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Global Fertilizer Outlook - 2
Monday, December 5, 2016 8:45AM CST

By Russ Quinn
DTN Staff Reporter

FORT LAUDERDALE, Fla. (DTN) -- It is a bit of a mixed bag for the phosphorus fertilizer outlook. The market will remain under pressure through 2017 with plenty of supply and some new capacity coming online, but lower raw material prices have brought down production costs for producers significantly.

While prices slipped from January 2016 to present day, the fall has not been as much as some anticipated it would be, said Chris Lawson, team leader for phosphates for CRU, Inc. based in London. World phosphorus prices have fallen to levels not seen since 2009, he said in his phosphorus outlook presentation at the 2016 Fertilizer Outlook and Technology Conference held in Fort Lauderdale, Florida, in mid-November.

"Relative to other commodities, phosphorus prices have held up fairly well in 2015," Lawson said. "There is much competitiveness in the phosphorus market."

OVERSUPPLY FROM CHINA

China is among the biggest reasons why the world market has so much market supply of phosphorous.

Lawson said China's phosphorus production doubled from 2006 to 2012, jumping from 6 million metric tons (mmt) in 2006 to over 12 mmt in 2016. The nation's phosphorus exports also climbed during this time from around 10% in 2006 to 36% in 2015. The forecast is China will have 28% in exports in 2016, he said.

Because of this additional production leading to lower prices, China's phosphorus producers are now struggling with cash flow. Also, the country's consumption rates are expected to fall from just under 12 mmt in 2015. About 11 mmt is forecast in 2016, which would be in line with 2009 levels.

Other challenges facing Chinese phosphorus producers at the present time, as consumption falls and stocks increase, are transportation taxes and coal prices are expected to rise, Larson said.

"All of this has led China to cutting some phosphate production," he added.

There are several different production-cutting scenarios, with one having larger producers cut 30% production in 2016, medium producers cutting 20% and small producers scaling back 10%.

China's DAP production in 2016 is expected to be around 16 mmt, with CRU's forecast for DAP production in 2017 closer to 15 mmt. With these year-long production cuts, the production could be in the 12 mmt to 13 mmt, Lawson said.

However, all of this is just talk currently with no production cuts implemented yet. Lawson said "not to take this too seriously" regarding a Chinese phosphorus production plan.

"That market is under a lot of pressure in China; I would think North America should be keeping a close eye on the Chinese market," Lawson said.

INDIA, BRAZIL KEY

The country with the most phosphorus imports is India; total phosphorus imports climbed from just over 6 mmt in 2014 to almost 8 mmt in 2015.

India increased imports because lower phosphorus prices made it more attractive to do so. Imports are forecast to fall in 2016, but increase in 2017 and by 2020 the total Indian phosphorus imports could be 8.5 mmt, he said.

Brazil is also very dependent on phosphorus imports, where 2016 imports exceeded 2015 levels.

However, the country's credit issues are slowing how much soybean acreage expands; in 2016, the acreage is forecast to see its smallest expansion in the last eight years, Lawson explained.

Soybeans account for roughly half of the phosphorus use in Brazil, Lawson said. A slowdown in soybean planting in Brazil could leave anywhere from a half-million to almost a million tons of MAP not being used in the South American country.

"This could be a key thing to watch in the phosphorus market," he said.

SUPPLY SIDE INCREASES

On the supply side, Morocco and Saudi Arabia are set to proceed with increases in phosphate production. These two countries account for 84% of all capacity addition planned in the world, Lawson said.

In addition, Morocco is also changing its attention to phosphate rock to downstream productions, which would be acid products.

With all of these issue facing the global phosphorus fertilizer market, it is not all doom and gloom, according to Lawson.

One positive aspect of the market would be demand, which has grown over the last five years and is expected to remain strong from past years. Lawson said phosphorus consumption in 2011 was 41.9 mmt and in 2016 44.1 mmt was to be consumed worldwide.

Demand should only continue to grow in the next five years in order to use up the supplies, he said.

Along with continued demand, lower input costs are also aiding the world's phosphorus producers. The costs in 2017 are forecast to be significantly lower than costs were in 2015, Lawson said. These lower costs help maintain margins, as well as benefit downstream and finished producers, Lawson said.

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

Follow Russ Quinn on Twitter @RussQuinnDTN

(ES/AG)


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