North America Giant Fertilizer Merger

Fertilizer prices have been falling in the recent years causing an erosion in the fundamentals of the industry, to which is has responded consolidating.

PotashCorp (POT) and Agrium (AGU) announced a merger of equals expected to be completed by the middle of 2017 that would create the world’s largest crop-nutrient supplier with a market value of about $26 billion. For an understanding of the significance of this new enterprise compare with the market capitalization of Mosaic (MOS) of $8.9 billion or CF Industries (CF) of $5.6 billion.

 

pcs

PotashCorp Allan Potash Operations

 

This is a deal of giants. PotashCorp is the largest world fertilizer company by nutrient capacity (14.2 million tonnes p.a.) and they are a low-cost potash producer (in the recent quarter they outflanked competition with the lowest cost per ton at $127 of potash produced). Agrium is a leading global producer and marketer of agricultural nutrients with a 4% of the global production capacity of potash, a 2% of ammonia, a 1% of urea, and 1% of phosphate. Agrium’s retail unit buys 10 million tons of fertilizer annually. The combined company would control the majority of North America’s potash production and more than 30 percent of North American nitrogen and phosphate production.

 

agrium

Agrium Vanscoy Potash Operations

 

The new company will be a leader in the fertilizer industry with close to 20,000 employees and operations and investments in 18 countries. PotashCorp shareholders will own 52% of new company.

The merger will result in low regional market overlap as the majority of PotashCorp fertilizer assets are in the eastern half of the U.S., Agrium’s nitrogen and phosphate assets are concentrated in western North America.  It is expected to generate up to US$500 million of annual operating synergies mainly from distribution and retail integration, production and SG&A optimization, and procurement.

The merger of the world’s largest fertilizer producer with the world’s largest ag-retailer is drawing the attention of the regulators and farmer groups.

Fertilizer Consumption Snapshot

00

 

01

 

02

 

03

 

04

 

05

 

Main Fertilizer Companies

Top10 Companies Capacity

Top10 Companies Sales

Fertilizer Prices

FPrices

India: Greenstar Fertilizers will double its phosphoric acid capacity

Tuticorin-based Greenstar Fertilizers (GSFL) acquired its phosphoric acid capacity from SPIC and now they plan to double their 75,000 tonnes per annum nameplate capacity. The revamping program is expected to take 12 to 18 months to be completed. They also plan to create in the next three years an additional 15,000 tonnes ammonia storage facility and a 600,000 tonnes DAP production facility.

India’s current phosphoric acid capacity is slightly over two million tonnes P2O5 and it’s DAP capacity is over 3.5 million tonnes P2O5.

Mineral Production Used by the Fertilizer Industry

minerals1

minerals2

minerals3

minerals4

Potash Fertilizers Snapshot

Potassium is an essential plant nutrient and an essential nutritional requirement for both humans and animals, for which there is no effective substitute. Potassium is used to make fertilizer, biofuels, gunpowder, and various industrial chemicals. About ninety percent of potash is used for fertilizer manufacture. Potassium Chloride (KCl) is the most common source of potassium. The mineral plays a vital role in crop growth and helps plants resist cold and drought. Due to its high chlorine content, MOP is widely used in chlorine resistant crops such as wheat, rice, soya, maize, and pastures.

Potassium intake is also important in animal nutrition and milk production.

Potassium sulphate and potassium nitrate are the main non-chloride K fertilizers.

 

K_reserves

Potash reserves are concentrated in just a few areas: major producing regions include the FSU, North America, Germany, and the Dead Sea area.

 

K_consumption

k_production 2014

Compared with other fertilizer nutrients, the potash industry is much consolidated, with Canada, Russia, Belarus and Germany accounting for more than 3/4 of world production. There are about twelve large potash manufacturers, most of them non-governmental owned.

k-cap_manufacturers

K_trade

         Source: Agrium Fact Book 2014-2015

 

Potash changes are driven mainly by the demand of the global fertilizer industry, in particular the Indian and the Chinese one, but also by the growth of the agrofuel production. The key crops influencing the potash price are first of all corn, and then soybeans and rice.

 

Potash Production Process

K_production_process

k_PRICES

Urea Fertilizers Snapshot

Urea, N-P-K composition 46-0-0, is the most commonly produced and widely traded nitrogen product. It is estimated that 90 percent is used as fertilizer and the rest for industrial purposes. Synthesized from ammonia and carbon dioxide (CO2), urea is the only primary nitrogen product chemically classified as organic (because of its carbon content). Nitrogen is the most crucial and major nutrient element in plant growth. It is abundant in nature and enhances better yields.  Because urea is produced from ammonia and carbon dioxide, which is a by-product of ammonia production, all urea plants are located adjacent to or in proximity to an ammonia plant.

urea1

urea2

China and India account for more than a half of urea output (as well as capacity), however, these two countries are the largest urea consumers, over half of it. In 2013, 44 percent of the urea fertilizer was consumed in East Asia, followed by South Asia, which took nearly a quarter of the product.

urea3

urea4

urea5

urea6

Urea, (Black Sea), bulk, spot,  f.o.b. Black Sea (primarily Yuzhnyy) beginning July 1991; for 1985-91 (June) f.o.b. Eastern Europe

Wheat (US), no. 1, hard red winter, ordinary protein, export price delivered at the US Gulf port for prompt or 30 days shipment

Kenya: New NPK factory

A new fertilizer factory was commissioned in the Eldoret town, Rift Valley Province in Kenya. The $1 billion factory will have an annual nameplate capacity of 150,000 metric tonnes of NPK and is expected to manufacture its first bag of fertilizer mid 2016. It is being set up by the Toyota Tsusho East Africa. World NPK capacity is estimated in some 100,000-120,000 tonnes product, and the main African producer is Egypt.

Ammonium Phosphates Snapshot

Ammonium phosphates are derived from a reaction of ammonia and phosphoric acid and they are nearly totally used as fertilizers. Less than 3% of the world consumption is used in industrial applications and animal feed. DAP, diammonium phosphate, is the main solid phosphate fertilizer. Its excellent handling properties and N-P-K composition 18-46-0 make it well suited to both large- and small-scale agriculture. The production of one tonne of DAP requires 0.23 tonnes of ammonia and 1,175 tonnes of phosphoric acid 40% P2O5 (0.470 tonnes P2O5). Actually this means that the production of one tonne of DAP requires almost one tonne of the fourth element, sulphur. The DAP trade is the dominant element in the phosphate scene, heavily influencing production and prices, some 35-40% of the global output of phosacid is used in DAP manufacture. More than 40% of the global production of DAP is traded across borders, much more than ammonia, but significantly less than potash. DAP is widely used in bulk blending. The production of 1 tonne MAP, monoammonium phosphate, typically 11-53-0, requires 0.15 tonnes of ammonia and 1.35 tonnes of phosphoric acid 40% P2O5.  MAP is produced in both granular and non-granular form, the latter being used in the production of granular NPK and suspension fertilizers.

ap01    ap02

ap03

ap04

ap05

ap06

ap07

ap08

« Older entries