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Back to the Future: The Outlook Post-Boom

Back to the Future: The Outlook Post-Boom. Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd. FAI Meeting February, 2009. Top-5 Urea Producers, 2007. Source: IFA/FCC. Top-5 Urea Exporters, 2007. Source: FCC/IFA

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Back to the Future: The Outlook Post-Boom

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  1. Back to the Future: The Outlook Post-Boom Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FAI Meeting February, 2009

  2. Top-5 Urea Producers, 2007 Source: IFA/FCC

  3. Top-5 Urea Exporters, 2007 Source: FCC/IFA Note: China includes adjustment for cross-border sales to Vietnam

  4. Top-5 MAP/DAP Producers, 2007 Source: IFA

  5. Top-5 MAP/DAP Exporters, 2007 Source: IFA

  6. What Now (1)? • The normal post-boom symptoms: • Stocks of high-cost material • Inability to purchase until stocks are sold • Nervousness amongst those purchasers in a position to purchase new product • Hand-to-mouth trading and purchasing • Doubts as to the viability/reliability of importers/merchants

  7. What Now(2)? • Post-boom peculiarities in 2009: • The gumming up of the financial and credit systems: LCs, collateral, trust. • No build-up of grain and food stocks • Bio-fuels are built into the system • A rapid response in production cut-backs • All quiet on the project front – capital costs have risen by 50-100% during the last cycle.

  8. What Next? • Is looking back a guide to the future? • All nutrients were in chronic oversupply. Now they are not. • A new cost structure has been established. • There are differences between the nitrogen and extractive industries based on the distribution of resources

  9. Nitrogen

  10. …and the end of a Super-Cycle (since 1973). Source: FMB/FCC/IMF

  11. Ukraine: New Feedstock Situation (from January 2009) Note: Effective oil input price (given lag mechanism) 2009 Average= c. US$75 per bbl

  12. Urea Project Outlook

  13. China: Incremental Urea Capacity • +16.8 million t/a new urea capacity due 2008-11 • But will feedstock be available/suitably priced? • Natural gas remains subsidised at US$2.5-3.5 per MMbtu • Reports of closures of coal-based nitrogen units (total existing capacity c.12-15 million tonnes N)

  14. Phosphates

  15. DAP US Gulf fob Bulk Source: FMB

  16. Phosphate Rock Reserves (billion tonnes) Source: US Geological Survey

  17. Potash

  18. Average Standard MOP fob Vancouver Source: FMB

  19. KCL Production and Exports, 2007 Source: IFA

  20. Whither Potash? • The only obvious locations for new mines are Canada, Russia and, perhaps, Belarus. • Grassroots projects cost up to US$ 2.5 billion for 2 million t/a. Uralkali was looking at a breakeven of US$ 500/t KCl at a new mine. • Savings of about 30% can be made using an existing location – PotashCorp and Mosaic. • Supply management has a 30 year history. The need for cash-flow is the one weakness.

  21. Thank you for your attention Bernard Brentnall, Director Fertilizer & Chemical Consultancy Ltd FMB House, 6 Windmill Road, Hampton Hill, Middlesex TW12 1RH, UK Tel: +44 20 8979 7866; Fax:+44 20 8979 4573 Email: bernard.brentnall@fertchem.co.uk www.fertchem.co.uk

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