Nitrogen fertilizer industry in transformation - "Two decades in review and journey ahead" - Nexant ...
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Nitrogen fertilizer industry in transformation “Two decades in review and journey ahead” Dr Dimitrios Dimitriou Senior Business Advisor Middle East Energy & Chemicals Advisory
Megatrends and Fertilizers
There are five major socio-economic driving forces
Rapid urbanisation
Climate change and resource scarcity
Shift in global economic power
Demographic and social change
Technological breakthroughs
3
Combined population and GDP growth fertilizer
consumption growing ~10 times since 1960’s
FERTILIZERS
6
Implications for the fertilizer industry
Fertilizer industry:
1. Urbanization results in less land available for agriculture.
2. Production of energy using hydrocarbons directly competes with producing
hydrogen/nitrogen based fertilizers. A change in energy policy might free-up reserves
for fertilizer production?
3. A growing population driven by birth rates and aging dramatically increases overall
demand for food.
4. Demand for (higher quality) food increases dramatically with population rich countries
(China and India) becoming more wealthy (increase in GDP per capita).
5. Digital technology solutions are appearing to help farmers increase efficiencies which
may push down demand (e.g. digital soil mapping, precise agriculture, accurate
weather forecast etc.)
6. Environmental implications of fertilizers production and use drive regulation and
fertilizer production (eg. green ammonia) and crop technology (eg. nitrogen fixation)
7
The journey
Industrial nitrogen production has increased 85 times since WWII
Timeline of ammonia industry development
19th century 1910-1913 1913-1934 1946-2018
From 1 plant in 1913 to >1000 ammonia and urea plants in 2018
First ammonia synthesis commercial plant
1910 1913 1934 1946 2010 2018
0.35 million tons 99% Haber Bosch
9
Some key trends over past decades – Global
Supply, Demand and trade Urea
300000 100%
200000
Operating Rate
Thousand tons
50%
100000
0 0%
2000 2005 2010 2015 2020
Production Consumption Capacity Operating Rate
Historic Prices vs Oil World Trade Urea
25000
600 120.0 20000
500 100.0 15000
Thousand tons 10000
400 80.0
$ per barrel
5000
$ per ton
300 60.0 0
200 40.0 -5000
-10000
100 20.0
-15000
0 0.0
-20000
2013
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2014
2015
2016
2017
2018
2000 2005 2010 2015 2020
North America South America Western Europe
Ammonia Arab Gulf Urea Arab Gulf Brent Oil C&E.Europe Middle East Africa
India China Other Asia Pacific
11
Some outcomes of overuse
12
Some key trends in China
Supply, Demand and Trade Urea, China
100000 120%
90000 110%
100%
80000
90%
70000
80%
Thousand tons
Operating rate
60000 70%
50000 60%
40000 50%
40%
30000
30%
20000
20%
10000 10%
0 0%
2000 2005 2010 2015 2020
Production Consumption Capacity Operating Rate
Supply, Demand and Trade Urea, India
45000 120%
40000 110%
100%
35000 90%
Thousand tons 30000 80%
Operating rate
25000 70%
60%
20000 50%
15000 40%
10000 30%
20%
5000 10%
0 0%
2000 2005 2010 2015 2020
Production Consumption Capacity Operating Rate
13Some key trends in North America
Basins
Gas Supply, Demand and Trade Urea
Oil
BAKKEN 25000 120%
20000 100%
80%
Operating Rate
Thousand tons
15000
60%
10000
40%
MARCELLUS 5000 20%
BARNETT 0 0%
2000 2005 2010 2015 2020
Production Consumption Capacity OpRate
EAGLE FORD
PacWest Consulting Partners
Cash Cost Margins Development
Natural Gas prices vs Oil
15Some key trends in the Middle East
Supply, Demand and Trade Urea
35000 100%
90%
30000
80%
25000 70%
Thousand tons
Operating rate
20000 60%
50%
15000 40%
10000 30%
20%
5000
10%
0 0%
2000 2005 2010 2015
Production Consumption Capacity Operating Rate
Urea Trade from Middle East
25000
Cash Cost Margins Development
20000
15000
10000
Thousand tons 5000
0
-5000
-10000
-15000
-20000
2000 2005 2010 2015 2020
Middle East urea exports
16Some key trends over past decades –New applications
Biodiesel Demand by region DEF Demand by region
3000
8000
7000
6000
2000
Thousand tons
Thousand tons
5000
4000
3000 1000
2000
1000
0
0
2000 2005 2010 2015
2000 2005 2010 2015 North America South America Western Europe
North America South America Western Europe C&E.Europe Middle East Africa
C&E.Europe Middle East Africa India China Other Asia Pacific
17Some key trends over past decades –New products
North America
18% South America
0.3%
Western Europe
4%
Eastern Europe
0.2%
Middle East
1%
Africa
Asia Pacific 0.1%
(including China)
77%
4 million tons in 2017
(growing at >5% CAGR)
18Nexant views - past
Fertilizer overuse and environmental impact!
Shale gas development and significant decoupling of natural gas prices in the US
from crude oil
Competitiveness position of US producers improved significantly
Producers in KSA enjoy a strong advantage on a cash cost basis due to low gas
cost, but limited gas resource for new projects and threat from other exporters rising
China become a large net exporter of urea threating global market – net exports
recently declined; supply and demand side reforms.
India and SEA main importing markets
Africa in focus: under application, large resources and population growth
From a buoyant market in until mid 2010’s to an oversupplied market today
20The road ahead?
Some key trends to follow?
22Nexant views - future
Consistent long term growth due to rising population but at lower rates due to
fertilizer over-application, regulation and nutrient stewardship in major consuming
markets
New products/new markets and new strategies for players in effort to create and
capture value
Digitalisation impacting demand and supply?
India emerging as a key producer?
China further capacity rationalisation, growing environmental drive and lower
exports;
Middle East continued position as low cost, volume exporter but competitive threat
rising; need for new business strategies!
Protectionism impacting market - Government changes can lead to trade tensions
Policy developments are a major driver of future fertilizer supply and demand
China, fertilizer consumption growth has been capped and supply decreasing
India, the government is considering options to improve the effectiveness of its
fertilizer subsidy scheme and become self sufficient
Africa emerging a major consuming and producing centre?
23Nexant, Inc.
San Francisco
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