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Energy and commodity price benchmarking and market insights
North American fertilizer:
Nitrogen context and trends For Pemex Petroquimica
Lauren Williamson 5 June 2013
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Fertilizers
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About Argus
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• Strategy report examines merchant ammonia market
amid structural changes
• 100 pages for long-term decision making
• Country-by-county projections
• Shale gas revolution impact analyzed
• Phosphate fertilizer trends and impact
Argus FMB World Ammonia Outlook to 2027
Copyright © 2013 Argus Media Ltd. All rights reserved.
Contact [email protected] for table of contents or to order a copy
Argus Fertilizer
• International presence, global coverage
• 8 reports, 170+ price assessments • Robust methodology • Extensively used in indexation of
physical and financial markets • FMB founded in 1982; Argus
acquired FMB in 2011
illuminating the markets
Agenda
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Global perspectives on ammonia
• US & Canada, in context
• Fertilizer past, present, future
• Price trends
• Product preference trends
Global perspective
illuminating the markets
Global ammonia trade
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Traded ammonia =19-20 million t/yr
• Long term increases
• Almost 90% of nitrogen produced converted in situ
• Trend growth of last 15 yrs due to demand growth for technical
uses and phosphate production
• Most phosphate producers rely on imports • Saudi Arabia’s Ma’aden an exception
0
5
10
15
20
25
1995 2000 2005 2010
million t
onnes
illuminating the markets
Merchant (traded) ammonia market
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Global food security concerns will continue to spur fertilizer demand ◦ Cellulosic and next-generation biofuels to exacerbate
• Government, private industry will invest to meet fertilizer demand
• Long-term growth in merchant ammonia market will be limited, but a significant shift in trade patterns expected
Direct Application
11%
AN/CAN 12%
DAP/NP/ NPKs 49%
Technical 28%
illuminating the markets
Demand drivers –trade
Copyright © 2013 Argus Media Ltd. All rights reserved.
Country Comment
Morocco OCP Jorf Phosphate Hub Programme (DAP/MAP)
US
Decline in direct application NH3 Less nh3 required for production of new phosphate types
Brazil, China Increasing domestic capacity to reduce imports
Japan Replacement of high cost capacity with imports (post Fukushima)
Latin America, India, Australia, Africa
New LDAN capacity
Australia, Madagascar, PNG
Metals Leaching, pollutants removal ‘Scrubbing’
East Asia Plastics/Textiles: MDI/TDI for rigid/semi polyurethane foams; acrylonitrile (Asia); Caprolactam (global trend decline, except China)
illuminating the markets
Supply drivers - trade
Copyright © 2013 Argus Media Ltd. All rights reserved.
Country Comment
Australia Exports diverted to domestic LDAN
US New import substituting capacity (Mosaic & Dyno), but up to 5.3mn t imports tied and capacity limited by environmental planning and permitting
Trinidad Resumption of production, deliveries
Indonesia
KPA/KPI tonnage to be used in NPKs/urea once gas contracts expire 2018/2020
Ukraine, Russia Swing production, more upgrading expected but capacity/trade increases longer term
Middle East, North Africa, Latin America
Continued investments set against political difficulties in certain key producing regions
illuminating the markets
Anhydrous direct applications
Copyright © 2013 Argus Media Ltd. All rights reserved.
• Majority of direct apps are in North America ◦ Some in Australia, Mexico, Denmark
• Direct applications in long-term trend decline
• Move towards other N products
• Increased environmental regulation of nitrogen fertilizer applications in West
Europe, North America
Source: IFA
0
500
1000
1500
2000
2500
3000
3500
4000
4500
199019911992199319941995199619971998199920002001200220032004200520062007200820092010
‘00
0 t
N
Canada
US
illuminating the markets
• Anhydrous ammonia – 82% N ◦ Transport, logistics more
expensive
◦ High N but less flexible
• Urea – 46% N ◦ Dry, bulk
◦ Greater risk for volatilization
• UAN- 28-32% N ◦ Fertigation, precision
◦ Flexible w/other products
The N options
Copyright © 2013 Argus Media Ltd. All rights reserved.
• AN – 34% N ◦ More stable, doesn’t lose
N to atmosphere as easily as urea
◦ Volatile, explosive under certain conditions
◦ Market share is eroding
• Other custom solution or suspension blends or dry bulk mixes available ◦ Solutions applications
increasing, displacing ammonia
Canada & the US, in context
illuminating the markets
US vs Canada
Copyright © 2013 Argus Media Ltd. All rights reserved.
Primary demand regions
US Canada
Wheat exports
25.5 mn t 18.5
Coarse grain exports
33 mn t corn
1.5 barley
GDP $15.08tn $1.4tn
Land area (excl water)
9.2 mn sq km
9.1 mn sq km
% Arable 18 6
Source: USDA, CIA World Fact Book
illuminating the markets
Country, cash crop profiles
Copyright © 2013 Argus Media Ltd. All rights reserved.
Country Crop Area (‘000 ha) Rate (kg nutrient/ha) N-P-K
Consumption (‘000 tons) N-P-K
Canada corn 1,111 156-52-95 173-58-106
canola 4,894 75-20-15 367-98-73
wheat 11,162 50-26-6 558-290-67
US corn 31,205 150-70-90 4,681-2,184-2,808
soy 28,506 30-60-95 599-1,197-1,896
wheat 31,978 70-30-10 2,015-863-288
Source: FAO
illuminating the markets
Crop fertilizer rates
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
50
100
150
200
250
300
350
Canada corn US corn Canada wheat US wheat Canada canola US soy
Kg
nu
trie
nt/
ha
K
P
N
Source: FAO
N 59%
P 20%
K 21%
US consumption
illuminating the markets
Crop economics
Copyright © 2013 Argus Media Ltd. All rights reserved.
Corn after soy
Corn after corn
Soy after corn
Wheat
Bushel/acre yield
190 180 56 75
Price $/bushel
6.00 6.00 12.50 8.50
Gross revenue
1,140 1,080 700 638
Total non-land costs
563 578 308 318
Return 577 502 392 320
Source: University of Illinois Corn most favorable,
barring significant price change or weather pattern
illuminating the markets
Corn production
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
200
400
600
800
1000
1200
2011/2012 2012/2013 2013/2014
Mill
ion
to
nn
es
World
US
359.17 mn t projected for US
US 37%
Mexico 2%
Canada 2%
Rest of World 59%
World corn production
illuminating the markets
US total consumption 1960-now
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
5,000
10,000
15,000
20,000
25,000
1960 1970 1980 1990 2000 2010
K20
P205
N
Source: USDA
Post-1980 decreasing P,K consumption
Fertilizers past, present, future
illuminating the markets
Historical points
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1921 •First commercial US NH3 plant
1930s •Ammoniated solutions marketed
•10 NH3 plants on stream
•Urea sold to US market
1944 •NH3 directly applied to fields
1950s •Retail blending booms 1950s-1970s
•Nearly 60 NH3 plants on stream by 1960
1970s •Energy shortage and costs become growing concern
1980 •5500 blending units across US
•Several thousand fluid fertilizer retail plants
1990s-2000s
•High gas costs squeeze margins, price numerous plants out of the market
Source: Argus, market survey, TFI
illuminating the markets
US NH3 production, consumption 2002-2011
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
'00
0 t
nu
trie
nt
N
Production
Apparent Consumption
Source: IFA
Nearly 3mn t decrease in production 2002-2005
illuminating the markets
US urea production, consumption 2002-2011
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
1 000
2 000
3 000
4 000
5 000
6 000
'00
0 t
nu
trie
nt
N
Production
Apparentconsumption
Consumption
Production
illuminating the markets
US N production capacity shifts 2005-2012
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008 2009 2010 2011 2012
in '0
00
pro
du
ct
sho
rt t
on
s
Ammonia
Urea,solid
UAN 28
Source: TFI
illuminating the markets
US production mostly near end-users, river transport, pipelines
NH3 imports from Canada, Ukraine, Trinidad
◦ Large volume to Tampa, Florida for phosphate production
Urea from Middle East, Egypt, Indonesia
UAN from Black Sea/Baltic, Egypt, Trinidad
N production, trade flows 2012
Copyright © 2013 Argus Media Ltd. All rights reserved.
imports
imports
production site imports
Anhydrous or aqua
20%
Fertilizer feedstock
51%
Industrial 29%
Ammonia end-use
illuminating the markets
N fertilizer benchmarks vs nat gas
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2
4
6
8
10
12
14
16
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
Jan
19
97
Jul 1
99
7
Jan
19
98
Jul 1
99
8
Jan
19
99
Jul 1
99
9
Jan
20
00
Jul 2
00
0
Jan
20
01
Jul 2
00
1
Jan
20
02
Jul 2
00
2
Jan
20
03
Jul 2
00
3
Jan
20
04
Jul 2
00
4
Jan
20
05
Jul 2
00
5
Jan
20
06
Jul 2
00
6
Jan
20
07
Jul 2
00
7
Jan
20
08
Jul 2
00
8
Jan
20
09
Jul 2
00
9
Jan
20
10
Jul 2
01
0
Jan
20
11
Jul 2
01
1
Jan
20
12
Jul 2
01
2
Jan
20
13
$/m
mB
tu
$/s
ho
rt t
on
Urea barge
Tampa ammonia
Henry Hub gas
Squeezed margins
Source: Argus, EIA
Meanwhile… shale gas revolution
prompts decoupling
illuminating the markets
Debottleneck Brownfield & Revamp
Greenfield Other
Announcements 7 6 10 5 (Coal, coke, biomass)
Some key players Koch, Agrium, PCS, LSB, Rentech
CF, IPL, Koch, Mosaic, Agrium (Borger, Redwater)
OCI, CHS, OVR, NPN, etc
Miss Power, Summit, CVR, Bionitrogen, Dakota Gas
Probability High Med high V. low-med (depending on project)
Low-med (depending on project)
Considerations None Increasing market competition
High capex, longterm gas/crop prices
Tax, financing, process viability
Intended US & Canada N projects
Copyright © 2013 Argus Media Ltd. All rights reserved.
illuminating the markets
• 13 mn t/yr dry, bulk ferts transported by barge ◦ Only 33 NH3 barges in operation; UAN needs liquid barges, competes against oil
• 2.5-3 mn t/yr NH3 transported by pipeline ◦ Nustar, Magellan transport majority vs. other lines in US Gulf, Florida
Transport
Copyright © 2013 Argus Media Ltd. All rights reserved.
Other transport
62%
Barge 38%
Dry bulk transport
illuminating the markets
US ammonia capacity projections
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2
4
6
8
10
12
14
16
2012 2017
mn
to
nn
es
US
• Domestic capacity increases and tied tonnage to impact import dependence
• Domestic projects likely to face delays ◦ Permitting, environmental
concerns slow the process
◦ Difficulties for non traditional entities
• US NH3 import demand to reduce 50% by 2027
Source: IFA
illuminating the markets
Increasing capacity trends
Copyright © 2013 Argus Media Ltd. All rights reserved.
◦ Most new NH3 capacity intended for upgrading
◦ Industrial consumption increasing on increased production of
downstream products
◦ Liquidity increasing?
‐ More production in the US Gulf, esp around New Orleans
‐ Transport/logistics challenges
• New barge costs $13-15mn
• Nustar, Magellan used near capacity
◦ Tampa benchmark viability in question
‐ Mosaic reducing NH3 consumption on increased added-value
phosphate production (MicroEssentials)
‐ Considering NH3 plant at Faustina
• Reduce import reliance down to around 200-300,000t/yr
Price trends
illuminating the markets
Farmer prices 1960-2012
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
100
200
300
400
500
600
700
800
900
$/s
ho
rrt
ton
to
far
me
r
Ammonia
UAN 30
Urea
Source: USDA
corn $1.40/
bu
corn $3.10/
bu
corn $2.62/
bu
corn $2.10/
bu
corn $4.00/
bu
illuminating the markets
• N prices strong positive correlation to corn
• UAN to corn R 0.69; NH3 to corn R 0.73; urea to corn R 0.56
• Urea had held stronger correlation until latest downward correction in global prices against still elevated corn prices
Fertilizer to corn 2008-2013
Copyright © 2013 Argus Media Ltd. All rights reserved.
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
Jun
20
08
Au
g 2
00
8
Oct
20
08
De
c 2
00
8
Feb
20
09
Ap
r 2
00
9
Jun
20
09
Au
g 2
00
9
Oct
20
09
De
c 2
00
9
Feb
20
10
Ap
r 2
01
0
Jun
20
10
Au
g 2
01
0
Oct
20
10
De
c 2
01
0
Feb
20
11
Ap
r 2
01
1
Jun
20
11
Au
g 2
01
1
Oct
20
11
De
c 2
01
1
Feb
20
12
Ap
r 2
01
2
Jun
20
12
Au
g 2
01
2
Oct
20
12
De
c 2
01
2
Feb
20
13
Ap
r 2
01
3
cen
ts/b
ush
el
$/s
ho
rt t
on
UAN barge
Tampa cfr (st)
Urea barge
Cbot corn
Relationship to change in future??
illuminating the markets
• Nitrogen complex tightly correlated
• On average, UAN at slight premium to urea, ammonia at greatest discount
• UAN more closely follows urea (R 0.89) from 2008-2013; however Jan-May 2013 a departure from the trend (R 0.24)
Cost per unit N
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2
4
6
8
10
12
14
16
18
Jun
20
08
Au
g 2
00
8
Oct
20
08
De
c 2
00
8
Feb
20
09
Ap
r 2
00
9
Jun
20
09
Au
g 2
00
9
Oct
20
09
De
c 2
00
9
Feb
20
10
Ap
r 2
01
0
Jun
20
10
Au
g 2
01
0
Oct
20
10
De
c 2
01
0
Feb
20
11
Ap
r 2
01
1
Jun
20
11
Au
g 2
01
1
Oct
20
11
De
c 2
01
1
Feb
20
12
Ap
r 2
01
2
Jun
20
12
Au
g 2
01
2
Oct
20
12
De
c 2
01
2
Feb
20
13
Ap
r 2
01
3
$/u
nit
of
nit
roge
n
UAN
Ammonia
Urea
illuminating the markets
Domestic ammonia prices
Copyright © 2013 Argus Media Ltd. All rights reserved.
200.0
250.0
300.0
350.0
400.0
450.0
500.0
550.0
600.0
650.0
700.0
$/s
ho
rt t
on
Domesticproducerprofitmargin(est)
Tampa cfr
• Producer margins been
above $400/st this year
• Added US NH3 capacity
to weaken domestic
price relationship to
Tampa?
• Increased capacity
abroad to put pressure
on Tampa prices
(beyond fob origin +
freight)
illuminating the markets
• Location of new
plants will impact
regional variations
• E and W Corn Belt
premiums to
decrease
• Security of supply
may decrease N
price volatility and
seasonal swings
Other trends…
Copyright © 2013 Argus Media Ltd. All rights reserved.
400.0
450.0
500.0
550.0
600.0
650.0
700.0
750.0
800.0
850.0
900.0
July2012
Jan2013
May
$/s
ho
rt t
on
Tampa cfr
Oklahoma ex-works
E Corn Belt
W Corn Belt
Product preference trends
illuminating the markets
US N direct application trends
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
2000
4000
6000
8000
10000
12000
14000
1970 1980 1990 2000 2010
'00
0 s
ho
rt t
on
s p
rod
uct
NH3
Urea
AN
UAN
Source: APPFCO, Interchem
illuminating the markets
• Urea used widely
• NH3 concentrated in
Midwest
◦ Proximity to supply,
pipelines
• UAN widely used but
28% used further
north
• AN preferred in South,
Southeast
Corn acre concentration
Copyright © 2013 Argus Media Ltd. All rights reserved.
illuminating the markets
• NO3 (nitrate) ◦ Preferred, ideal for uptake, instant supply
◦ Risk of leaching esp. in high temps and water
• NH3 (ammonia) converts to NH4 (ammonium) in soil ◦ Ammonification
◦ Soil needs moisture to attach to organic matter
• NH4 absorbed at low rates ◦ Takes time to convert to NO3 (nitrification) at warmer temps
• Urea NH4 by urease enzymes ◦ Risks some volatizing to NH3 and escapes to atmosphere
(denitficiation)
◦ Urease inhibitors and sulfur or polymer coatings to slow
Getting the right N
Copyright © 2013 Argus Media Ltd. All rights reserved.
NH3 NH4 NO3
illuminating the markets
Nitrate availability over time
Copyright © 2013 Argus Media Ltd. All rights reserved.
0
10
20
30
40
50
60
70
80
90
100
0 Weeks 3 Weeks 6 Weeks
Anhydrous
Anhydrous + inhibitor
Urea
Urea+inhibitor
UAN
AN
UAN
Source: University of Kentucky
illuminating the markets
• Safety ◦ NH3 tank inspections
◦ Risk of theft
◦ Operational safety courses mandatory by DOT and under HMR
• Transportation ◦ NH3 barges limited, old fleet
◦ Rail tariffs cost-prohibitive – risk and hazard
◦ Trucking common, causes municipal concerns on leaks/accidents
• Environment ◦ NH3 fall dates to assist w/ appropriate temperature observance
◦ Mandatory vs voluntary BMPs (state specific) and precision ag techniques
◦ Nitrogen credits reducing runoff into watersheds
• AN ◦ Dept of Homeland Security monitored
◦ Further restrictions expected after West, Texas incident… ‐ Could impact other N products such as NH3
Evolving regulatory environment
Copyright © 2013 Argus Media Ltd. All rights reserved.
illuminating the markets
• Ammonia outlook ◦ 19-20mn t/yr traded, trade patterns to change
◦ Growth trend on technical, phosphate demand increases
• North America market ◦ Corn is king; crop-fertilizer price connection strong
◦ Nat gas prices inspiring investment, increasing N capacity to pressure pricing
• Trends ◦ Regulatory environment tightening
◦ Product preference and techniques are evolving, though overall fertilizer demand is stable
Key takeaways
Copyright © 2013 Argus Media Ltd. All rights reserved.
Any questions?
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Johannesburg
illuminating the markets Copyright © 2013 Argus Media Ltd. All rights reserved.
Lauren Williamson
Editor, North American Fertilizer
Email: [email protected]
Phone: +1) 713.429.6355
Office: Houston, TX 77057
URL:
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Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence
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