CD4855_Ammonia__Urea_Markets_in_Latin_America_-_January_2009_(UPDATED_9th_Jan) - final BRITISH 02.pdf

7/15/2019 CD4855_Ammonia__Urea_Markets_in_Latin_America_-_January_2009_(UPDATED_9th_Jan) - final BRITISH 02.pdf

1/60

British Sulphur Consultants confidential

Ref No: CD4855

J anuary 2009

Ammonia & UreaMarkets in Latin

America

A Single-Client Report prepared for:

YPFB

31 Mount Pleasant, London WC1X OAD

Tel: +44 (0) 20 7903 2132 Fax: +44 (0) 20 7833 4973 Websi te: www.crugroup.com

This report is supplied on a private and confidential basis to the customer. Its contents

must not be disclosed to any other company, organisation or individual, nor be

photocopied or otherwise reproduced in whole or in part, without the prior written

permission of CRU International.

This report is delivered on the understanding that CRU Internationals liability is limited to

the provision of the professional services outlined in the contract for this report. Although

every effort has been made to undertake this work with care and diligence, CRU

International cannot guarantee the accuracy of any forecasts or assumptions or that the

proposed investment will be successful. If the client uses our work in any information

Memorandum or similar document for the purpose of raising funds, CRU Internationalaccepts no liability to third parties however arising and without limitation.

CRU International Ltd, 2009. All rights reserved.


2/60

CD4855 Ammonia & Urea Markets in Latin America


Contents

Page

Ammonia & Urea Markets in Latin America 1

Ammonia & Urea Markets in Latin America 1

1. Latin American Agriculture & Nitrogen Demand 2

2. Latin American Nitrogen Consumption by Major Country 5

2.1 Argentina 6

2.2 Bolivia and Paraquay 8

2.3 Brazil 8

2.4 Chile 10

2.5 Colombia 112.6 Mexico 12

2.7 Peru 12

2.8 Uruguay 13

2.9 Venezuela 14

3. Latin American Ammonia Consumption by Country 15

3.1 Cuba 16

3.2 Mexico 17

3.3 Trinidad 17

3.4 Argentina 17

3.5 Brazil 17

3.6 Chile 18

3.7 Colombia 18

3.8 Peru 18

3.9 Venezuela 18

4. Latin American Urea Consumption by Country 19

5. Latin American Ammonia & Urea Supply 20

5.1 Nitrogen Production & Capacity 21

5.2 Company Profiles of Major Nitrogen Players in Latin America 22

5.3 Latin American Nitrogen Capacity by Plant 24

6. Ammonia and Urea Capacity to 2027 26

6.1 Short-Term Ammonia Capacity Changes between 2008 to 2012 26

6.2 Longer-Term Ammonia Capacity Changes to 2027 27

6.3 Short-Term Urea Capacity Changes between 2008 to 2012 28

6.4 Longer-Term Urea Capacity in 2027 29

7. Latin American Nitrogen Supply/Demand in Balance 32

7.1 Supply and Demand in Calendar Year 2007 32

7.2 Supply and Demand in Calendar Year 2012 34

7.3 Supply and Demand in Calendar Year 2017 357.4 Supply and Demand in Calendar Year 2027 36


3/60

CD4848 Phosphate Fertilizer Producers


Contents continued

Page

8. Target Markets for Ammonia & Urea into Latin America 378.1 Major Buyers/Suppliers in 2007 37

8.2 Target Markets 44

8.3 Price Forecast for the major ammonia and urea suppliers into Latin

America 44

9. Conclusions & Recommendations 48

9.1 Target Markets 48

9.2 Latin American Competitiveness 51

9.3 Conclusions 55


4/60



List of Tables

Page

Table 1: Estimate Harvested Acreage & Production in Latin America 2Table 2: Latin Americas Domestic Nitrogen Apparent Consumption 5

Table 3: Argentinas Domestic Nitrogen Consumption 7

Table 4: Bolivia & Paraguays Domestic Nitrogen Consumption 8

Table 5: Brazils Domestic Nitrogen Consumption 9

Table 6: Chiles Domestic Nitrogen Consumption 10

Table 7: Colombias Domestic Nitrogen Consumption 11

Table 8: Mexicos Domestic Nitrogen Consumption 12

Table 9: Perus Domestic Nitrogen Consumption 13

Table 10: Uruguays Domestic Nitrogen Consumption 14

Table 11: Venezuelas Domestic Nitrogen Consumption 15

Table 13: Latin Americas Apparent Consumption of Urea 19

Table 14: Latin American Nitrogen Production in Calendar Year 2007 22

Table 15: Latin American Nitrogen Capacity Summary in 2007 22

Table 16: Nitrogen Capacity in Latin America in 2007: Plant List 24

Table 17: Latin Americas Ammonia Capacity to 2027 27

Table 18: Latin Americas Urea Capacity to 2027 29

Table 19: Nitrogen Capacity in Trinidad in 2027 29

Table 20: Nitrogen Capacity in Argentina in 2027 30

Table 21: Nitrogen Capacity in Brazil in 2027 30

Table 22: Nitrogen Capacity in Peru in 2027 31

Table 23: Nitrogen Capacity in Venezuela in 2027 31

Table 24: Latin American Nitrogen Supply/Demand Balance 2007 32





Table 29: Latin America Nitrogen Imports by Country 2007 38

Table 30: Latin America Nitrogen Imports by Country 2012 39Table 31: Latin America Nitrogen Imports by Country 2017 40




Table 35: Ammonia & Urea Prices, 1999 to 2027 45

Table 36: Argentinas Domestic Urea Supply/Demand Balance 48

Table 37: Brazils Domestic Urea Supply/Demand Balance 49

Table 38: Chiles Domestic Urea Supply/Demand Balance 50

Table 39: Perus Domestic Urea Supply/Demand Balance 50Table 40: Uruguays Domestic Urea Supply/Demand Balance 51


5/60



List of Diagrams

Page

Diagram 1: Nitrogen Fertilizer Use by Crop at the Global Level 5Diagram 2: Latin American Nitrogen Consumption - 2007 33

Diagram 3: Latin American Nitrogen Imports - 2007 33

Diagram 4: Published Ammonia Prices 1999 to 2027 46

Diagram 5: Published Urea Prices 1999 to 2027 47

Diagram 6: Breakdown of Ammonia Site Costs for South and Central America

Producers, 2008 52

Diagram 7: Ammonia Business Costs for Trinidad vs. Major 53

Diagram 8: Breakdown of Urea Site Costs for South and Central American

Producers, 2008 53

Diagram 9: Average Business Costs of Competitors in the Latin American

Urea Market 54

Diagram 10: Average Production Costs (US$ per metric tonne) 54


6/60


British Sulphur Consultants confidential 1

Ammonia & Urea Markets in Latin

America

Latin Americas apparent consumption of nitrogen is an estimated at 8.1 million tonnes in 2007

accounting for an estimated 7% of the worlds total. The BSC forecast for nitrogen consumption in 2017

is 10.9 million tonnes and in 2027 is 13.6 million tonnes. This forecast represents a growth rate of 2.6%

per year for the Region during this twenty-year forecast period beginning in 2007. Urea is the most

popular nitrogen containing product both in Latin America and globally and is expected to continue

growing, retaining a 50% or greater market share of total nitrogen consumption.

Latin America is both an importer and an exporter of nitrogen products. Imported nitrogen currently

represents about 70% of the regions consumption. Some inter-regional trade exists but most of the

nitrogen imports originate from outside the region. Latin America is also an exporter of nitrogen with

Trinidad accounting for 80% of the ammonia and urea trade from the region.

With a strong and growing regional market, Latin Americas close proximity to the worlds largest

nitrogen import market in the United States and access to relatively low cost natural gas, there should be

considerable interest in investment in new nitrogen capacity in Latin America. However, investment has

been hampered by concerns over political risk in countries where the Government controls the natural gas

and can change the rules at any time after an investment is made.

Feedstock costs determine the competitiveness of the nitrogen plant. Low feedstock costs are necessary

to remain competitive and are also required to repay the huge capital costs associated with an

ammonia/urea investment. The manufacturer with the lowest cost will survive during the cyclical decline

and prosper during the cyclical upturn. After feedstock costs, location is the second most important

factor. International nitrogen trade is continuing to grow as most of the new capacity is being built in

countries with low cost feedstock that will be targeting export markets. A location advantage could

partially offset a disadvantage in production costs.

Bolivia is a land-locked country with a relatively low level of nitrogen consumption and therefore, the

bulk of the production from a new world-scale nitrogen complex in Bolivia will need to be exported.

Brazil, Argentina, Mexico and Chile are the Latin American countries that will show the most growth in

urea consumption and imports. The major challenge for a new ammonia and urea manufacturing in

Bolivia is to be competitive and this requires a relatively low feedstock costs. Information on feedstock

costs in Bolivia were not provided but BSC believes that the worlds lowest cost ammonia producers have

a current feedstock costs below $2 per thousand cubic feet (million BTUs). At $2 gas, a new, efficient

ammonia/urea plant would have cash production costs of about $100 per tonne of urea. Debt service(principal plus interest) could add an additional $100 per tonnes during the first ten-years of the project.

At the bottom of the price cycle in 2012, BSC is forecasting that fob Caribbean urea price will bottom out


7/60



at around $230 per tonne. With $2 gas, this project should be able to cover production cost and service its

debt even at the bottom of the price cycle. Profit margins will increase substantially as the market

recovers.

1.Latin American Agriculture & Nitrogen Demand

World crop production will need to increase to satisfy future demand for food, feed, natural fibers and

fuels. With proper land use practices, Latin America (Central & South America) has the potential to

become the major supplier into these growing world agricultural markets. This region currently plants

more than 120 million hectares of eleven major crops. Tropical forests and grassy plains occupy a large

portion of the surface in a number of these countries. The use of these forest lands for timber, for tropical

products, for crop production or for cattle grazing can help alleviate poverty within the country as well as

provide an opportunity for exports. But this land can also be degraded if used incorrectly. Improvements

in land management and agricultural technology will be necessary to make this land sustainable for future

generations while reducing ecological degradation. Issues of land ownership, international trade, national

credit policies, the cost of capital and some Government reforms will also be needed.

Latin America produced about 14% of eleven major world crops on an estimated 120 million hectares of

land in 2008. Soybeans and corn were the largest in terms of volume, each accounting for an estimated

116 million tonnes of production. In terms of world market share, soybeans production in Latin American

accounted for 53% of global production while corns market share was 15%. Latin American is also

dominant in terms of sugar production with a 32% world share. Brazil is the regions largest crop

producer accounting for an estimated 62 million hectors harvested for these eleven crops and a 44% share

of the Latin American market. Argentina is the second largest with an estimated 30 million hectors and a

31% share followed by Mexico at about 11 million hectares with 11% of Latin American production.

Table 1: Estimate Harvested Acreage & Production in Latin America

in 2008

Harvested(millions of

hectares)

Production(millions of

tonnes)

Share of

Production(% of

world)Soybeans 41.4 116.1 53%

Corn 31.2 116.4 15%

Wheat 9.5 27.0 4%

Rice 5.5 17.3 4%

Sorghum 4.2 12.0 19%

Sunflower 2.5 3.6 12%

Cotton 1.8 9.5 8%

Barley 1.3 3.5 3%

Oats 0.7 1.4 6%

Rye 0.1 0.1 1%

Sugarcane 22.0 (e) 53.1 32%

Total Eleven Major Crops 120.1 360.0 14%


8/60



The above list of crops excludes many smaller volume, yet important crops like fruits and vegetables,

floral and ornamentals, tobacco, potatoes, coffee, cocoa, nuts and more. These crops represent additional

opportunities for international trade and fertilizer consumption.

The following is a summary of the main crops and their growing regions:

Soybeans, although only introduced into Argentina in the 1950s and Brazil on the 1960s are

the most important cash crop grown in Latin America.

o In 2007, an estimated 41.4 million hectares were harvested in all of Latin America.

Their success is evident in Brazil and Argentina who have become the worlds second

and third largest producer and exporter of the soybeans. By the turn of the 21st century,

Paraguay had also become one of Latin Americas top exporters of soybeans.

o Since legumes require little or no nitrogen to grow (0 to 10 Kg Nitrogen/Ha), they are

not an important consumer of nitrogen.

In total, food and feed grain crops (corn, wheat, rice, barley, sorghum, rye and oats) are even

larger than soybeans with an estimated 52.5 million hectares planted in 2007.

o Corn or maize is native to tropical America and is the second largest crop grown in

Latin America with an estimated 31 million hectares harvested in 2007. Brazil, Mexico

and Argentina are the regions largest producers. Throughout the 20th century Argentina

has emerged as the worlds second corn exporter. Nitrogen use on corn is intensive with

application rates of 50 to as much as 150 Kg Nitrogen/Ha common.

o Wheat is mostly grown in northern Argentina, south-western Uruguay, Brazil and

Mexico accounting for an estimated 9.5 million hectares harvested in 2007. Argentina

is one of the five major wheat exporters along with Australia, Canada, the EU and theUnited States. Nitrogen application rates on wheat depend on where it is grown but

rates of 40 to as much as 150 Kg Nitrogen/Ha found in the region.

o Rice - a dietary staple in several countries is most successfully grown in the Savannah

and rain forest climatic areas of Brazil and Colombia as well as on the Peruvian coast.

In 2007, an estimated 5.5 million hectares were harvested in 2007. Rice is also

intensively fertilizer with application rates from a low of 40 to a high of 150 Kg

Nitrogen/Hg.

Sugarcane adapted well to the South American environment when introduced by the Europeans

in colonial times. Currently, an estimated 22 million hectares of sugarcane was harvested in

Latin America during 2007. In northern Brazil it is an important part of their economy. Sugar

cane and beets are also grown in Mexico, Guatemala, Argentina, Colombia and a number of

other Latin countries. Nitrogen application rates on cane can range from 40 to 140 Kg

Nitrogen/Ha.

Cacao, the source of cocoa, is native to the Amazon region and is an important crop particularly

in Brazil. Nitrogen consumption on cocoa is generally less than 50 Kg/Ha.

Other crops of coffee, potato, sweet potato, cassava, fruits and vegetables are also important

local crops in many countries within the region. All consume nitrogen.


9/60



According to Global Insite, Latin Americas harvested crop acreage will continue to increase during the

next 10-years, expanding by about 10 million hectares with most of this growth in Brazil (Cerrado) and

Argentina (Pampas).Brazil has about 4% of the worlds arable land and according to one source at least

40% of it is unused. Brazil covers nearly half of the South American continent. Because of its abundant

rainfall, tropical to sub-tropical climate and available forest and woodlands, Brazil should become the

worlds new breadbasket. Others believe that the rain-forest of Brazil should be left alone because of the

potential for significant damage to the environment of the region and the world.

Argentinas most densely populated region, the Pampas, is also the most productive in terms of

agriculture with a focus on cereals, oil crops and ranching. Argentina has an estimated 30 million hectares

of arable and permanent cropland.

Brazil, Argentina andMexico are the largest consumers of fertilizers. Application rates on maize, rice

and wheat are relatively low when compared to the farmers in West Europe and the U.S.The expansion of

planted acreage and growth of conversion from pasture to crop production is expected to continue over

the forecast. This land will be planted mostly to grains. Demand for ethanol will also increase acreage

devoted to sugarcane. Argentina and Brazil are two of the worlds largest soybean producers. Reduced

soybean planting in North America will provide an opportunity to increase planting in Latin America.

Soybeans are a nitrogen-fixing crop, requiring only a minimum nitrogen application.

The consensus among agronomists is that fertilizers are responsible for roughly one third of the increase

in world grain production. The balance is provided by irrigation, improved crop varieties, cultivation

practices, weed and insect control and planting density. According to the International Plant NutrientInstitute (IPNI), fertilizers boost crop yield, improve and enhance the physical quality of the soil and

provide disease resistance to the crops they feed.

According to a recent International Fertilizer Industry Association (IFA) report entitled, Assessment of

Fertilizer Use by Crop at the Global Level published by Patrick Heffer of the IFA, cereals account for

56% of the total nitrogen fertilizer consumption worldwide. Wheat contributes 19% of the worlds

fertilizer nitrogen followed by rice and maize (corn) at 16% each and other coarse grains with about 5%

(Diagram below).Oil crops (soybeans, oil palm and other oil crops) represent about 7%, while cotton and

sugar crops are estimated at 4% and 3% and fruits & vegetables are at 15%.


10/60



Diagram 1: Nitrogen Fertilizer Use by Crop at the Global Level

IFA

2.Latin American Nitrogen Consumption by MajorCountry

Latin Americas apparent consumed of nitrogen is an estimated at 8.1 million tonnes in 2007 accounting

for an estimated 7% of the worlds total.

Table 2: Latin Americas Domestic Nitrogen Apparent Consumption

(thousand of tonnes nitrogen)

1997 2007 2017 2027 Change

Central America 2007 to 2027

Belize 1 3 6 7 3

Costa Rica 84 61 79 94 33

Cuba 121 95 61 81 -14

Dominica 8 7 8 8 1

Dominican Republic 49 34 56 70 36

El Salvador 58 37 53 68 31

Guatemala 109 132 153 177 45

Haiti 6 0 1 1 0

Honduras 66 90 79 96 5

J amaica 8 8 14 17 9

Martinique 4 3 1 1 -1

Mexico 1,594 1,540 1,704 2,030 490

Nicaragua 26 45 40 48 4

Puerto Rico * 12 1 2 2 1

Panama 14 14 16 19 5

Trinidad 2 18 36 71 53

Total Central America 2,162 2,089 2,308 2,791 702


11/60



Table 2: Latin Americas Domestic Nitrogen Apparent Consumption

(thousand of tonnes nitrogen) Con c lu d e d .

1997 2007 2017 2027 Change

South America

Argentina 392 973 1,386 1,780 807

Bolivia 7 4 11 15 12

Brazil 1,957 3,323 4,876 6,130 2,807

Chile 246 395 446 546 151

Colombia 330 471 592 727 256

Ecuador 134 121 124 155 34

Fr Guiana 1 2 1 1 -1

Guyana 11 13 19 24 12

Paraguay 2 2 18 22 20

Peru 154 312 586 731 419

Surinam 7 3 5 6 3

Uruguay 38 101 145 181 80

Venezuela 230 268 425 507 240

Total South America 3,509 5,987 8,633 10,824 4,837

Total Latin Ameri ca 5,671 8,075 10,941 13,615 5,540

Nitrogen in fertilizers was estimated 6.4 million tonnes while nitrogen in non-fertilizers was estimated at

1.7 million tonnes. The BSC forecast for nitrogen consumption in 2017 is 10.9 million tonnes and in 2027

is 13.6 million tonnes. This forecast represents a growth rate of 2.6% per year for the Latin American

region during this twenty-year forecast period beginning in 2007 to 2027. The share of nitrogen for

fertilizers and non-fertilizers is expected to remain about the same at an 80%/20% split.

The following is a brief review of crop production and nitrogen use for the major nitrogen consuming

countries in Latin America. Ammonia consumption consumed in converted products that were exported is

excluded when calculating nitrogen consumption even though the ammonia was consumed domestically.

2.1Argentina

Nitrogen consumption in Argentina was estimated at 1.0 million tonnes in 2007. Approximately 90% wasconsumed in fertilizers and 10% in non-fertilizer. Urea was the largest form of nitrogen with about 60%

of this total nitrogen consumption contributing about 0.6 million tonnes of N (1.2 million tonnes of urea),

supplied from both domestic production and imports. DAP and MAP supplied about 16% of total

nitrogen consumption estimated at about 160,000 tonnes of N (1.1 million tonnes of DAP & MAP). All

of Argentinas the DAP and MAP was imported. A small amount of ammonium sulphate estimated at

less than 25,000 tonnes of N (120,000 tonnes of ammonium sulphate) was used in fertilizers, all of this

was produced domestically. About 11% of the total nitrogen consumption was supplied as ammonium

nitrate estimated at 112,000 tonnes of N (328,000 tonnes of ammonium nitrate) used primarily for non-

fertilizer uses mainly in explosives.


12/60



Argentina is best known as a cattle-raising country on the grassy plains of Pampas. However, the pampas

is also the most productive crop producing region in Argentina. The total land area of Argentina is 274

million ha, of which 142 million ha is under permanent pasture, 34 million ha under arable crops and one

million ha under permanent crops. About 1.6 million ha are irrigated (FAO). About half of the farmers

cultivate rented land. Argentina can be divided into three large agricultural regions:

The humid region covering about 68 million ha (25 percent).

The semi-arid region, 48 million ha (15 percent), where irrigation is often necessary.

The arid region, 170 million ha (60 percent), consists of practically all of Patagonia to the

south of Rio Colorado. There is little agricultural activity in this region.

In terms of crops, nitrogen is used mainly on grain crops (corn, wheat, rice, barley, sorghum, rye and

oats) for domestic use in food and animal feeds and for export into the international market. Wheat and

corn receive about 60% of the nitrogen fertilizer consumption. Argentina is the worlds fourth largest

exporter of wheat (United States, Canada and Russia are larger) where about two-thirds of the countries

production is exported. In addition to wheat, Argentina is the worlds second largest exporter of corn next

to the United States where about three-fourths of their corn production is exported. Argentina is also third

largest soybean producer next to the United States and Brazil, but soybeans are legumes and require little

or no nitrogen to grow. Nitrogen use on sunflowers has also been increasing following planted acreage

upward. Fruit (citrus, grapes, apples & pears), industrial (cotton, sugar cane & tobacco) and horticultural

crops (potato, garlic, onion & tomato) are also important nitrogen consumers.

Nitrogen consumption in Argentina is forecast to grow from a current level of 1.0 million tonnes ofnitrogen to 1.4 million tonnes by 2017 and 1.8 million tonnes by 2027. This represents a growth of about

3.1% per year. This growth will come mainly from increased grain production, where application rates

are relatively low. Much of this grain production will be destined for the international market. Urea will

remain the principal nitrogen source where domestic consumption is forecast to double by 2027 from a

current 0.6 million tonnes of nitrogen (1.2 million tonnes of urea) to 1.2 million tonnes of nitrogen (2.5

million tonnes of urea).

Table 3: Argentinas Domestic Nitrogen Consumption

(millions of product tonnes)

1997 2007 2017 2027 Change

2007 to 2027

Ammonia 0.1 * * * * * * * *

Urea 0.5 1.2 1.9 2.5 1.3

UAN * * 0.3 0.4 0.5 0.2

AN 0.1 0.3 0.4 0.5 0.2

AS * * 0.1 0.1 0.2 0.1

DAP 0.5 0.5 0.6 0.7 0.2

MAP 0.1 0.6 0.8 1.1 0.5

Other

Total Nitrogen(1)

0.4 1.0 1.4 1.8 0.8

(1) Total nitrogen represents the value of the nitrogen in each product excludi ng nitrogen in exports.

Source: British Sulphur Consultants


13/60



2.2Bolivia and Paraquay

These two interior (landlocked) countries consumed an estimated 5,000 tonnes of nitrogen in 2007 with

an 60%/40% split between fertilizer and non-fertilizer uses. All of the fertilizer is imported. Urea is an

important nitrogen source for agriculture accounting for an estimated 1,100 tonnes of N (2,300 tonnes of

urea). Some DAP was also imported for agricultural use. Most of the ammonium nitrate is believed to be

used by the non-fertilizer explosives industry.

Soybeans are the largest crop in terms of acreage with Paraguay harvesting an estimated 2.6 million

hectares and Bolivia harvesting 0.7 million hectares. However, as we said a number of times above,

soybeans consume little or no nitrogen. The nitrogen consuming crops are mainly grains (corn, wheat,

and rice), sunflowers, potatoes, cotton and sugarcane. In Bolivia, an area of untapped arable land in the

eastern lowlands and higher fertilizer application rates could greatly increase crop production and

fertilizer consumption. Bolivia has one of the lowest rates of fertilizer application in the world.

Application rate in Paraguay are also relatively low with a major problem for nitrogen growth being the

high level of soybean production when compared to grain crops.

Table 4: Bolivia & Paraguays Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia * * * * * * * * *

Urea 0.005 0.002 0.031 0.039 0.037

UAN * * * * * * * * *

AN 0.5 0.010 0.012 0.015 0.004

AS * * * * 0.002 0.003 0.003

DAP 0.009 0.011 0.053 0.063 0.052

MAP 0.006 * * * * * * * *

Other

Total Nitrogen(1)

0.175 0.005 0.028 0.035 0.030



Nitrogen consumption is forecast to increase at about six fold, but from a very low base. Urea will

become the nitrogen source of choice with a 50% share of total nitrogen in 2027.

2.3Brazil

Brazil is the largest fertilizer consumer in Latin America with an estimated 3.3 million tonnes of nitrogen

used in 2007. An estimated 85% of Brazils nitrogen is used in fertilizers (2.9 million tonnes of N) with

and remaining 15% is for non-fertilizer uses (0.4 million tonnes of N). Currently, about 62% of Brazils

nitrogen is imported. About half of the nitrogen is consumed as urea accounting for 1.6 million tonnes of

N (3.5 million tonnes as urea) with two-thirds of this urea imported. DAP and MAP are the next larger

supplier of nitrogen with an estimated 13% share of total N and accounting for 0.4 million tonnes of N

(3.8 million tonnes as DAP & MAP). All of Brazils DAP is imported while 60% of the MAP is

imported.


14/60



Ammonium sulphate accounts for about 14% of the total or about 0.5 million tonnes of N (2.4 million

tonnes as ammonium sulphate). About 90% of this ammonium sulphate is imported. Ammonium nitrate

consumption was estimated at about 13% of total N or about 0.4 million tonnes of N (1.4 million tonnes

as ammonium nitrate). Brazil uses ammonium nitrate for both fertilizers and non-fertilizers (explosives).

About 67% of the ammonium nitrate is imported. Brazil also uses an estimated 1.5 million tonnes of

ammonia that is converted into downstream nitrogen products like urea, ammonium nitrate, MAP,

ammonium sulphate and industrial products.

Table 5: Brazils Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia 0.4 0.4 0.4 0.4 * *

Urea 2.1 3.5 6.1 8.0 4.5

UAN * * * * * * * * * *

AN 0.1 1.4 1.6 2.0 0.6

AS 1.4 2.4 2.4 2.5 0.1

DAP 0.1 0.7 1.2 2.1 1.4

MAP 1.5 2.9 3.9 4.9 1.9

Other

Total Nitrogen(1)

1.9 3.3 4.9 6.1 2.8



In terms of crops, nitrogen is used mainly on grain crops (corn, wheat, rice) and also for potatoes and

sugarcane. Brazil is the worlds third largest producer (United States & China are larger) and exporter

(United States & Argentina are larger) of corn where about 12% of their corn production is exported.

Brazil is second largest soybean producer and exporter next to the United States but once again, soybeans

are legumes and require little or no nitrogen to grow.

Brazil has the worlds second largest ethanol program and with plentiful soybean supplies it is expanding

into biodiesel. More than half of the nations sugarcane crop is processed into ethanol, which now

accounts for about 20 percent of the countrys fuel supply. In Brazil, producers are getting 650 gallons of

ethanol per acre from sugarcane. In the U.S., between 560 and 580 gallons of ethanol is made from an

acre of corn. The outlook for global biofuels will depend on a number of interrelated factors

including the future price of oil, availability of low-cost feedstocks, and sustained commitment to

supportive policies by governments, technological breakthroughs that could reduce the cost of second

generation biofuels and competition from unconventional fossil fuel alternatives.

Brazil is prepared to take advantage of the growth with a commitment to both ethanol and biodiesel. We

have 80 million hectares of land in the Amazon that is going to turn us into the Saudi Arabia of

biodiesel, said Expedito Parente, a Brazilian chemical engineer who took out the first patent for the

manufacture of biodiesel on an industrial scale. Brazils President Lula is similarly enthusiastic. In the


15/60



next 1015 years, we will see Brazil become the leading producer of biodiesel, he said recently. Few

countries can compete with Brazil, because God gave us sun, land and hard-working people.

As indicated above, Brazil is one of the few countries that can provide new cropland in the future and the

agricultural forecasting service, Global Insite is projecting that Brazil will clear and plant up to 10 million

more hectares in the Cerrado during the forecast period. Sugarcane production is also expected to grow

sharply along with increased use of ethanol. Brazil is also the worlds largest exporter of coffee, sugar,

orange juice, beef and poultry.

Nitrogen consumption in Brazil is forecast to grow from a current level of 3.3 million tonnes of nitrogen

to 4.9 million tonnes by 2017 and 6.1 million tonnes by 2027 (Table above). The average growth rate

during the next twenty years is forecast at about 3.1% per year. This growth in nitrogen consumption will

come mainly from increased grain production, once again with much of this grain destined for the

international market. Urea will remain the principal nitrogen source with domestic consumption forecast

to more than double by 2027 from a current 1.6 million tonnes of nitrogen (3.5 million tonnes of urea) to

3.7 million tonnes of nitrogen (8.0 million tonnes of urea).

2.4Chile

Chile consumed an estimated 0.4 million tones of N in 2007 with about 60% for fertilizers and the

remaining 40% for non-fertilizers. About half of Chiles nitrogen consumption is in the form of urea

accounting for 0.2 million tonnes of N (0.4 million tonnes of urea). All of this urea is imported. About 0.1

million tonnes each of DAP and MAP are also used accounting for about 30,000 tonnes of N. All of theDAP and MAP is imported. All of the ammonium nitrate consumption in Chile is for explosives. Chile

exports about 25% of its ammonium nitrate production mainly into Peru and surrounding Latin American

countries.

Table 6: Chiles Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia * * * * * * * * * *Urea 0.3 0.5 0.5 0.6 0.2

UAN * * * * * * * * * *

AN 0.2 0.4 0.5 0.6 0.2

AS * * * * * * * * * *

DAP 0.1 0.1 0.1 0.2 0.1

MAP 0.1 0.1 0.1 0.1 * *

Other

Total Nitrogen(1) 0.2 0.4 0.4 0.5 0.1



The major nitrogen consuming crops in Chile are corn, wheat and sugar beets. Chile is a net importer of

food. Given its limited arable land, production on existing land will need to be farmed more intensely to


16/60



maximize crop production. There is interest in biofuels using sugar cane or rapeseed, but limited arable

land will temper this growth.

BSC is forecasting that nitrogen fertilizer consumption will grow from the current 0.4 million tonne level

to 0.5 million tonnes by 2027. This represents a growth rate of 1.6% per year. Urea will remain the

dominate nitrogen source for fertilizer use growing from the current 0.5 million tonnes of urea to 0.6

million tonnes of urea by 2027 maintaining a 50% plus share of total nitrogen consumption. Ammonium

nitrate growth will be mainly for explosives.

2.5Colombia

Nitrogen consumption in Colombia was estimated at 0.5 million tonnes of N in 2007. An estimated 75%

of the N is for fertilizers and 25% is ammonium nitrate for explosives. Urea is the dominate nitrogen

product for fertilizers with about half of total N supplied as urea estimated at 0.2 million tonnes of N (0.5

million tonnes of urea). All of Colombias urea is imported. The remaining N is supplied with DAP, MAP

and ammonium sulphate. The non-fertilizer consumption of ammonium nitrate is currently around 0.1

million tonnes of N or 0.3 million tonnes of ammonium nitrate.

Colombias major crops include coffee, corn, rice, sugar cane and cocoa. All are nitrogen consumers with

coffee being the largest. Most of Colombias sugar cane is grown in the Cauca Valley, a rich, mostly flat

agricultural valley with annual rainfall similar to the eastern Corn Belt of the United States, but summer-

like temperatures year-round. There are about a half million hectares of sugarcane in the valley, planting

and harvesting occurs year around, and yields exceeding 50 tons/ha are common, some of the highestyields in the world. Colombia is gearing up for increased sugarcane output for ethanol.

Nitrogen consumption in Colombia is forecast to increase from the current 0.5 million tone level to 0.7

million tonnes by 2027. This represents a growth rate of about 2.2% per year. Urea will remain the

dominate source for N on crops growing from 0.5 million tonnes of product to 0.8 million tonnes by

2027.

Table 7: Colombias Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia 0.1 0.1 0.1 0.1 * *

Urea 0.3 0.5 0.7 0.8 0.4

UAN * * * * * * * * * *

AN * * 0.3 0.3 0.4 0.1

AS 0.1 0.1 0.1 0.1 * *

DAP 0.1 0.1 0.2 0.2 0.1

MAP 0.1 0.1 0.1 0.2 0.1

Other

Total Nitrogen(1) 0.3 0.5 0.6 0.7 0.2




17/60



2.6Mexico

Nitrogen consumption in Mexico was estimated at 1.5 million tonnes of N in 2007. About 80% was for

fertilizer and 20% for non-fertilizers. Urea is also the dominate source of N with an estimated 47% share

of the total representing an estimated 0.7 million tonnes of N (1.5 million tonnes of urea). Nearly all of

this urea was imported. Ammonium sulphate is the next largest source of N with a 14% market share or

0.2 million tonnes of N (1.0 million tonnes of ammonium sulphate). Nearly all of the ammonium sulphate

is produced domestically. DAP and MAP provide about 0.1 million tonnes of N to Mexicos crops (0.5

million tonnes of DAP & MAP). About half of Mexicos straight ammonia and ammonium nitrate are

used for a variety of non-fertilizer products including fibers and explosives.

Mexican crops include grains (corn, barley and sorghum are the largest), coffee, citrus and sugar cane.

Sugar is Mexicos largest agricultural industry. The North American Free Trade Agreement (NAFTA)

will have important ramifications to the Mexican sugar industry and trade with the United States where

Mexican sugar exports have an advantage over exports from other regions. Mexico high production costs

will limit exports but the industry will continue to grow as it is very important to the country.

Nitrogen consumption in Mexico is forecast to increase from a current 1.5 million tonnes to 2.0 million

tonnes 2027. This represents a growth rate of 1.4% per year. Urea will remain the largest source for N

representing about 50% of the total growing to 1.0 million tonnes of N (2.1 million tonnes of urea). A big

jump in ammonium sulphate consumption is also forecast increasing its share of total N to 18% by 2027

(0.4 million tonnes of N or 1.9 million tonnes of product).

Table 8: Mexicos Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia 0.6 0.4 0.4 0.4 * *

Urea 0.9 1.6 1.7 2.1 0.5

UAN * * * * * * * * * *

AN 0.5 0.6 0.6 0.7 0.1

AS 1.5 1.0 1.4 1.9 0.9

DAP 0.2 0.3 0.5 0.5 0.2

MAP 0.1 0.2 0.2 0.3 0.1

Other

Total Nitrogen(1)

1.6 1.5 1.7 2.0 0.5



2.7Peru

Peru consumed an estimated 0.3 million tonnes of nitrogen in 2007. About 70% was for fertilizers and30% for non-fertilizers (explosives). Urea was the dominant nitrogen supplier accounting for about half of

the total nitrogen consumption at an estimated 0.2 million tonnes of N (0.4 million tonnes of urea). All of


18/60



this urea was imported. Most of the ammonium nitrate consumption of 0.1 million tonnes of N was for

non-fertilizer use in explosives (0.3 million tonnes of product). All of the DAP, MAP and ammonium

sulphate were also imported.

Table 9: Perus Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia * * * * * * * * * *

Urea 0.2 0.3 0.9 1.1 0.8

UAN * * * * * * * * * *

AN 0.1 0.3 0.4 0.5 0.2

AS 0.1 0.1 0.1 0.1 * *

DAP 0.1 0.1 0.2 0.2 0.1

MAP * * * * * * * * * *

Other

Total Nitrogen(1)

0.2 0.3 0.6 0.7 0.4



The main commercial crops in Peru are coffee, sugar cane, cotton, potatoes, coca and rice. The production

for local consumption, much of which is grown by peasants who still practice subsistence agriculture,

includes potatoes, corn, barley, wheat, manioc, sweet potatoes and vegetables and fruits. Agriculture is

concentrated mainly in the valleys of the coastal region, in the basins and valleys of the high level surface

of the Andes, and in the western margins of the eastern region. Irrigation in Peru has been and will remain

a major contributor to increasing the country's food security, agricultural growth and productivity, and

human development in rural areas.

Nitrogen consumption in Peru is forecast to increase from a current 0.3 million tonnes of N in 2007 to 0.7

million tonnes in 2027. Ureas share of total nitrogen consumption is forecast to increase from about 50%

to 67% during the forecast period. In 2027, Peru is expected to consume 1.2 million tonnes of urea, up

from 0.4 million tonnes in 2007.

2.8Uruguay

Nitrogen consumption in Uruguay was estimated at 0.1 million tonnes in 2007, all of this is believed for

fertilizer use. Urea accounts for about 60% of the total nitrogen consumption or 66,000 tonnes of N

(343,000 tonnes of urea). DAP and MAP supply most of the other nitrogen to the agriculture industry.

Uruguay's economy is characterized by an export-oriented agricultural sector and very dependant on its

larger neighbours, Brazil and Argentina. Agriculture makes up 10.5% of the countries GDP and consumes

9% of its labour force. Uruguay has an old fashioned, relaxed approach to farming and most farms

combine grass and pasture fed cattle with row crops. The main row crops in Uruguay are wheat, rice,

soybeans and barley. Application rates are low as is crop yield.


19/60



Uruguay had a bumper year in 2008 with growth in wheat production and exports. Soybeans are also

increasing. Uruguay is set to export a record 1 million metric tons of wheat from the 2008-09 crop due to

greatly expanded area and good growing conditions. The total area of wheat planted almost doubled this

season from 245,000 Ha last season to 460, 000 hectares. Fortunately for Uruguay they did not suffer the

same drought conditions as Argentina and consequently, total wheat output this season is expected to

reach 1.3 million - 1.4 million tons.

Table 10: Uruguays Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia * * * * * * * * * *

Urea * * 0.1 0.2 0.2 0.1

UAN * * * * * * * * * *

AN * * * * * * * * * *

AS * * * * * * * * * *

DAP 0.1 0.1 0.2 0.2 0.1

MAP 0.1 0.1 0.1 0.2 0.1

Other

Total Nitrogen(1)

* * 0.1 0.1 0.2 0.1



Nitrogen fertilizer consumption is forecast to increase to 0.2 million tonnes by 2027 with growth in urea,

DAP and MAP as nitrogen sources.

2.9Venezuela

Venezuela consumed an estimated 0.3 million tonnes of nitrogen in 2007. About 90% was for fertilizers

and 10% for explosives. About 65% was as urea or 223,000 tonnes of N (484,000 tonnes of urea). Nearly

all of this urea was from domestic production. A small volume of ammonium nitrate, ammonium sulphate

and DAP also provided nitrogen to Venezuela farmers. All of the ammonium nitrate was believed used

for explosives.

Corn, rice, sorghum, fruits, vegetables and sugar cane are the main crops. Based on application rate data,

we believe that corn consumes the most nitrogen followed by pasture, coffee then rice. The country

imports much of its food. Venezuela has a tropical climate. Many believe that Venezuelas agriculture

potential far exceeds current output levels given the vast untapped land and water resources that exist in

the central Orinoco plain and in the lowlands of the southern state of Amazonas.


20/60



Table 11: Venezuelas Domestic Nitrogen Consumption


1997 2007 2017 2027 Change

2007 to 2027

Ammonia 0.1 0.1 0.1 0.1 * *

Urea 0.3 0.4 0.6 0.8 0.4

UAN * * * * * * * * * *

AN * * 0.1 0.1 0.1 * *

AS 0.1 0.1 0.1 0.1 * *

DAP * * * * 0.1 0.2 0.1

MAP * * * * 0.1 0.1 0.1

Other

Total Nitrogen(1)

0.2 0.3 0.4 0.5 0.2



BSC is forecasting that nitrogen fertilizer consumption will nearly double over the twenty-year forecast

period to about 0.5 million tonnes of nitrogen in 2027. Urea is to remain the primary source of N growing

from a current 380,000 tonnes of urea to 768,000 tonnes by 2027.

3.Latin American Ammonia Consumption by Country

As shown in the Section 2 above, nitrogen can be supplied in many different nitrogen containing

products. The most popular products are;

Anhydrous Ammonia (AA) a gas with a nitrogen content of 82%,

Urea a solid product with a nitrogen content of 45% (coated urea) to 46% (uncoated urea),

Ammonium Nitrate (AN) a solid product with a nitrogen content of 33% to 34.5%,

Ammonium Sulphate(AS) a solid product with a nitrogen content of 20.5% to 21%,

Diammonium Phosphate (DAP) a solid product with a nitrogen content of 18%,

Monoammonium Phosphate (MAP) a solid product with a nitrogen content of 10% to 11%,

Urea Ammonium Nitrate (UAN) a solution product with a nitrogen content of 28% to 32%,

Each of these products has a different nitrogen content, different physical forms (solid, liquid or gas),

different chemical compositions and different pricing structures. The focus for the buyer (consumer) is on

the nitrogen and how it performs in the fertilizer or for the specific industrial application. For some

countries, availability may be the most important determining factor as many products are not produced

locally and is not available for local consumption.

In terms of markets, ammonia is different than urea the other converted nitrogen products. Ammonia is

mainly an intermediate product that is converted into another product. About 80% of worlds

ammonia is converted at the same manufacturing site (on-site) into converted nitrogen products. Theremaining 20% of ammonia production is referred to as merchant ammonia and is sold to another

fertilizer or industrial clients for further processing at their own factories. The bulk of this merchant


21/60



ammonia is traded in the international market while some additional sales are made within the country it

was produced to local ammonia converters.

Since virtually all of the worlds nitrogen consumption is based on ammonia, then world ammonia

consumption is essentially equal to the world nitrogen consumption. However, total ammonia

consumption in a particular country or region can be different than domestic ammonia consumption as

shown in Section 2 above to avoid double counting the nitrogen in converted products and because

nitrogen exports are eliminated to calculate domestic nitrogen consumption. The countrys total ammonia

consumption will exceed the countrys domestic ammonia consumption when the country uses ammonia

to manufacture converted nitrogen products and when it exports converted nitrogen products. In Latin

America; Argentina, Mexico, Trinidad and Venezuela are examples where the ammonia consumption

total exceeds domestic ammonia consumption. This gets a bit tricky but goes back to the statement that

ammonia is mainly an intermediate product. For reference, the Table 12 shows total ammonia

consumption for Latin America in 2007 at 4.6 million tonnes while domestic ammonia consumption from

Section 2 will show domestic ammonia consumption at a lower 1.1 million tonnes level. Once again, this

difference is in conversion and exports. Total ammonia consumption in Latin America is forecast to grow

to 8.8 million tonnes in 2017 and to 11.3 million tonnes in 2027.

Table 12: Latin Americas Total Ammonia Consumption

(thousands of tonnes Ammonia)

1997 2007 2017 2027 Change


Cuba 60 34 47 64 30Mexico 1,859 741 1,024 1,169 428

Trinidad 259 396 944 2,247 1,851

Total Central America 2,255 1,177 2,021 3,486 2,309

South America

Argentina 130 667 1,300 1,589 922

Brazil 1,331 1,501 2,635 3,050 1,550

Chile 63 191 323 407 216

Colombia 139 178 208 260 82

Peru 18 22 609 635 613

Venezuela 612 894 1,784 1,852 958


Total Latin America 4,549 4,632 8,882 11,284 6,652Totals do not add because of consumption fr om small countri es not shown.

3.1Cuba

In 2007, Cuba imported an estimated 34,000 tonnes of ammonia to make ammonium nitrate for fertilizer

use at their plant at Nuevitas. Ammonium nitrate production is forecast to increased, pulling total

ammonia consumption and ammonia imports upward to 47,000 tonnes by 2017 and to 64,000 tonnes by

2027.


22/60



3.2Mexico

The BSC forecast is that total ammonia consumption will increase from the current 741,000 tonne level in

2007 to 1.1 million tonnes in 2017 and 1.2 million tonnes in 2027 (once again, these numbers are

different than the Table 8 above because of conversion & exports).Ammonia is being consumed for both

fertilizer and non-fertilizer uses. On the fertilizer side, ammonia is consumed in a urea plant that was

reopened at Minatitlan, three ammonium nitrate plants, six ammonium sulphate plants along with the

restart of the Fertinal DAP/MAP at Lazaro Cardenas. Ammonia consumption for non-fertilizers is at a

number of different locations throughout the country. Some of this ammonia will be supplied from

captive production and some from imported ammonia.

3.3Trinidad

Nearly all of Trinidad nitrogen production is exported either as ammonia or as urea. In 2007, Trinidad

produced 5.2 million tonnes of ammonia and exported 4.8 million tonnes. One plant manufactured urea

(and consumed ammonia) with a reported production of 686,000 tonnes of urea requiring an estimated

397,000 tonnes of ammonia (allowing for 2% conversion losses).For this reason, domestic ammonia

consumption is estimated at 396,000 tonnes in 2007, all from a captive ammonia/urea plant.

At the end of 2009, a new ammonia/melamine/UAN plant will be commissioned at Point Lisas that will

consume up to 740,000 tonnes of ammonia at capacity. This plant is expected to be followed by at least

five new ammonia/melamine/urea/UAN plants with a conversion capacity of an additional 1.6 million

tonnes of ammonia by 2027.Trinidads domestic ammonia consumption is forecast to increase to 0.9

million tonnes in 2017 and 2.2 million tonnes in 2027. All will be supplied from captive ammonia

production.

3.4Argentina

In 2007, Argentina consumed an estimated 667,000 tonnes of ammonia, nearly all of this ammonia

consumed in the production of urea with the small volume consumed in the production of UAN,

ammonium nitrate and ammonium sulphate. Urea will remain the primary ammonia consumer with a new

ammonia/urea plant expected before 2017.With this expansion, domestic ammonia consumption is

forecast to grow from the 2007 level of 667,000 tonnes to 1.3 million in 2017 and 1.6 million in 2027.

Nearly all of this ammonia will be supplied from captive production.

3.5Brazil

Brazil consumed an estimated 1.5 million tonnes of ammonia in 2007.An estimated 0.7 million tonnes of

ammonia was consumed in the production of urea at three plants, an estimated 0.2 million tonnes for

ammonium nitrate production at two plants, an estimated 0.1 million consumed for ammonium sulphate

production at three plants, an estimated 0.2 million tonnes ammonium phosphate at five MAP plants and

the remaining 0.3 million tonnes consumed for non-fertilizer uses.


23/60



BSC is expecting that new capacity will be built for urea, ammonium nitrate and MAP resulting in

domestic ammonia consumption growing from a current 1.5 million tonnes to 2.6 million tonnes by 2017

and 3.1 million tonnes by 2027. Some of this ammonia will be supplied from captive production and

some from imported ammonia.

3.6Chile

In 2007, Chile imported an estimated 191,000 tonnes of ammonia to make ammonium nitrate for fertilizer

use at two plant located at Mejillones. Ammonium nitrate capacity and production is forecast to

increased, pulling ammonia consumption and imports upward to 323,000 tonnes by 2017 and to 407,000

tonnes by 2027. Most of this ammonia will be supplied from imports.

3.7Colombia

Colombia consumed an estimated 178,000 tonnes of ammonia in 2007 in the production of ammonium

nitrate and ammonium sulphate. Both are forecast to increase sending domestic ammonia consumption up

to 208,000 tonnes in 2017 and 260,000 in 2027. Most of this ammonia will be supplied from imports.

3.8Peru

Peru consumed an estimated 22,000 tonnes of ammonia in 2007, all of this for ammonium nitrate

production at their plant in Callao. Most of this was ammonia was imported. A new ammonia/urea plant

has been announced for Peru that is currently expected in 2012/13. Most of this plants ammonia is

expected to be converted into urea mainly for export. Most of this urea will be exported. As a result, total

ammonia consumption is forecast to increase to 609,000 tonnes in 2017 and to 635,000 by 2027.All of

this ammonia will be supplied from captive production.

3.9Venezuela

Total ammonia consumption in Venezuela was estimated at 0.9 million tonnes in 2007. Venezuela is the

largest nitrogen exporter in Latin America and converts or sells most of its ammonia production for theexport market. This ammonia is manufactured in four plants that also produce captive urea. Ammonia

consumption is forecast to increase along with new ammonia/urea capacity. By 2017, ammonia

consumption is forecast to reach 1.8 million tonnes and grow to 1.9 million tonnes by 2027. All of this

ammonia will be supplied from captive production.


24/60



4.Latin American Urea Consumption by Country

Urea is the most popular nitrogen containing product both in Latin America and globally and is expected

to continue growing, retaining a 50% or greater market share. In addition to being readily available, ureaoffers many preferred physical and chemical properties and an international market where competitive

and comparative pricing is available and mostly transparent.

Table 13: Latin Americas Apparent Consumption of Urea

(thousands of tonnes urea)

1997 2007 2017 2027 Change


Belize * * 6 10 12 6

Costa Rica 106 51 73 88 37

Cuba 128 27 35 43 16

Dominican Republic 63 56 62 75 19

El Salvador 52 13 17 21 8

Guatemula 113 159 173 211 52

Honduras 131 148 121 148 * *

J amaica 6 10 16 19 9

Mexico 909 1,599 1,711 2,083 484

Nicaragua 50 83 74 90 7

Puerto Rico * 19 2 * * * * * *

Panama 21 22 25 31 9Trinidad 12 6 6 7 1

Total Central America 1,635 2,151 2,326 2,831 680

South America

Argentina 498 1,247 1,922 2,533 1,286

Bolivia 5 2 11 14 12

Brazil 2,140 3,490 6,122 8,015 4,526

Chile 291 494 516 646 152

Colombia 368 498 671 850 351

Ecuador 248 195 184 235 40

Guyana 21 27 36 46 19

Paraguay * * 0 20 25 25

Peru 212 339 879 1,125 786

Surinam 14 6 10 13 7

Uruguay 35 140 194 249 108

Venezuela 324 380 638 768 387


Total Latin America 5,792 8,969 13,526 17,346 8,378

Totals will not add because of a small tonnage that are unaccounted for or sold into s mall Caribbean countries.

Urea and the other converted nitrogen products are essentially an end-market product moving to millions

of individual farmer customers or for the manufacturers of technical products based on urea. These

products are sold into both domestic (about 75%) and international markets (about 25%).


25/60



Urea is sold mainly as a fertilizer for use as such (direct application) or to a lesser extent for blending

with other phosphate and potash fertilizers to produce NP/NPK compound fertilizers. Non-fertilizer uses

of urea include:

Urea formaldehyde, used in resins and adhesives.

Melamine, used in laminates and plastics.

Animal feed supplement.

Fermentation agents, particularly for mono-sodium glutamate.

DeNox agent (used in removing nitrogen and nitrous oxides from combustion gases).

De-icer used on roads and runways.

Three countries account for about 70% of Latin Americas urea consumption. The largest urea consumer

was Brazil at 3.5 million tonnes about 39% of this urea is imported. Currently, about half of Brazils

nitrogen is supplied in the form of urea and urea will remain the principal nitrogen source for domestic

consumption. BSC is forecasting that urea consumption will increase to 6.1 million tonnes by 2017 and to

8.0 million tonnes by 2027.

The next largest urea consumption is in Mexico where 1.5 million tonnes were used in 2007. Urea will

remain the largest source for N representing over half of the total growing to 1.7 million tonnes in 2017

and 2.1 million tonnes in 2027. Nearly all of Mexicos urea was imported in 2007.

The third largest is Argentina at 1.2 million tonnes of urea. Argentina is a net importer of urea. Urea will

remain the principal nitrogen source where domestic consumption is forecast to double by 2027 from acurrent 1.2 million tonnes 2.5 million tonnes.

In Bolivia, BSC believes that a small amount of urea is transhipped into the country out of Argentina with

consumption currently representing an estimated 2,300 tonnes of urea. BSC is forecasting that urea

consumption in Bolivia will increase to 14,000 tonnes by 2027.

Other important consumers of urea are Venezuela, Chile, Colombia and Peru who used a combined total

of 1.7 million tonnes in 2007. Urea consumption in these four countries is forecast by BSC to increase to

3.4 million tonnes by 2027.

5.Latin American Ammonia & Urea Supply

Ammonia production in Latin America is currently in six countries with Trinidad accounting for about

half of the regions total production. Latin America is both an importer and an exporter of nitrogen

products. Imported nitrogen represents about 70% of the regions consumption. Nitrogen imports enter the

Latin America market mainly by vessel with Brazil being the largest import destination. Some inter-

regional trade exists but most of the nitrogen imports originate from outside the region. Latin America is


26/60



also an exporter of nitrogen with Trinidad accounting for 80% of the ammonia and urea trade from the

region.

With a strong and growing regional market, Latin Americas close proximity to the worlds largest

nitrogen import market in the United States and access to relatively low cost natural gas, there should be

considerable interest in investment in new nitrogen capacity in Latin America. However, investment has

been hampered by concerns over political risk in countries where the Government controls the natural gas

and can change the rules at any time after an investment is made.

5.1Nitrogen Production & Capacity

The follow is a summary of the major nitrogen products produced and consumed in Latin America.

Ammonia (82-0-0) production in Latin America in calendar-year 2007 was estimated at 9.3

million tonnes of product. About 40% of this ammonia production is converted on-site to other

nitrogen products with the remaining 60% sold as ammonia. Latin America has excess ammonia

production and Trinidad is the worlds largest ammonia exporter with 4.8 million tonnes shipped

from Trinidad and another 0.5 million tonnes from other Latin American sources (mainly

Venezuela) in CY 2007.In addition, this region imported 0.7 million tonnes of ammonia with

most (0.6 million tonnes) as inter-regional product out of Trinidad.

Urea (46-0-0) is the most widely used nitrogen fertilizer in Latin America. About half is

manufactured as a granular product and half as a prill. Urea production was estimated at 4.5

million in CY 2007. Latin America is short urea and imported 5.6 million tonnes and anadditional 0.9 million tonnes of inter-regional product. Latin America also exported 2.0 million

tonnes of urea in CY 2007; about half of this urea was exports into the Latin American market.

Latin America has only one producer of Nitrogen Solutions (28/32-0-0). Urea-ammonium-

nitrate solution (UAN) production was estimated at 0.3 million tonnes in CY 2007.

Ammonium Nitrate (34-0-0) production was about 40% of high-density material for fertilizer

use and 60% of low-density material for non-fertilizer uses. In CY 2007, an estimated at 1.2

million tonnes were produced. Exports were minimal. Latin America is short ammonium nitrate

importing an estimated 2.5 million tonnes into the region of in CY 2007.

Ammonium Sulphate (21-0-0)production was estimated at 1.4 million tonnes in CY 2007.

Most of the production is in Mexico and Brazil where it is consumed locally. Exports were

minimal. Latin America is short ammonium sulphate and imported a total of 2.6 million tonnes

in CY 2007 from the United States, Europe and the FSU with the largest import market in Brazil.

Latin America is an important consumer of Ammonium Phosphates including Mono-

Ammonium Phosphates (11-52-0) andDi-Ammonium Phosphates (18-46-0). Latin America

currently produces MAP only in Brazil with an estimated 1.1 million tonnes of production in CY

2007 with only a trace volume of DAP also in Brazil. The region imported an estimated 2.5

million tonnes of DAP and 3.0 million tonnes of MAP in CY 2007. Other North American nitrogen production includes Ammonium Thiosulphate (12-0-0),

Sodium Nitrates (16.7-0-0), Potassium Nitrates (13.8-0-44.3) andNPKs.


27/60



Table 14: Latin American Nitrogen Production in Calendar Year 2007


Central America South America Total

Ammonia (82% N) 6.0 3.3 9.3

Urea (46% N) 0.8 3.7 4.5

UAN (32% N) 0.0 0.3 0.3

Ammonium Nitrate (34% N) 0.1 1.1 1.2

Ammonium Sulphate (21% N) 1.0 0.4 1.4

DAP (18% N) 0.0 * * * *

MAP (11% N) 0.0 1.1 1.1

Total Nitrogen1

4.9 2.7 7.6

Overall, Latin America ammonia capacity was 10.9 million tonnes of 82% ammonia in seven countries

(Table 16). All of the 11 Latin American solid urea plants converted ammonia from adjacent ammonia

plants to take advantage of the bi-product CO2 from ammonia production. Solid urea capacity was 6.5

million tonnes in six countries. Only one UAN plants was operating at the beginning of 2008 with a

capacity of 0.5 million tonnes. Nine of the twelve ammonium nitrate plants operated on purchased

ammonia with total ammonium nitrate capacity of 2.3 million tonnes.

5.2Company Profiles of Major Nitrogen Players in Latin America

The nitrogen industry in Latin America is vertically integrated with the highest concentration of ammonia

capacity in Trinidad where about half of the regions capacity is operating. The largest nitrogen holding

companies were PCS Nitrogen in Trinidad, Koch Nitrogen in Trinidad, Pequiven in Venezuela, Yara in

Trinidad and PEMEX in Mexico as shown on the table below. Ammonium sulphate capacity was

estimated at 2.6 million tonnes in thirteen plants. Table 15 shows ownership of Latin American nitrogen

capacity followed by a profile of each of the major Latin American nitrogen manufacturers.

Table 15: Latin American Nitrogen Capacity Summary in 2007


Amm oni a Urea UAN AN AS Share*

PCS Nitrogen 2.1 0.7 - - - 19%

Koch Nitrogen** 1.9 0.5 - - - 18%

Pequiven (PVDSA)** 1.6 2.0 - - - 15%

Yara Nitrogen 1.3 - - - - 12%

PEMEX 1.0 - - - - 9%

Petrobras 0.9 1.1 - - - 8%

Profertil (jv Agrium) 0.7 1.1 0.6 - - 6%

Ultrafertil SA 0.6 0.7 - - - 6%

All Others 0.8 0.4 - 2.3 2.6 6%

Total 10.9 6.5 0.6 2.3 2.6 100%


* Share is based on total ammonia capacity.

** Includes Kochs 35% interest i n FertiNitro. For Pequiven, includes remaining capacity for FertiNitro & Venezuela.

1 Represents the nitrogen value in ammonia, the base product for all nitrogen production.


28/60



5.2.1 PCS Nitrogen TrinidadPCS Nitrogen Trinidad is a wholly-owned subsidiary of Potash Corporation of Saskatchewan (PCS).PCS

is an integrated producer of fertilizers, industrial and animal products producing all three fertilizer

nutrients. PCS is a public traded company and is the fifth largest supplier of nitrogen products to the

North American market as well as the largest nitrogen producer in Latin America. PCS currently

manufactures nitrogen products at four ammonia plants at Point Lisas in Trinidad with an ammonia

capacity of 2.1 million tonnes and one granular urea plant with a capacity of 0.7 million tonnes. PCS

produced at capacity and reported 2.1 million tonnes of ammonia and 0.7 million tonnes of granular urea

in 2007. Most of this production was exported into the United States.

5.2.2 Koch Nitrogen TrinidadKoch Industries is the largest private company in the Americas. Koch Nitrogen is a wholly-owned

subsidiary of Koch Industries. Koch Nitrogen is the fourth largest nitrogen supplier into North America

and the second largest nitrogen producer in Latin America. Koch currently manufactures ammonia at

three plants at Point Lisas in Trinidad with an ammonia capacity of 1.5 million tonnes. One of these

plants (Point-Lisas Nitrogen) is a 50/50 joint-venture with Terra Nitrogen in the United States. Koch also

has a 35% interest in the FertiNitro plant in Venezuela ammonia capacity is 1.2 million tonnes. Koch total

ammonia capacity in Latin America is 1.9 million tonnes and urea capacity is 0.5 million tonnes.

5.2.3 Pequiven (PVDSA)Petroquimica de Venezuela, S.A. (PVDSA) and also know as Pequiven is owned by the Venezuela

Government. This company either owns or has a majority interest in all nitrogen manufacturing within the

country. The FertiNitro nitrogen facility is owned 35% by Pequiven, 35% by Koch Nitrogen and 30% by

others. The Nitroven nitrogen facility is owned 90% by Pequiven and 10% by others. Total capacity

controlled by Pequiven is essentially all of the capacity in Venezuela. However, Pequivens ammonia

capacity (excluding the Koch share) is 1.6 million tonnes of ammonia and 2.0 million tonnes of urea.

5.2.4 Trinidad NitrogenTrinidad Nitrogen is a joint-venture between the Trinidad Government and Yara Trinidad. Yara manages

the plants and markets all of the ammonia produced from the three plants. Yara International ASA is the

parent company of Yara Trinidad. Yara International is a global fertilizer and chemical company with itsheadquarters in Norway. The company is traded on the Oslo Stock Exchange. These three plants have an

annual capacity of 1.3 million tonnes and generally operate at around the 1.0 million tonne level.

5.2.5 PEMEX, MexicoPetroleos Mexicanos (PEMEX) is the State-owned petroleum company that owns and operates the

Mexican petrochemicals industry including the ammonia plants. PEMEX operates all three ammonia

plants in Mexico with an annual capacity of 1.0 million tonnes. In 2007, ammonia production in Mexico

was reported at 753,000 indicating a utilization rate of 75%.


29/60



5.2.6 Petrobras, BrazilPetrobras is the largest integrated energy company in Brazil. They operate two ammonia and urea plants

with a capacity of 0.9 million tonnes of ammonia and 1.1 million tonnes of urea.

5.2.7 Ultrafertil , Brazil

Ultrafertil is the operating company for the nitrogen plants owned by Fosfertil, a privately ownedBrazilian fertilizer company. Fosfertil is also Brazils largest producer of phosphate fertilizers. Ownership

in Fosfertil is complex with Fertibras (Yara) at 15%, Fertifos (includes Mosaic) at 56%. Ammonia

capacity is 0.6 million tonnes and urea capacity is 0.7 million tonnes.

5.2.8 Profertil , ArgentinaProfertil is a 50/50 joint-venture between Agrium and Repsol YPF. Agrium is one of the largest fertilizer

companies in North America while Repsol is an integrated oil and gas company in Argentina. Argium

markets all of the production from this plant. Ammonia capacity is 0.7 million tonnes while urea capacity

is 1.1 million tonnes.

5.3Latin American Nitrogen Capacity by Plant

As indicated on Table 16 below, Latin America produced ammonia in 27 ammonia plants with an

ammonia capacity of 10.9 million tonnes (Table 16). The highest concentration of ammonia plants is in

Trinidad with a capacity of 5.2 million tonnes of capacity. This is followed by Venezuela with 2.0 million

tonnes and Brazil with 1.5 million tonnes of ammonia capacity.

Table 16: Nitrogen Capacity in Latin America in 2007: Plant List

(thousand tonnes of product)

Country Company Location Ammonia Urea UAN AN

Central America

Cuba Revol uti on Pl ant Nuevi tas - - - 197

Total Cuba - - - 197

Mex ic o PEMEX Camar go, Chi h. 132 - - -

PEMEX Cos ol eacaque, Ver . 450 - - -

PEMEX Cos ol eacaque, Ver . 450 - - -

Grupo Real del Monte Minat i tlan - 248 - -

Agr oni tr ogenad os Coatzac oal cos - - - 360

Fertimina Minatitlan - - - 180

Fertinal Lazaro Cardenas - - - 270

Ni tr oammonia (Ori ca) Moncl ova - - - 68

Total Mexico 1,032 248 - 858

Tr in idad Car ibbean Ni trogen Po in t L isas 610 - - -

Point Lisas Nitrogen Ltd Point Lisas 610 - - -

Nitrogen 2000 Point Lisas 610 - - -

PCS Nitrogen Point Lisas 520 709 - -

PCS Nitrogen Point Lisas 520 - - -


30/60



Table 16: Nitrogen Capacity in Latin America in 2007: Plant List

(thousand tonnes of product) Co n c lu d ed .

Country Company Location Ammonia Urea UAN AN



Trinidad Nitrogen Point Lisas 465 - - -

Trinidad Nitrogen Point Lisas 550 - - -

Yara International Point Lisas 310 - - -

To tal Tr in idad 5,207 709

Total Central America 6,239 957 - 1,055

South America

Argentina Fabricaciones Mi li tares Rio Tercero 21 - - 23

Petrobras Energi a Campana 119 190 - -Proferti l Baha Blanca 677 1,073 550 -

Total Argentina 807 1,263 550 23

Brazil Petrobras Camacari, BA 495 495 - -

Petrobras Laranjeiras, SE 413 594 - -

Ultrafertil SA Araucaria, PR 436 660 - -

Ul tr afer ti l SA Cubatao, SP - - - 100

Ultraferti l SA Piacaguera, SP 200 - - 407

Total Brazil 1,544 1,749 - 507

Chile ENAEX Mellijones - - - 100

ENAEX Mellijones - - - 350

Total Chile - - - 450

Colombia

Abonos Colombianos Cartagena 131 - - 232

Fertilizantes Colombianos Barrancabermeja 50 17 - 30

Total Col ombi a 181 17 - 262

Peru

Fertilizantes

Sinteticos Cuzco 32 - - -

Nitratos SA Callao - - - 45

Total Peru 32 - - 45

Venezuela Nitroven (PVDSA) El Tablazo 297 396 - -

Nitroven (PVDSA) El Tablazo 297 396 - -

Petroquimica

(PVDSA) Puer to Moron 243 248 - -

FertiNi tro Jose 1,188 1,452 - -

Total Venezuela 2,025 2,492 - -

Total South America 4,589 5,521 550 1,287

Total Latin America 10,868 6,478 550 2,342


31/60



6.Ammonia and Urea Capacity to 2027

The nitrogen market is cyclical. These cycles are the result of swings in the supply and demand balance

most often caused by the overbuilding of new capacity during periods when supply and demand is tight.

This tight market pushes prices and profit margins upward. The growth in new capacity will eventuallyexceed the growth in demand and the supply and demand balance swings from a tight market to a weak

market. This weak market pulls prices and profit margins downward. During the downward portion of the

cycle, little or no new capacity is built and some older, less efficient plants are closed until demand once

again catches up with supply at which time prices and profit margins begin to recover. The cycle is

repeated once again. The length of each cycle is different and typically last from 8 to 12 years.

Once financing is secured, the current lead time to build a new ammonia/urea plant can be up to 40

months and capital cost for a world scale (2,000 tpd ammonia and 3,500 tpd urea plant) is about $1.6

billion. This estimate of lead time has increased from about 32 months and the capital costs are nearly

twice as high as they were just four years ago when the nitrogen building cycle was beginning to

accelerate.BSC expects these estimates will retreat some from their current highs as raw material costs

decline along with new orders. Nevertheless, the point is that all ammonia/urea plants that will be

commissioned during the next three years and many of those over the next four years are already under

construction. Some of these may be delayed because of the current economic downturn but BSC believes

that most will eventually be completed. New capacity beyond the next four years is speculative and is

based on the BSC forecast of supply, demand and prices. The timing, size and location of this new

capacity is based mainly on competitive costs with a strong emphasis on the cost of feedstock along with

the overall production and delivered costs into a targeted market.

6.1Short-Term Ammonia Capacity Changes between 2008 to

2012

At this time, only one new ammonia plant is under construction, the Clico Energy plant at Point Lisas,

Trinidad that is expected to be commissioned in late 2009 or early 2010. This 610 thousand tonne plant

will convert all of its ammonia into melamine and about 1.2 million tonnes per year of UAN solutions.

Mexico is a high cost ammonia producer and BSC is forecasting that 0.9 million tonnes of ammonia

capacity will be closed before 2012 as nitrogen market prices and margins deteriorate. The State owned

PEMEX Petroleum Company has already closed more than 1.5 million tonnes of ammonia capacity since

2000.BSC does not believe that PEMAX will operate unprofitable ammonia plants and will opt to sell gas

into more profitable markets.


32/60



6.2Longer-Term Ammonia Capacity Changes to 2027

As indicated above, capacity changes beyond 2012 are speculative based on BSCs forecast of supply,

demand and prices. These changes are shown on Table 17 below. Latin American is one of the fastest

growing nitrogen markets and with relatively low cost available for sale or conversion, BSC is forecasting

that a number of new ammonia projects will be built over the twenty year period. Overall, the forecast

shows twelve projects with an estimated 8.6 million tonnes of new ammonia capacity built during the

next twenty years. The net increase in ammonia capacity is forecast to be 7.7 million tonnes of ammonia

with the closure of 0.9 million tonnes of capacity in Mexico. Most of these new ammonia projects will be

for conversion of ammonia into downstream urea or urea ammonium nitrate for the export market.

Table 17: Latin Americas Ammonia Capacity to 2027

(thousands of tonnes ammonia)

2007 2012 2017 2022 2027 ChangeCentral America

Mexico 1,032 132 132 132 132 - 900

Trinidad 5,257 5,867 7,187 8,847 9,847 4,640

Total Central America 6,289 5,999 7,319 8,979 9,979 3,980

South America

Argentina 807 847 1,347 1,347 1,347 540

Brazil 1,544 1,584 2,184 2,284 2,384 840

Colombia 181 181 181 181 181 - - -

Peru 32 32 732 732 732 700

Venezuela 2,025 2,025 2,685 3,685 3,685 1,660

Total South America 4,589 4,669 7,129 8,229 8,329 3,741Total Latin America 10,828 10,668 14,448 17,208 18,310 7,720Includes debottlenecking of existing capacity

6.2.1 TrinidadTrinidad should provide a number of nitrogen projects as new offshore natural gas reserves become

available. At least three new nitrogen projects have been proposed and investigated during the last three

years but none were awarded gas contracts and therefore were cancelled or put on hold. The Government

is committed to developing local gas-based industries and is actively working with their two gas

producing companies, British Petroleum (BP) and British Gas (BG), to increase domestic gas availability.

BSC is forecasting that in addition to the Clico project currently under construction, five world scale

ammonia plants will be built in Trinidad adding a total of 4.6 million tonnes of new capacity by

2027.Some of these projects will be with Trinidads existing ammonia manufactures and all will be joint-

ventures with some Trinidad ownership. Four of these new ammonia plants will be located south of Point

Lisas at La Brea where the Government is developing a new industrial complex.

6.2.2 ArgentinaArgentinas last investment into ammonia was a joint-venture with the Canadian company Agrium

commissioned in 2000 and 2001. Argentina will need more nitrogen to feed its growing population and

will encourage development of at least one, new world scale ammonia project before 2017. With limited

gas reserves and a number of local industries competing for a share of available gas, future project will be


33/60



limited. Ammonia capacity is forecast to increase by 0.5 million tonnes by 2016. Other projects are

possible if new gas reserves are found.

6.2.3 BrazilNo new capacity is currently planned for Brazil.BSC is forecasting that a new plant will be added around

2016 by one of the existing ammonia manufacturers (FAFEN or Ultrafertil) in either Camacari or the

Piacaguera region. Some debottlenecking of existing capacity is also expected to improve efficiency and

lower production costs. Ammonia capacity is forecast to increase by 0.8 million tonnes by 2016 and hold

at that level.

6.2.4 PeruA new ammonia/urea project, a joint-venture between the Argentina energy company Plus Petro and the

U.S. fertilizer company CF Industries is being investigated for Peru. While plans for this project appear to

have stalled since the downturn in the nitrogen market, BSC still believes a new 0.7 million tonne

ammonia plant will be built in Peru and is currently forecasting a 2013 start-up. Plus Petro has the gas

contract and appears eager to convert a portion of this gas into higher value downstream products like

ammonia. While Plus Petro would like to develop additional projects in Peru, alternative, more profitable

uses for this gas and the high capital costs to build a new ammonia plant will limit the number of projects.

6.2.5 VenezuelaA number of projects have been proposed for Venezuela with the last major ammonia plant

commissioned at Jose in 2001 by FertiNitro, a joint-venture between Petroquimica de Venezuela SA

(Pequiven) and the U.S. Company Koch Industries. BSC bel

Documents

CD4855_Ammonia__Urea_Markets_in_Latin_America_-_January_2009_(UPDATED_9th_Jan) - final BRITISH 02.pdf