Yara Fertilizer Industry Handbook
February 2014
1
List of contents


Fertilizer industry overview
–
What is fertilizer?
p. 2
–
The fertilizer industry
p. 16
Fertilizer industry dynamics
–
–

Industry value drivers
–
–
–
–

Ammonia
Urea
Drivers of demand
Drivers of supply
Price relations
Production economics
Industrial applications
IR – Date: February 2014
p. 26
p. 28
p. 33
p. 39
p. 42
p. 60
p. 67
p. 74
p. 80
What is fertilizer?
3
Plants need nutrients to grow
IR – Date: February 2014
Calcium
They cannot replace each
other, and lack of any one
nutrient limits crop growth
YIELD
Potassium

Soil conditions
& other growth
factors
Phosphorus
Nutrient behavior

Nutrients have specific
and essential functions in plant
metabolisms
4
What is fertilizer?
Nitrogen is the main driver of yield
IR – Date: February 2014
5
Why mineral fertilizer ?
Supply of crop residues
and organic fertilizer
NPK
Organic
substance,
humus
N
Mineralisation
S
P
…
K
Mg
• Export of nutrients
with the harvest
• Growing demand
for food & feed
Crop residues are decomposed to minerals
Mineral fertilizers are necessary to replace those nutrients that have been removed from the field
IR – Date: February 2014
6
Nitrogen – the most important nutrient
Nutrient characteristics
Primary
benefit
16%
Potassium
(K)
Phosphorus
(P)
Application

Improve
crop quality

Annual
application
not always
done

Fewer suppliers,
production
discipline

Increase crop
size



Most important
and commonly
lacking nutrient
Annual
application
critical
Industry more
fragmented,
under
consolidation

More dynamic
prices, but stable
volume
23%
61%
Nitrogen
(N)
Total 176 million
tons nutrients
Source: IFA (season 2012/13 estimate, May 2013)
IR – Date: February 2014
Industry structure
7
Profitability of investment in mineral fertilizers
Yield response (monetary value) to N fertilizer rate
Income
USD/ha
Yield, ton/ha
10.0
3,000
9.0
2,500

The investment in nitrogen fertilizer
is highly profitable for growers
Fertilizer investment: 248 USD/ha

Net return: 1,711 USD/ha

Net return > 7 x investment

8.0
7.0
2,000
6.0
1,500
5.0
4.0
1,000
3.0
2.0
500
1.0
0
0.0
0
50
100
150
200
250
300
Fertilizer application, kg N/ha
Source: Winter wheat yield data: Long term trial, Broadbalk, Rothamsted (since 1856).
IR – Date: February 2014
8
Breakdown grain production costs
Example: 2013F average US corn production costs
Fertilizers as part of US corn
production costs
Seed
15 %
30%
Other
7%
25%
Fertilizer
24 %
Land
22 %
20%
15%
10%
Power & Machinery
24 %
Chemicals
4%
Labour
4%
5%
0%
2000 2002 2004 2006 2008 2010 2012 2014F
Source: USDA (Cost-of-production forecasts May 2013)
IR – Date: February 2014
9
Nitrates vs. urea
Nitrate is the most important fertilizer in Europe
Urea (CON2H4)
Urea-N needs to be
converted into ammoniumN before it is plant
available.
IR – Date: February 2014
Ammonium (NH4+)
Ammonium-N is fixed onto
clay minerals in the soil and
therefore immobile. The plant
roots have to grow actively
towards the nutrient.
Nitrate (NO3-)
Nitrate-N is always dissolved
in the soil water and is
transported passively together
with the water into the plant
root. Thus, nitrate is rapidly
effective.
10
Nitrate-based fertilizers are superior to urea both
agronomical and environmentally
The agronomical efficiency of nitrates is
superior to urea
The carbon footprint is lower than for Urea
Nitrogen recovery (% of AN)
Lifecycle carbon footprint (kg CO2 eq/kg N)
12
100
75
8
50
4
25
0
0
AN
Urea
UAN
Urea requires up to 20% higher N application to
achieve same cereal crop yield and quality as AN
AN
Urea
Although urea is more CO2 efficient in production, CO2
emissions and ammonia volatilization on application
more than offset for this
Source: DEFRA (2006), NT26 project report; Fertilizer Europe; 2EMEP/EEA air pollutant emission inventory guidebook (2007); Yara
IR – Date: February 2014
11
Trial results in arable crops
Winter wheat trials in UK from 1994-98
Application rate of 160 kg of N/ha
Grain yield (t/ha)
9.0
8.8
8.6
8.4
8.2
Urea
Source: Levington Agriculture, UK (1999)
IR – Date: February 2014
UAN
CAN
CN
12
Nitrates’ agronomic advantage has higher value
for cash crops than for commodity crops
Crop value with nitrates
€/ha
3,500
3,192
Increase in crop production value
using nitrates instead of urea
Index
1,200
1,016
3,000
1,000
2,500
800
2,000
600
1,553
1,500
400
1,000
500
200
0
0
Wheat/UK
IR – Date: February 2014
Oranges/Brazil
100
Wheat/UK
(160 kg N/ha)
Oranges/Brazil
(180 kg N/ha)
13
Fertilizer characteristics:
Organic compared to mineral fertilizer
Characteristics
Organic fertilizer
Mineral fertilizer
Nutrient
source
Crop residues and animal
manures
Nitrogen from the air and minerals
from the soil
Nutrient
concentration
Low concentration
High concentration
Nutrient
availability
Variable
Immediately available for the crop
Quality
Often inconsistent
Traceable and consistent
IR – Date: February 2014
14
Organic farming represents only a marginal
share of total cultivated land
40
0.9%
35
0.8%
3%
7%
0.7%
30
10%
Oceania
33%
0.6%
25
0.5%
Latin America
20
0.4%
15
Europe
Asia
18%
North America
0.3%
Africa
10
0.2%
5
0.1%
-
0.0%
2005 2006 2007 2008 2009 2010 2011
Ha, billions
Source: Organic-world.net
IR – Date: February 2014
Share of cultivated land
29%
15
Fertilizer production routes
Natural gas
Air
Ammonia plant
NH3
Air
Nitric acid plant
CO2
Urea
HNO3
Rock
Ammonium nitrate
Nitrophosphate plant
Calcium nitrate
Salts of K, Mg, S
Rock
Phosphoric acid plant
H2SO4
Rock
NPK fertilizers
H2PO4
DAP / MAP
Sulphuric acid plant
Triple Super Phosphate
Rock
IR – Date: February 2014
The fertilizer industry
17
Consumption per nutrient
Million tons nutrient
140
120
N
1.4% growth pa.
P
1.7% growth pa.
K
2,8% growth pa.
100
80
60
40
20
0
1976
1980
Source: IFA, June 2013
IR – Date: February 2014
1984
1988
1992
1996
2000
2004
2008
2012
2016F
18
Nitrogen consumption in key regions
Million tons nitrogen
40
Rest of Asia: 2.3% *
35
China: 0.4% *
30
25
20
Europe: 1.6% *
North America: 0.0% *
15
10
Latin America: 3.6% *
5
0
1999
2001
2003
Source: IFA, June 2013
IR – Date: February 2014
2005
2007
2009
2011
2013F
2015F
2017F
* CAGR 12-17
19
Key global fertilizer products
Nitrogen N
Ammonia
4%
Other
12 %
DAP/MAP
7%
Potash K2O
Other
2%
TSP
6%
AN/CAN
8%
UAN
5%
NPK
26 %
Phosphate P2O5
Urea
56 %
NPK
8%
SSP
10 %
108 million tons*
MOP/SOP
72 %
NPK
20 %
29 million tons
Source: IFA 2012 (nutrient totals) and 2011 (product split) * Does not include industrial nitrogen applications
IR – Date: February 2014
Other
9%
DAP/MAP
56 %
41 million tons
20
Nitrogen fertilizer demand – 5 key markets
China (33.8 mt)
West /central Europe (10.3 mt)
USA (12.1 mt)
DAP/MAP
6%
DAP/MAPOther
2%
9%
NPK
5%
Other
DAP/MAP 9%
2%
Other
8%
Urea
18%
Urea
22%
NPK
8%
NPK
16%
UAN
11%
Ammonia
27 %
UAN
27%
ABC
17%
Nitrates
43%
Nitrates
2%
India (17.4 mt)
Other
1%
Brazil (3.6 mt)
AS
12%
DAP/MAP
11%
NPK
8%
Nitrates
17%
Source: IFA 2011
IR – Date: February 2014
NPK
3%
Urea
51%
DAP/MAP
18%
Urea
78%
Urea
67%
21
Nutrient application by crop
N+P+K
Other
12%
Other
12 %
Wheat
16%
Fruit & veg
15%
Oilseeds
11%
Other cereal
5%
Source: IFA (2010/11)
IR – Date: February 2014
Maize
16%
Wheat
18 %
Fruit & veg
15 %
Rice
14%
Sugar crops
4%
Cotton
4%
NITROGEN
Rice
15 %
Sugar crops
4%
Cotton
4%
Roots/Tubers
3%
Oilseeds
7%
Maize
17 %
Other cereal
5%
22
Nitrogen application by crop
Russia
EU-27
USA
Other
27%
Other
33%
Fruits &
vegtables
7%
Oilseeds
10%
Maize
49%
Other
Wheat
cereals
13%
3%
Fruits &
vegtables
2%
Wheat
28%
Maize
Other 13%
cereals
15%
Other
21%
Oilseeds
2%
Maize
7%
Sugar
crops
8%
Wheat
48%
Other
cereals
14%
Cotton Wheat
Fruits &
16%
3%
vegtables
Oilseeds
30%
6%
Wheat
Rice
14%
Maize 15%
15%
India
Brazil
Other
24%
Maize
25%
Other
30%
Rice
5%
Source: IFA 2010/11
Sugar
crops
22%
Fruits &
vegtables Cotton
4%
10%
IR – Date: February 2014
Fruits &
vegtables
6%
Cotton
9%
Oilseeds
8%
China
Wheat
24%
Rice
30%
23
Fertilizer company comparison
Revenues - USD billion
Yara
Agrium
Mosaic*
L4Q
2012
PCS
K+S
ICL
CF
0
2
* 12 months ending May 2013
Source: Thomson Worldscope
IR – Date: February 2014
4
6
8
10
12
14
16
18
24
Yara – the leader in nitrogen fertilizers
Global no 1 in ammonia
Global no 1 in nitrates
Global no 1 in NPK
complex fertilizer
Production capacity* (mill t)
Production capacity* (mill t)
Production capacity* (mill t)
9
8
7
6
5
4
3
2
1
0
7
8
6
7
5
6
5
4
4
3
3
2
2
1
1
0
Yara
CF
GDF Agrium PCS
* Incl. companies’ shares of JVs
Source: Yara & Fertecon
Excluding China
IR – Date: February 2014
0
Yara Euroc. GDF
Source: Fertilizer Europe
Acron Agrofert
Yara* Euroc. Acron
Source: Fertilizer Europe
ZAT Rossosh
25
Yara – the European cost leader
Production cost index: 100 = European FE average excl. Yara
Average cost Yara’s European plants
Source: Fertilizer Europe
IR – Date: February 2014
European average (excl. Yara)
2012
2011
2010
2009
2008
2007
2006
50
2005
50
2004
60
2003
60
2012
70
2011
70
2010
80
2009
80
2008
90
2007
90
2006
100
2005
100
2004
110
2003
110
2002
Index
2001
Index
2002
Nitrate cost position
2001
Ammonia cost position
Fertilizer industry dynamics
27
Potential industry concerns
and associated mitigants
Weaknesses and risks
Mitigating factors
Over-investment at the top
of the cycle
Rising construction costs and lead times, reduced state
ownership
Weak players/lack of focus
Spin-offs from chemical/energy companies followed by
consolidation
High cost of natural gas in Europe
Long-term trend of gas price convergence between
regions, as pipeline and LNG investments increase liquidity
International trade restrictions
WTO accession
Regulatory regimes
Operational excellence
Terrorism, accidents, country, customer
and currency risk
Increased management awareness
of risk and better risk management
IR – Date: February 2014
Ammonia
29
Ammonia production
10 largest producers
Total production
Million tons
60
160
50
140
40
120
30
100
20
80
10
Source: IFA
IR – Date: February 2014
Egypt
Saudi Arabia
Canada
Ukraine
Trinidad
USA
India
Indonesia
2002-2012 trend growth rate = 2.3%/year
0
Russia
60
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
China
Million tons
180
30
Most of the ammonia produced is upgraded to
urea or other fertilizers
Ammonia use
Ammonia trade
Million tons
25
Million tons
160
Total world trade
139
140
20
120
100
15
80
10
60
Yara trade
40
5
32
20
0
02
03
04
05
06
Source: Yara, IFA
IR – Date: February 2014
07
08
09
10
11
12
0
Fertilizer
Industrial use
Urea
Nitrates
DAP/MAP
NPK
Other N
Direct application
Total
Source: Fertecon
31
Global ammonia trade in 2012
10 largest exporters
10 largest importers
Million tons
7.0
Million tons
5.0
4.5
4.5
6.2
6.0
4.0
5.0
3.5
3.2
3.0
4.0
2.5
3.0
2.0
1.6
0.7
0.7
1.2
0.5
0.8
1.0
0.8
0.7
0.5
Source: IFA
IR – Date: February 2014
0.6
0.4
0.4
Belgium
France
Morocco
Korea
India
0.0
USA
Iran
Qatar
Egypt
Algeria
Indonesia
Canada
Ukraine
Saudi Arabia
Russia
Trinidad
0.0
0.7
Spain
0.8
Germany
1.0
1.0
1.8
2.0
1.2
Turkey
1.2
Taiwan
1.5
32
Main ammonia trade flows 2012
Million tonnes
1.9
1.2
0.9
0.8
0.8
3.8
0.6
3.1
1.3
1.0
Source: IFA
IR – Date: February 2014
0.4
Urea
34
Urea production in 2012
Total production
10 largest producers
Million tons
180
Million tons
60
160
50
140
40
120
30
Source: IFA
IR – Date: February 2014
6.2
USA
Russia
India
Indonesia
2002-2012 trend growth rate = 3.5% p.a.
6.5
4.6
4.4
4.2
4.1
3.8
0
China
60
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6.9
Canada
10
Iran
80
Pakistan
20
Egypt
100
Qatar
22.5
35
Global urea trade in 2012
10 largest importers
10 largest exporters
Million tons
Million tons
9.0
8.0
7.0
8.0
6.9
8.0
7.1
7.0
6.0
6.0
4.8
5.0
4.2
4.0
5.0
3.6
4.0
2.9
3.0
3.0
1.8
2.0
Source: IFA
IR – Date: February 2014
Mexico
Thailand
Brazil
USA
Indonesia
Canada
Egypt
Iran
Saudi Arabia
Oman
Ukraine
0.0
Qatar
0.0
Russia
1.0
China
1.0
India
1.0
1.5
1.4
1.1
0.9
0.8
France
1.4
2.3
Italy
2.0
Pakistan
2.2
Turkey
3.1
Australia
3.1
3.0
36
Main urea trade flows 2012
Million tonnes
0.6
1.4
1.4
1.6
3.7
1.4
1.4
4.0
1.4
0.5
0.9
4.0
9.3
1.1
1.7
Source: IFA
IR – Date: February 2014
1.3
37
Short-term urea balance impacted by Chinese
export taxes
Accumulated urea exports
Urea price and export tax
USD per ton
Kilotons
8,000
2010
2012
7,000
Export tax
600
120 %
500
100 %
400
80 %
300
60 %
200
40 %
100
20 %
6,000
2013
5,000
2008
4,000
2011
2009
3,000
2,000
1,000
0
0
Source: BOABC
IR – Date: February 2014
0%
* Export tax during low tariff period depends on price level with
40 yuan/t (~2%) representing the minimum tax level
38
Chinese domestic urea price and export tax set
the export floor price
Chinese domestic urea price
RMB/t
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
Source: China Fertilizer Market Week
IR – Date: February 2014
Industry value drivers
40
Key value drivers
Urea prilled fob Black Sea (USD/t)
Ammonia fob Black Sea (USD/t)
600
525
516
600
545
477
500
400
500
200
300
240
185
200
341
300
200
175
0
0
8.9
6.7 7.0
7
5.5
4.4 4.1
4.0
4
3.7
2.8
3
2
65
54
60
40
261
05
06
07
08
09
10
11
12
13
7.1
6.7
6.4 6.4
5.9 5.6
6.3 6.0
5.9
5.6 5.7
73
80
5
04
6
80
5.9
240
NOK/USD exchange rate
104 105 104
97
100
8
03
8
120
8.9
9
187
Oil Brent blend spot (USD/bbl)
Henry Hub (USD/MMBtu)
10
164
244
0
03 04 05 06 07 08 09 10 11 12 13
03 04 05 06 07 08 09 10 11 12 13
143
214
316
100
100
100
6
289
337
249
220 223
139
379
400
423 407
308
264
229 240 245
466
500
499
400
357
300
CAN cif Germany (USD/t)
62
4
38
28
2
20
1
0
0
03
04
05
06
07
08
09
10
11
12
13
0
03 04 05 06 07 08 09 10 11 12 13
Source: The Market, Fertecon, CERA, World Bank, Norges Bank
IR – Date: February 2014
03
04
05
Average prices 2003 - 2013
06
07
08
09
10
11
12
13
41
Nitrogen fertilizer value drivers
Drivers
Revenue
drivers
Cost
drivers
Effect on
European / Ukrainian gas
prices and Chinese coal prices

Supply-driven price for urea
Grain inventories/prices

Urea demand
New urea capacity vs. closures

Urea supply
Global urea demand vs. supply

Urea price (above floor)
Urea price

Most other nitrogen
fertilizer prices
Market segmentation

Value-added margins
Oil product prices and LNG
development

Gas cost in Europe
Manning and maintenance

Fixed cost
Productivity and economies
of scale

Unit cost
IR – Date: February 2014
Drivers of demand
43
Drivers of nitrogen consumption growth

Fertilizer consumption
– Population growth
– Economic growth (improved diets)
– More meat consumption in developing
countries
– More protein-rich diets
– More fruit and vegetables
– Reduce hunger
– Biofuels

Industrial consumption
– Economic growth
– Environmental limits (e.g. reduction of NOx
emissions)
IR – Date: February 2014
44
Grain consumption growth stronger than
population growth
Million tons
Billions
2,500
12
US drought resulting in 3.5%
drop in production, low stocks,
demand rationing and spiking
prices
10
2,000
3% drop in production
3% drop in production, low
stocks, demand rationing and
spiking prices
4% drop in production, low
stocks, demand rationing
and spiking prices
1,500
8
6
1,000
4
500
2
0
0
65
70
75
80
85
90
95
Population less developed regions
Source: US Department of Agriculture, United Nations
IR – Date: February 2014
00
05
10
15E 20E 25E 30E 35E 40E 45E 50E
Population more developed regions
Grain consumption
Diet change the most important factor for growth
in food consumption
Impact on food consumption 1998-2008
Million tons grain equivalent*
Grain eq. consumption 1998
Diet change
(same cal/cap and pop)
Increased calorie
consumption
(same pop and diet)
Population growth
(same cal/cap and diet)
Grain eq. consumption 2008
Fertilizer consumption for food crop**
Million tons nutrients
2,200
126
240
14
13
230
9
160
2,830
162
* Assumed 500 kcal/kg grain, 600 kcal/kg meat, meat/grain production factor of 3
** N, P and K demand. Average effective yield delivered to consumers of 2 ton cereal/ha; 120 kg fertilizer/ha
Source: McKinsey & Company
IR – Date: February 2014
Historical
CAGR of 2,5%
(1998-2008)
45
46
Higher meat consumption requires more feed
grain
Significant potential for increasing
meat consumption in emerging countries
Feed grain multipliers for meat
production
World
2X
Poultry
EU
North America
4X
Pork
Latin America
Asia
7X
Beef
Africa
0
20
40
60
80
Kg/capita/year
Source: FAO
IR – Date: February 2014
100 120 140
0
1
2
3
4
5
6
7
8
Kilograms of grain to produce 1kg of meat
9
47
0.5
10
0.4
8
0.3
6
0.2
4
0.1
2
0.0
1960
1970
1980
1990
Hectares/person
Source: IFA, Worldmarkets.com
IR – Date: February 2014
2000
2010 2020E
Population
Population (billion)
Hectares/person
Increasing population and reduced land
available for food production per capita
 Very limited potential to
increase farmable land
 Improved living
standards increase
protein consumption per
person, requiring more
grain for animal feed
0
The only solution is to
increase agricultural
productivity
48
Long-term grain price development underlines
productivity challenge
FAO Food price index
2002-2004=100
300
250
200
150
100
50
0
Food Price Index
IR – Date: February 2014
Cereals Price Index
49
Production per capita has improved but remains
lower today than in the 80s
Kg/capita
350
Peak: average 1983-1986:
326 kg/capita
Average 2009-2012
319 kg/capita
340
330
320
310
300
290
280
Average 2002-2003
289 kg/capita
270
260
1960
1965
1970
1975
1980
Source: USDA (cereal production) and UN (population)
IR – Date: February 2014
1985
1990
1995
2000
2005
2010
2015
50
Record 2013 crop add only 1 day of
consumption to global grain stocks
Grain consumption and production
Days of consumption in stocks
Million tons
Days
2,500
85
2,450
80
2,400
2,350
75
2,300
2,250
70
2,200
2,150
65
2,100
2,050
60
2,000
55
1,950
06
07
08
09
10
Consumption
Source: USDA February 2014
IR – Date: February 2014
11
12
13E
Production
14F
06
07
08
09
10
11
12
13E
14F
51
Mineral fertilizer essential
to sustain future yield increases
1 tonne of grain requires ~25kg nitrogen

Increased production of
mineral fertilizers
necessary to meet future
nutrient demand

Limited potential for
recycling organic
material

Nutrient reserves in the
soil do not increase
Tons of cereals
per hectare
4.5
4.0
3.5
3.0
2.5
Mineral fertilizer
2.0
1.5
Organic fertilizers
1.0
Existing soil nutrients
0.5
0.0
1960
1970
1980
Source: FAO, Worldmarkets.com, Yara
IR – Date: February 2014
1990
2000
2010
2020E
52
Key crops by producing
Maize-global production 840 mt
Other
26%
Wheat-global production 651 mt
United
States
32%
EU-27
20%
Other
32%
Ukraine
3%
EU-27
7%
Brazil
8%
US
10%
Russia
6%
China
24%
Rice-global production 464 mt
China
31%
Source: USDA, 2012/13 season
IR – Date: February 2014
China
5%
Other
10%
USA
35 %
Argentina
21%
Vietnam
6%
Bangladesh
Indonesia
7%
8%
India
14%
Soybeans-global production 268 mt
India
4%
Other
27%
China
18%
India
21%
Brazil
30%
53
Agricultural profile – key regions
Arable land, top 3 crops area harvested and nitrogen application.
EU
107 mill ha
USA
160 mill ha
Maize (34.0)
Soybean (29.9)
Wheat (18.5)
168 kg/ha
3 kg/ha
84 kg/ha
Wheat (26.1)
Barley (11.9)
Maize (8.9)
China
116 kg/ha
112 mill ha
153 kg/ha
Maize (33.6)
Rice (30.3)
Wheat (24.3)
India
Brazil
157 mill ha
72 mill ha
Soybean (24.0)
5 kg/ha
Maize (13.2)
Sugarcane (9.6)
54 kg/ha
65 kg/ha
* Total nitrogen applied (kg) divided by harvested area
Source: IFA (2011/2012 season), FAO (2011/12 season)
IR – Date: February 2014
Rice (44.0)
113 kg/ha
Wheat (29.0)
Millet(10.7)
137 kg/ha
149 kg/ha
166 kg/ha
185 kg/ha
54
Large variations in yields across regions
Maize yields
Wheat yields
Tons/Ha
Tons/Ha
9
8
7
6
5
4
3
2
1
0
8
7
6
5
4
3
2
1
0
US
Argentina
China
Brazil
Mexico
France
Rice yields
Tons/Ha
China
India
US
Russia
Soybean yields
Tons/Ha
8
7
6
5
4
3
2
1
0
3
3
2
2
1
1
China
Viet Nam
Indonesia
Source: FAOSTAT 2012
IR – Date: February 2014
India
Bangladesh
0
Argentina
US
Brazil
China
India
55
Biofuels: high-level outlook
Global ethanol production
MB/D
2,500
2,000
FSU
Africa
1,500
Asia/Pacific
Latin America
1,000
EU-28
Canada
U.S.
500
0
2005
2006
2007
Source: PIRA, October 2013
IR – Date: February 2014
2008
2009
2010
2011
2012 2013E 2014E 2015E 2020E 2025E
56
N-fertilizer consumption from biofuels production
Million tons N
2.5
2.0
2.0
1.5
1.0
0.6
0.5
0.5
0.3
0.0
US - maize for
ethanol
Source: IFA
IR – Date: February 2014
Europe - rapeseed Brazil - sugarcane for
for biodiesel
ethanol
Others
57
The effect on fertilizer consumption of
genetically modified crops
Cropped area by trait,
Million hectares
Cropped area by crop,
Million hectares
Rapeseed
9
Cotton
19
HT + IR
41
Insect
resistance
(IR)
23
Source: ISAAA
IR – Date: February 2014
Herbicide
tolerance
(HT)
100
Soybean
81
Maize
40
58
Fertilizer reduces carbon footprint from farming
Fertilizer - an efficient solar energy catalyst
 Production marginal part of carbon footprint - efficient application more important
 Huge positive effects of fertilizer use by lower land use
Production
 Yara’s production more energy-efficient than
competitor average
 Yara developed N2O catalyst
3.6 kg
CO2 eqv
PRODUCTION
TRANSPORTATION
0.1 kg
CO2
5.6 kg
CO2 eqv
FARMING
Application
 Nitrates better than urea
 Precision farming (N-tester etc.)
 Balanced fertilization (NPK)
75 kg
CO2
75 kg
CO2
HARVEST
CONSUMPTION
CAPTURE
© Yara 2010
IR – Date: February 2014
59
Seasonality in fertilizer consumption
Jul
Corn
USA
China
Europe
Brazil, first crop
Brazil, second crop
Wheat
China (winter wheat)
China (spring wheat)
India (Rabi)
USA (winter wheat)
USA (spring wheat)
Europe (winter wheat)
FSU (winter wheat)
Rice
China (single crop)
China (early double crop)
China.(late double crop)
India (Kharif)
India (Rabi)
Planting/seeding
Harvest
Source: USDA
IR – Date: February 2014
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Drivers of supply
61
Nitrogen value chain
Raw
material
Intermediate
products
Finished
products
Industrial
products
H, Ar, CO etc
Industrial gases
C02
Ammonia
Ammonia
Urea
Environmental
products
Natural gas
Nitric acid
Nitric acid
Nitrates
Calcium
Nitrate
IR – Date: February 2014
Industrial nitrogen
chemicals
62
Nitrogen technology developments
450
400
Birkeland-Eyde electric arc method
350
300
GJ/tN
Cyanamid method
250
200
150
Haber-Bosch synthesis
100
50
Steam reforming natural gas
Theoretical minimum
0
1910
IR – Date: February 2014
1915
1930
1950
1960
1975
2000
63
Energy consumption in ammonia production
Energy consumption
per ton ammonia
(relative index)
140
120
107
100
113
118
120
100
80
China’s coal-fired
ammonia plants use 70%
more energy and emit 2.5
times more CO2
60
40
20
0
Yara
Europe
Europe
ex Yara
Source: Fertilizer Europe (2008)
IR – Date: February 2014
US
Romania &
Bulgaria
Russia
64
Projected nitrogen capacity additions outside
China in line with historical consumption growth
Year
Driving regions
Excluding China
Qatar 26%
UAE 20%
Iran 28%
Algeria 26%
Algeria 23%
2013
2014
2015
Iran 12%
USA 38%
Nigeria 12%
USA 28%
Iraq 27%
2016
2017
Urea capacity growth relative
to nitrogen capacity
Excluding China
1.2% (1.4%)
1.5% (1.8%)
3.8% (3.5%)
2.7% (3.2%)
1.7% (1.5%)
Gross annual addition 2013-2017
~2.2%
Assumed annual closures
~0.5%
Net annual addition 2011-2015
~1.8%
Trend consumption growth from 2002
2.1%
Source: Fertecon urea update December 2013 (August update in brackets). Consumption data source is IFA.
IR – Date: February 2014
65
5 year typical construction time for nitrogen
fertilizer projects*
4–6 years
Business
development
Feasibility
phase
Gas
agreement
Concept
selection
phase
12-24 months
depending on complexity
Prepare
for
execution
Construction
Operation
30-36 months
6-12 months
- check cost assumptions by approaching market
- bidding for contracts and/or equipment
* Ammonia and urea plant example
IR – Date: February 2014
66
Global urea capacity utilization
Urea capacity utilization
100%
95%
90%
Excluding China
85%
80%
75%
70%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F2014F2015F2016F2017F
Source: Fertecon Aug 2013
IR – Date: February 2014
Price relations
68
Upgrading margins from ammonia to urea
USD/tonne
900
800
700
600
500
400
300
200
100
0
Jan 01
Jan 02
Jan 03
Jan 04
Jan 05
Jan 06
Jan 07
Urea fob Black Sea
Source: Average of international publications
IR – Date: February 2014
Jan 08
Jan 09
Jan 10
Jan 11
Jan 12
0.6 * Ammonia fob Black sea + 15
Jan 13
Jan 14
69
Grain prices important for fertilizer demand
USD/mt
USD/t
350
700
300
600
250
500
200
400
150
300
100
200
50
100
0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Corn
Source: World Bank, Fertilizer publications
IR – Date: February 2014
Urea fob Middle East
0
70
Only shorter periods with supplydriven urea market
600
Urea price, fob Yuzhny
500
400
300
200
100
0
2004
2005
2006
2007
Europe oil index
Source: Fertecon (Ukraine), Yara estimates
IR – Date: February 2014
2008
2009
2010
Ukraine (Fertecon)
2011
US
2012
China
2013
2014E
71
Nitrate premium is mainly a function of
crop prices and proper marketing
Wheat price, USD/t
CAN price, USD/t
450
400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
02/03
0
03/04
04/05
05/06
Adjusted urea*
06/07
07/08
08/09
09/10
Nitrate premium, USD/t
* Urea fob Black sea adjusted for import costs into Europe and nitrogen content similar to CAN
IR – Date: February 2014
10/11
11/12
Wheat price
12/13
72
Grain/oilseed prices – yearly averages
Wheat (HRW US Gulf)
USD/bu
10
Rice (Thailand)
USD/t
700
600
8
500
6
400
4
300
200
2
0
2003
USD/bu
8
7
6
5
4
3
2
1
0
2003
100
2005
2007
2009
2011
2013
Corn (US Gulf)
0
2003
2005
2007
2009
2011
2013
Soybeans (cif Rotterdam)
USD/bu
20
15
10
5
2005
2007
Source: World Bank, Dec 2013
IR – Date: February 2014
2009
2011
2013
0
2003
2005
2007
2009
2011
Average prices 2004-2013
2013
73
10-year fertilizer prices – monthly averages
Ammonia fob Black Sea
USD/t
1,000
800
400
600
300
400
200
200
100
0
2004
2005
2006
2007
2008
2009
2010
2011
CAN cif Germany
USD/t
500
2012
2013
0
2004
2005
2006
2007
Urea prilled fob Black Sea
2008
2009
2010
2011
2012
2013
DAP fob US Gulf
USD/t
1,200
USD/t
800
1,000
600
800
600
400
400
200
200
0
2004
2005
2006
2007
2008
2009
2010
Source: Average of international publications
IR – Date: February 2014
2011
2012
2013
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Average prices 2004 - 2013
Production economics
75
Yara’s operating cash costs are mainly variable
Operating cash costs 2012
NOK
Billions

Temporary plant closures can be
made speedy and with limited
stop/start costs

Example for ammonia/urea plants:
80
70
60
50
40
62.8
30
Variable costs (90%)
- Dry raw materials
- Energy
- Freight
- 3rd party finished fertilizer
– Cost of stopping is 2 days energy
consumption
– Cost of starting is 3 days energy
consumption
20
10
0
– Takes half a week to stop and a
week to start
7.2
IR – Date: February 2014
Other cash cost (10%)
76
Ammonia cash cost build-up – example
Gas price:
x Gas consumption:
=
Gas cost:
+
Other prod. cost:
=
Total cash cost
8
36
USD/MMBtu
36 MMBtu natural
gas/tonne ammonia
MMBtu/mt NH3
288
USD/mt NH3
26
USD/mt NH3
314
USD/mt NH3
Ammonia (NH3)
(82% N)
Typical natural gas
consumption for
ammonia production
Source: Blue Johnson & Associates.
IR – Date: February 2014
77
Urea cash cost build-up – example
314
USD/mt NH3
x
Ammonia use:
0.58
NH3/mt urea
=
Ammonia cost
182
USD/mt urea
+
Process gas cost*
41
USD/mt urea
+
Other prod. cost**:
22
USD/mt urea
=
Total cash cost
245
USD/mt urea
36 MMBtu natural
gas/tonne ammonia
Ammonia (NH3)
(82% N)
0.58 mt ammonia
per tonne urea
CO2
Ammonia price:
Urea
(46% N)
* Process gas cost is linked to natural gas price
** Including load-out
IR – Date: February 2014
Source: Blue Johnson & Associates.
78
Theoretical consumption factors
Ammonia
(82% N)
Urea
(46% N)
AN
(33.5% N)
* There are several NPK formulas. 15-15-15 is just an example
IR – Date: February 2014
P and K
CAN
(27% N)
NPK
(15-15-15)*
79
Main phosphate processing routes
2006 production and exports, million tons P2O5
Phosphate rock
(72% BPL*, 33% P2O5 )
Rock production: 191
Rock exports: 31
Sulphur**
Phosphoric acid
(100% P2O5)
Production: 42
Export: 4.4
Ammonia
( 82% N)
Source: IFA
DAP
MAP
TSP
(18% N, 46% P2O5)
(11% N, 52% P2O5)
(46% P2O5)
Production: 33
Export: 16
Production: 21
Export: 5
Production: 6
Export: 3.8
* P2O5 content of phosphate rock varies. This is an example.
** 1 ton of phosphoric acid requires 1 ton of sulphur.
IR – Date: February 2014
Industrial applications
81
Industrial nitrogen applications
H2S abatement
Technical nitric
in oil fields H2S abatement
in sewage
acid
Cleaning/
scrubbing
Concentrated
nitric acid
NITCAL®
DIPCAL®
Aqueous
ammonia
Stationary sources
Glue
ANFO
Emulsions
Vessels (Yarwil)
Acrylonitrile
CN
TAN
AdBlue ®/heavy-duty vehicles
Nitric
acid
N2O abatement
NOX
abatement
Dry ice
NH3
Urea
Melamine
Combined
products
Applic. LIC
CO2
Industrial gases
Formates
LIC wholesale
Nitrogen
Oxygen
Argon
Propane
Ammonia
IR – Date: February 2014
82
Industrial use accounts for 19% of global
nitrogen consumption
~26 million tons N
~8 million tons N as urea
Environment
3%
Environment
5%
Other
16%
Explosives
20%
Chemicals
77%
19% of total N consumption
Source: Yara estimates
IR – Date: February 2014
Melamine
15%
Glue
64%
10% of total urea consumption
83
Global demand development of nitrogen
chemicals for industrial applications is strong
Million tons N
40
35
Urea
30
Nitric Acid
25
20
Ammonia, DeNOx
15
Ammonia, TAN
10
Ammonia, P-Chem
5
0
2010
2015E
2020E
Estimated growth of Industrial applications
is 10 million tons N (3.3 % annual growth)
Source: Fertecon
IR – Date: February 2014
84
Example
Urea and ammonia based solutions
to improve air quality
Air1
NOxCare
Yarwil
Automotive, off and on road
Stationary
Maritime
Nitrogen oxides emissions lead to ground
ozone layer and acid rain
Urea or ammonia combined with an SCR
catalyst, eliminates up to 90% NOx emissions
Legislation requires emission limits from
mobile sources (transport fleets on land and
at sea) and from industrial sources (power
plants, cement factories, waste incinerators,
refineries…)
AdBlue/DEF is a generic name for urea-based solution
Air1 is Yara’s brand name for AdBlue/DEF
IR – Date: February 2014
85
Example
Technical Nitrates for Civil Explosives
Various grades of Ammonium Nitrate and Calcium Nitrate for use in the civil
explosives and mining industries
IR – Date: February 2014
86
Example:
CO2 has numerous industrial applications
Food additive:
High-quality CO2
for beverage carbonisation
Industries Served :
Food care:
CO2 for greenhouses, chilling
and freezing, processing and
transport
Animal care:
Controlled atmosphere for
livestock stunning
Manufacturing:
Welding and cutting
gases
Blasting :
Multipurpose cleaning
IR – Date: February 2014








Breweries
Dairies
Bakeries
Meat and Poultry processing
Fish Farming and processing
Greenhouses
Airline catering
Refrigerated transport
87
Calcium nitrate for H2S abatment
• Hydrogen Sulphide (H2S) is a
highly toxic, odorous, and
corrosive gas formed in
wastewater systems. It
represents a significant health
risk potentially causing loss of
smell, eye irritation, rhinitis and
respiratory difficulties amongst
other symptoms
Industries Served :





• Yara’s calcium nitrate application

is a natural biological system that

removes and prevents the
formation of H2S in sewage
systems and waste water
treatment plants
IR – Date: February 2014
Municipalities
Wastewater treatment
plants
Dairies
Pulp and paper industry
Slaughter houses
Breweries
Oil fields
88
Sources of market information

Fertilizer market information
–
–
–
–
–
–
–
–

www.fmb-group.co.uk
www.fertecon.com
www.cruonline.crugroup.com
www.profercy.com
www.icispricing.com
www.greenmarkets.pf.com
www.boabc.com
www.fertmarket.com
Fertilizer industry associations
–
–

FMB
Fertecon
Fertilizer Week
Profercy
The Market
Green Markets (USA)
Beijing Orient Business (China)
China Fertilizer Market Week
International Fertilizer Industry Association (IFA)
Fertilizers Europe (EFMA)
www.fertilizer.org
www.efma.org
Food and grain market information
–
–
–
–
–
Food and Agriculture Organization of the UN
International Grain Council
Chicago Board of Trade
World Bank commodity prices
US Department of Agriculture (USDA)
IR – Date: February 2014
www.fao.org
www.igc.org.uk
www.cbot.com
www.worldbank.org
www.usda.gov
www.yara.com