Firm demand and project delays keep fertilizer markets tight
The International Fertilizer Industry Association (IFA) released to the public its Medium-Term Fertilizer Outlook 2012-2016. This report shows that demand for fertilizer is steadily increasing in response to supportive agricultural market fundamentals, while expansion of supply is still delayed because of schedule slippages for about half of projects.
On the demand side, tight market conditions for maize and oilseeds provide strong incentives for farmers to increase productivity and optimize their return. In this connection, world fertilizer demand is seen as up by 2.8% in 2011/12, and by another 2.5% in 2012/13, to reach 181 million tonnes (Mt) of nutrients (nitrogen, phosphate and potassium). When compared to 2007/08 – the last campaign before the economic downturn – world fertilizer demand is anticipated to have fully recovered by 2012/13, including for potash. During this five-year period, South Asia alone is forecast to account for approximately 60% of the net increase in global demand.
“In the next five years, reduced inventories and strong crop prices are expected to persist in the agricultural commodity markets because of the need to supply the fast-rising food, feed, fibre and bioenergy markets. This is anticipated to stimulate fertilizer demand, but high crop price volatility could result in significant year-on-year variations,” says Patrick Heffer, Director of the IFA’s Agriculture Service. World demand is projected to reach 193 Mt by 2016/17, corresponding to a compound annual growth rate of 2.1% over the average of the 2009/10 to 2011/12 campaigns. Average annual growth is seen as stronger for potash (+3.7% per year) than for phosphates (+2.3%) and nitrogen (+1.5%) because the nitrogen and phosphate markets have recovered faster than the potash market, and because there is an urgent need to rebalance fertilization to the benefit of potash in several developing countries.
Contrary to historical trends, Asia’s weight in regard to global growth is progressively declining, while Latin America is seen as reinforcing its position as an engine of future expansion. Demand is anticipated to rise firmly in Eastern Europe and Central Asia, as well as in Africa. In volume terms, East Asia, South Asia and Latin America together would account for three-quarters of the increase in world demand during the next five years. The outlook for world fertilizer demand remains subject to major uncertainties, especially the evolution of the world economy.