Inside Fertilizer Analytics - Phosphates Episode Notes

Introduction

• Host: Tim Chain, Head of Fertilizers and Agriculture at Argus
• Guests: Clara Lloyd (Senior Manager, Consulting Team) and Tim Evans (Senior Analyst, Phosphates Team)
• Focus of discussion: Phosphates, recent research, and market issues.

Key Issues and Market Dynamics

Demand Side Overview

• India is a crucial market for phosphates, looking to increase self-sufficiency.
• Two key initiatives in India:
  • NanoDAP: Liquid form granules of DAP to replace imports (9 million tons per year target).
  • SSP: Underutilized capacity, low-cost production. Record consumption of 782,000 tons in recent years.

Effectiveness of Indian Initiatives

• NanoDAP: Ambitious production targets; still early to assess efficiency and effectiveness.
• SSP: Government subsidies and re-education efforts to improve farmer trust, but quality control issues persist.

Non-Fertilizer Demand: LFP Batteries

• LFP (Lithium Iron Phosphate) batteries projected to grow demand for P2O5.
  • Current estimate: 370,000 tons of P2O5 for 2023.
  • Expected to rise to 2.7 million tons by 2030, and over 4 million tons by 2033.
  • Growth driven primarily by electric vehicles and energy storage.

Global Distribution of LFP Demand

• China dominates LFP production and EV growth.
• Europe and the U.S. are expected to lag behind in growth due to supply chain challenges.

Supply Dynamics

EuroChem's Lafosa Closure

• Potential closure of Lafosa not anticipated to disrupt the market significantly due to previously diminished production capabilities.
• European market may see short-term price support upon demand recovery.

U.S. Phosphate Production Challenges

• Expected closure of several U.S. mines by 2037, leading to significant capacity loss (60% of current rock capacity).
• Increased reliance on imports may lead to higher prices for U.S. farmers.
• Potential shift toward lower P2O5 intensive products.

Innovations in Phosphate Production

• Secondary recovery processes, like tailings processing, could improve U.S. phosphate production outlook.

Investment Opportunities in North Africa

Key Projects

• Tunisia: New TSP line from GCT expected to come online.
• Algeria:
  • Somifos: Expanding mining capacity by 2026.
  • ACFC: Large-scale phosphate project backed by Chinese investment, potential to impact supply significantly.
• OCP (Morocco): Planning to increase granulation capacity to 22 million tons per year by 2027.

Policy and Import Duties

• Recent U.S. duty revisions on Russian and Moroccan products will affect supply dynamics.
  • Russian duties increased to 53%.
  • Moroccan duties reduced to approximately 14.5%.
• Impacts on the market include reduced sourcing options and increased price volatility.

Price Projections

Short-term Outlook

• Overall bearish trend expected to continue through 2023.
• MAP prices showing firmness amid a broader decline.
  • East of Suez market heavily influenced by India.
• U.S. vulnerability due to limited sourcing options and minimal carryover stock.

Medium-term Outlook

• Prices expected to stabilize in 2024, with significant capacity coming online.
• Potential for renewed growth post-2027, driven by supply constraints and raw material costs.

Conclusion

• Continued monitoring of market trends and investment opportunities essential.
• For further information, contact Argus for analytics and insights.