IFFCO, Rakesh Kapur

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.

Page 33: IFFCO, Rakesh Kapur

Organization logo to appear here