A report issued last week by the Rome-based Food and Agriculture Organization indicates production of N, P and K fertilizers in the next four years will lead to an overall surplus of fertilizer.
Total global fertilizer demand is expected to increase about 1.7 percent per year until 2012. Nitrogen demand will grow by 1.4 percent, phosphates by 2 percent and potassium by 2.4 percent. At the same time, production is expected to grow at an annual rate of 3 percent.
Nitrogen production, the report stated, will rise by 23.1 million mt by 2012, exceeding demand by 10 percent. Phosphate production is expected to show a 3.2 percent annual growth, moving a surplus of 400,000 mt this year to 2.9 million mt in four years. Potash will also show an increase in its surplus, growing at an annual rate of 2.4 percent.
The global numbers, however, do not show the changes that are taking place in the consumption and production trends in different sectors of the world. North America and Europe are expected to see increases in consumption less than 1 percent across the board. The two areas represent 26.5 percent of global fertilizer consumption.
The real growth will take place in Asia, which already represents 58.6 percent of global fertilizer consumption. Demand in Asia is expected to increase by 2.1 percent per year for all fertilizers. Annual nitrogen consumption is estimated to increase by 1.6 percent, phosphates by 2.4 percent and potash by 3.5 percent. The report adds that Asia will move from a small deficit of nitrogen to a considerable surplus in four years, thanks to increased production.
Within the Asia group, East Asia, which includes China, represents 37 percent of global consumption. Increased production of grains, fruits and vegetables in the area is the driving force for increased demand. The FAO estimates that demand in this sub region, which also includes Vietnam, Thailand, Malaysia, and the Philippines, will increase by 1.7 percent annually.
Potash leads the growth rate with 3.3 percent per year. Annual phosphate and nitrogen consumption will grow by 1.9 percent and 1.3 percent, respectively. The FAO report said the dramatic increase in potash demand in Asia indicates a growing concern for balanced applications.
India, Pakistan, and Bangladesh will see more dramatic increases. Total estimated fertilizer consumption in these three countries is expected to grow by 2.8 percent per year. Nitrogen consumption is estimated to grow at an annual rate of 2.2 percent, phosphates at 3.5 percent and potash at 4.2 percent.
Besides looking at consumption and production trends, the FAO also looked at other factors affecting the fertilizer market. In the section on freight rates and vessel availability, the report said freight rates have risen 154 percent between November 2006 and November 2007. High rates are expected to continue well into 2009. New vessels are expected to come online late next year and should provide some relief to shippers.
Changes in trading patterns, higher oil costs and a growing interest in developing bio-fuels also contributed to higher fertilizer demand and prices.
The report, which is available from the FAO website at ftp://ftp.fao.org/agl/agll/docs/cwfto11.pdf, noted that the pricing pattern in the past year has defied normal models. Prices continued to rise even as production also increased. The report said volatility in the grain markets and general market uncertainty provided a basis for the steady rise in prices.