Global Fertilizer Outlook - 2

JACKSONVILLE, Fla. (DTN) -- Near-term headwinds cloud a phosphate fertilizer outlook where trade and demand remain at healthy levels and most industry players expect a balanced market in the medium term.

This was the key message from Tim Mizuno, manager of market research for PotashCorp, at a phosphate outlook session during the recent Fertilizer Outlook and Technology Conference held in Jacksonville, Florida.

Macroeconomic factors negatively affected all fertilizer markets in 2015, he said. Lower crop prices, regional gross domestic product growth changes and issues with currencies have all converged this year to limit fertilizer sales and lower demand.

"Simply put, lower crop prices put pressure on fertilizer," Mizuno said.

However, it is not all doom and gloom for phosphate fertilizer this year. As was the case for potash fertilizer, phosphate fertilizers remain affordable despite lower commodity prices, he said. The forecast for phosphate fertilizer use for 2015 is around 40 million metric tons, which would be a slight increase from 2014.

FUNDAMENTAL CHANGES

Some fundamental changes have occurred in the U.S. phosphate fertilizer industry in recent years, Mizuno said.

The first shift is the U.S. importing more phosphate instead of producing the fertilizer. In 2010, the U.S. imported 6% of the phosphate market share. For 2015, this number is forecast to be closer to 11%.

The U.S. is also exporting less phosphate fertilizer. In 2005, the U.S. exported roughly 9 million metric tons, and the 2015 forecast is 5 mmt.

Why the change? Mizuno said permitting and environmental concerns in the U.S. have led to more phosphate fertilizer imports. The process to operate a phosphate facility in the U.S. has become more regulated.

CHINA NOW A MAJOR EXPORTER

In other near-term developments, China has become a major phosphate fertilizer exporter.

As late as 2005, the country was self-sufficient and did not produce any phosphate fertilizer to export. The 2015 forecast is for the country to have about 8 mmt of DAP/MAP net exports, he said.

"China has grown phosphate fertilizer capacity domestically over the last 10 years, and this has fundamentally changed the dry phosphate market," he said.

Mizuno said phosphate exports from China are expected to climb in 2016 thanks to India's and Brazil's tight inventory and good demand.

Consistent growth in phosphate imports is expected in India in 2015. Cumulative phosphoric acid and DAP imports are expected to be above the three-year average in the forecast, he said.

Meanwhile, robust import levels in 2014 led to high inventory levels in Brazil in early 2015. This pressured the dry phosphate market in Brazil. Another obstacle for Brazil's phosphate market in 2015 was issues with farmers obtaining credit, he said. Demand for phosphate in Brazil is expected to rise again in 2016.

FIVE-YEAR OUTLOOK: BALANCED

Mizuno said the five-year outlook for the phosphate fertilizer market is to remain relatively balanced between supply and demand in the medium term. Annual global demand could climb to over 40 mmt by 2020. The operating rate could decrease slightly, while operational capability could increase some, he said.

Phosphate rock is what phosphate fertilizers are made out of and is also used in products other than fertilizer. Nearly 75% of the phosphate rock reserve is located in Morocco and West Sahara, while China is the leading phosphate rock producer at 80 mmt of production. The majority of new global phosphate rock capacity is expected in Morocco, Saudi Arabia and South America. With these new developments, global phosphate rock capacity could increase to 275 mmt from 257 mmt in 2015, he said.

This capacity increase would be equivalent to approximately 9.5 mmt of phosphate fertilizer, he said.

"I think we will see steady growth in the phosphate market for some time to come," Mizuno said.

World imports of DAP/MAP, the most common phosphate fertilizers, are expected to grow with India a key market to watch. World DAP/MAP imports are expected to rise to just under 28 mmt by 2020, up from the forecast 24 mmt in 2015, he said.

World DAP/MAP exports are also expected to rise, Mizuno said. By 2020, world exports are expected to increase to around 28 mmt from the 24 mmt forecast for this year. The majority of export growth would mainly be in Morocco and Saudi Arabia.

Russ Quinn can be reached at russ.quinn@dtn.com

Follow him on Twitter @RussQuinnDTN

(ES/AG/CZ)

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