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Yara Fertilizer
Industry Handbook
January 2017
List of contents
• Fertilizer industry overview
• What is fertilizer? p. 2
• Why mineral fertilizer? p. 5
• Environmental impact of fertilizer p. 9
• The fertilizer industry p.17
• Fertilizer industry dynamics p. 28
• Ammonia p. 30 • Urea p. 35 • Nitrates p. 40 • NPKs p. 47
• Industry value drivers p. 52
• Drivers of demand p. 55 • Drivers of supply p. 67 • Price relations p. 75 • Production economics p. 83
• Industrial applications p. 89
1
What is fertilizer?
2
Fertilizers are plant nutrients, required for crops to grow
• Crops need energy (light) CO2, water and minerals to grow
• The carbon in crops originates from CO2 absorbed through the leaves
• Crops absorb water and plant nutrients from the soil
• Plant nutrients are building blocks of crop material. Without nutrients the crops can not grow
• Mineral fertilizers provide plant nutrients for crops
• Three main nutrients: Nitrogen, Phosphorus and Potassium are primary nutrients
3
Principle of crop nutrition: crop growth is limited by the most
deficient nutrient
• Law of the Minimum” (Liebig, 1843): “Crop yields
are proportional to the amount of the most
limiting nutrient.”
• Plant nutrients have specific
and essential functions in crop metabolisms
• They cannot replace each other, and lack of any
one nutrient limits crop growth
• It is therefore essential to focus on a balanced
nutrition of all plant nutrients
YIELD
Pota
ssiu
m
Phosphoru
s
Calc
ium
Soil conditions
& other growth
factors
4
Why mineral fertilizer?
5
Mineral fertilizer replace nutrients removed with the harvest
Mineral fertilizers are necessary to replace those nutrients that have been removed from the field
N Organic
material,
humus
Crop residues are decomposed to minerals
Mineralisation
• Export of nutrients with the
harvest
• Growing demand for food
& feed
Supply of crop residues and
organic fertilizer
P K
S Ca
Mg
NPK
6
Mineral fertilizer characteristics compared to organic fertilizer
Characteristics Mineral fertilizer Organic fertilizer
Nutrient
source
Nitrogen from the air,
Phosphate and Potassium from deposits / mines Crop residues and animal manures
Nutrient
concentration
High nutrient concentration
Low logistical cost
Low nutrient concentration
Large volumes to transport and store
Nutrient
availability Immediately available for the crop
Variable, organic material needs to be
decomposed to release nutrients
Quality Traceable and consistent Often inconsistent
Dependent on source
7
Nitrogen – the most important nutrient
60%
23%
18%
Total 181 million
tons nutrients
Nutrient characteristics
Primary benefit Application Industry structure
Improve
crop quality
Increase crop size
Most important and
commonly lacking
nutrient
Application
can be varied
Annual application
critical
Fewer suppliers, production
discipline
Fragmented Industry, under
consolidation
More dynamic prices, but
stable volume
Potassium (K)
Phosphorus (P)
Nitrogen (N)
Source: IFA 2015/2016 season (June 2016 estimates)
8
Environmental impact of fertilizer
9
Fertilizer reduces the carbon footprint of farming
Application
Higher efficiency with nitrates
Precision farming tools
Fertilizer - an efficient solar energy catalyst
Production is a marginal part of the carbon footprint; efficient application is more important
Huge positive effects of fertilizer use, since higher yields enable lower land area use
Production
Yara’s production is more energy-efficient than competitor average
© Yara 2010
PRODUCTION TRANSPORTATION FARMING HARVEST CONSUMPTION CAPTURE
3.6 kg
CO2 eqv
0.1 kg
CO2
5.6 kg
CO2 eqv
75 kg
CO2
75 kg
CO2
10
The right nitrogen fertilizer rate is key to avoid nitrate leaching
0
20
40
60
80
100
4
5
6
7
8
9
10
none medium right too much
Grain yield (t/ha) Nitrate in soil after harvest (kg N/ha)
• Leaching of nitrate into groundwater
affects water quality and contributes to
eutrophication
• Oversupply of organic and mineral
nitrogen fertilizer represents the main
driver for nitrate leaching
• Nitrogen fertilizer application according
to crop demand does not increase
nitrate leaching
Supply of N fertilizer to the crop
11
Choosing the right nitrogen fertilizer to avoid ammonia
volatilization losses
0.7 1.8
3
10.8
19.9
CN CAN AN UAN Urea
Ammonia volatilization in % NH3-N per unit N applied
Reference: EMEP/EEA emission inventory guidebook 2013
• Volatilization of ammonia gas contributes
to pollution, affects air quality and induces
soil acidification
• The use of organic or urea-based nitrogen
fertilizer represents the main driver for
ammonia losses
• Nitrate-based N fertilizer or immediate
incorporation of urea into the soil avoids
volatilization losses
N fertilizer
12
Water availability is the main constraint on agricultural production
in many important growing areas
Water scarcity is a clear issue Agricultural water use has to
become more ”intelligent”
The segment has seen
strong growth historically
17% of cropland is irrigated, it is twice as
productive as other land and contributes
40% of world food production…
…but it uses 70% of all freshwater…
…thus, productivity growth from irrigation
has to come from better use of water
0.4 1.0
1.8
3.2
6.2
10.2
1981 1986 1991 2000 2006 2009
Mill.ha
Yellow River
Dry on last 100km:
1972: 15 days
1997: 226 days
Lake Aral
Only ~25% of
original size
Rio Grande
failed to reach
Gulf of Mexico in 2001
for first time
Source: World Bank, 2008 Source: Kulakarni et.al., 2006; Gopalakrishnan,
2008; USDA, 2008; MOI, 2009 Source: Center Pivot: carrot production in Brazil
Expansion of Micro-irrigation
CAGR
11.9%
13
Good crop nutrition enables increased water efficiency:
“more crop per drop”
600
510
450
380
No fertilizer low medium right
Water requirement (liter per kg of wheat grain)
Supply of fertilizer to the crop
• Water is a key input for crop growth
• About 70 % of global water consumption is
for agriculture
• Sub-optimal crop nutrition tends to drive
over-consumption of water
• Optimized crop nutrition improves water use
efficiency
Source: Yara research
14
Carbon footprint of urea production differs by region
3.50
3.99 3.78
3.61
6.53
4.14
EU 27 Russia US Africa China(coal-based)
China(gas-based)
kg CO2 equivalents per kg urea nitrogen
Source: Fertilizers Europe (2016) for production in 2014
15
Carbon footprint of ammonium nitrate production by region
3.42
7.23 6.82
11.06
8.61
EU 27 Russia US China(coal-based)
China(gas-based)
kg CO2 equivalents per kg AN nitrogen
Source: Fertilizers Europe (2016) for production of granulated AN in 2014
16
The fertilizer industry
17
Consumption trend per nutrient
0
20
40
60
80
100
120
140
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017F 2020F
Million tonnes nutrient
N 1.2% growth pa.*
1.6% growth pa.* P
K 2.3% growth pa.*
Source: IFA, June 2016 * CAGR avg. 2013-2015 to 2020
18
Urea 58%
UAN 5%
AN/CAN 9%
NPK 6%
DAP/MAP 7%
Ammonia 4%
Other 11%
MOP/SOP 76%
NPK 21%
Other 3%
DAP/MAP 57%
NPK 18%
SSP 9%
TSP 6%
Other 10%
Key global fertilizer products
108 million tonnes*
32 million tonnes 41 million tonnes
Nitrogen N
Potash K2O Phosphate P2O5
Source: IFA 2015 (nutrient totals) and 2014 (product split) * Does not include industrial nitrogen applications
19
Wheat 18%
Rice 15%
Maize 17%
Other cereal 5%
Oilseeds 7 %
Roots/Tubers 3%
Cotton 4%
Sugar crops 4%
Fruit & veg 15%
Other 12%
Wheat 16%
Rice 14%
Maize 16%
Other cereal 5%
Oilseeds 11%
Cotton 4%
Sugar crops 4%
Fruit & veg 15%
Other 12%
Nutrient application by crop
Source: IFA (2010/11)
N + P + K Nitrogen
By tonnes nutrient
20
Fertilizer consumption by region – 5 key markets Million tons nutrient consumption
Source: IFA 2014
Russia
India
West/Central
Europe
Brazil
United States
China 4.44.1
K P N
11.8
2.92.6
K P N
11.4
5.44.8
3.9
K P N
2.5
6.0
P N
16.8
K
7.4
K P
11.4
N
32.9
0.4
0.6
1.5
K N P
21
Nitrogen consumption in key regions
0
10
20
30
40
50
60
70
80
2000 2004 2008 2012 2016F 2020F
Million tonnes nitrogen
Europe: 0.8% *
North America: 0.4%*
Latin America: 4.4%*
Asia: 1.4% *
Source: IFA, June 2015 * CAGR 2015-2020
22
• Despite a consolidation trend, the industry is
still higher fragmented
• Top 3 producers account for only ~15% of
world capacity
Phosphate
(P)
• More concentrated than N-industry
• Top 3 producers account for ~24% of capacity
Potash
(K)
• Highly concentrated industry
• Top 3 producers account for ~48% of capacity
The N industry is fragmented, while the P and K industries are
more concentrated
Nitrogen1
(N)
2015 figures1, million tonnes nutrient
Mosaic
OCP India
PhosAgro
GCT PotashCorp
Vale
JPMC
Ma'aden (excl.
Mosaic)
China
Other
PotashCorp
Belaruskaly
Mosaic Uralkali
K+S Kali
China
Other
Source: IFA 23
Yara CF Agrium TOAZ PCS Orascom
Eurochem Uralchem
Koch
Sabic Chinese players
Other non-Chinese
1) Nitrogen: 2013 figures
Nitrogen fertilizer application by region and product
Source: IFA 2014
China (32.9 mt)
India (16.8 mt)
West /central Europe (11.4 mt)
Brazil (3.9 mt)
USA (11.8 mt)
Urea 21%
Nitrates 43%
UAN 12%
NPK 11%
DAP/MAP 3%
Other 11%
24
Urea 55%
Nitrates 12%
NPK 1%
DAP/MAP 22%
AS 12%
Urea 22%
Ammonia 27 %
Nitrates 2%
UAN 28%
NPK 7%
DAP/MAP 6%
Other 7%
Urea 70%
ABC 17%
NPK 6%
DAP/MAP 9%
Other 1%
Urea 84%
NPK 3%
DAP/MAP 13%
Other 1 %
Nitrogen fertilizer application by region and crop
Source: IFA 2010/11
Russia
India
EU-27
Brazil
USA
China
25
Maize 25%
Sugar crops 22%
Cotton 4%
Fruits & vegtables
10%
Rice 5%
Other 30%
Fruits & vegetables
30%
Rice 15% Maize
15%
Wheat 13%
Oilseeds 6%
Cotton 3% Other 16%
Wheat 24%
Rice 30%
Oilseeds 8%
Cotton 9%
Fruits & vegtables
6%
Other 24%
Wheat 48%
Other cereals
14%
Sugar crops 8%
Maize 7%
Oilseeds 2%
Other 21%
Wheat 28%
Maize 13% Other
cereals 15%
Oilseeds 10%
Fruits & vegtables
7%
Other 27%
Maize 49%
Wheat 13%
Fruits & vegtables
2%
Other cereals
3%
Other 33%
Source: Thomson Worldscope
Fertilizer company comparison
4.3
5.4
4.6
6.3
8.9
14.8
13.4
3.9
5.5
3.9
5.3
7.5
13.9
12.2
CF
ICL
K+S
PCS
Mosaic*
Agrium
Yara
L4Q 2015
Revenues - USD billion
26
Yara – the leading nitrogen fertilizer company
1) Incl. companies’ shares of JVs
2) As of end 2016
Source: Yara estimates, company info
9.9
8.42
7.2
4.2 4.1
7.4
4.5
3.2 2.7
2.3
2016 production capacity, excl. Chinese producers1 (mill. tonnes)
Global no 2 in ammonia Global no 1 in nitrates Global no 1 in NPK
* Incl. TAN and CN * Compound NPK, excl. blends
27
5.3
3.3 2.7 2.7
1.9
Yara – the European cost leader
Ammonia cost position Nitrate cost position
Production cost index: 100 = European industry average excl. Yara
Index Index
50
60
70
80
90
100
110
50
60
70
80
90
100
110
Average cost Yara’s European plants
European average (excl. Yara) Source: Fertilizer Europe
28
Ammonia
29
Global ammonia production
60
80
100
120
140
160
180
200
Million tonnes
Total production
Source: IFA
2005-2015 trend growth rate = 2.2%/year
66.6
15.2 13.8 11.7
6.0 5.3 4.9 3.7 3.7 3.7
Million tonnes
10 largest producers (2015)
30
Most of global ammonia production is upgraded to urea and
other finished fertilizer
143
37
Fertilizer Industrial use
Million tonnes
Ammonia use
Urea Nitrates DAP/MAP NPK Other N
Source: Fertecon
0
5
10
15
20
25
Million tonnes
Ammonia trade - seaborne
World trade
Yara trade
Source: Yara, IFA
31
Global ammonia trade
Source: IFA
4.5
3.6
1.2 1.2 1.1 1.0 0.8 0.7 0.7
0.4
Million tonnes
10 largest exporters (2015)
5.4
2.3
1.0 0.9 0.9 0.8 0.7 0.6 0.6 0.5
Million tonnes
10 largest importers (2015)
32
Main ammonia trade flows (2015)
1.7
0.5 0.9
0.6
1.2
3.6
0.9
1.1 2.6
1.5
Million tonnes
0.5
0.6
33
Source: IFA 2015 trade statistics ( covering 85% of total trade)
Urea
34
Global urea production
Source: IFA
71.0
24.0
7.2 7.0 6.2 5.7 5.3 4.0 4.0 3.8
Million tonnes
10 largest producers (2015)
2005-2015 trend growth rate = 3.1% p.a.
60
80
100
120
140
160
180
200
Million tonnes
Total production
35
Global urea trade
Source: IFA
13.7
5.4 5.0
3.7 3.4 2.6
1.9 1.6 1.5 1.0
Million tonnes
10 largest exporters (2015)
10.6
7.9
4.2
2.1 1.8 1.7 1.2 1.1 1.0 0.9
Million tonnes
10 largest importers (2015)
36
Main urea trade flows (2015)
2.2
9.3
0.9 0.5 2.2
4.3 1.8 1.2 1.0
1.5
2.6
Source: IFA 2015 trade statistics ( covering 87% of total trade)
Million tonnes
1.1
0.6
7.0
0.8
3.0
2.4
0.6
37
Chinese domestic urea price and export tax set the global floor
price
Source: China Fertilizer Market Week, International publications
0
100
200
300
400
500
600
USD/mt Urea price China (inland proxy price)
Urea fob Black Sea
38
Nitrates
39
2.2 2.3 1.8
0.9 1.0
0.2 0.6 0.4 0.3 0.1
1.6
0.2
0.1
0.2 0.1
0.7 0.0 0.3 0.4
Million tonnes
nitrogen(AN/CAN)
10 largest producers (2015)
Domestic
consumption
Exports
Nitrate production
Source: IFA, AN/CAN including nitrate part of UAN, as are
industrial grades
7.4
4.5
3.2 2.7
2.3 2.2 1.9 1.8 1.8 1.6
Million tonnes
AN/CAN/CN
10 largest producers by company (2015)
Source: Yara estimates, company info
40
Nitrates are products with a nitrate content of 50 % or more
N fertilizer N content Nitrate (% of total N) Other nutrients
CAN (calcium ammonium nitrate) 27% 50% 4% MgO
AN (ammonium nitrate) 34% 50%
NPK various about 50% P & K
CN (calcium nitrate) 15.5% 93% 19% Ca
Urea 46% 0%
UAN (liquid urea ammonium nitrate) 28% 25%
ASN (ammonium sulfate nitrate) 26% 25% 13% S
AS (ammonium sulfate) 21% 0% 24% S
41
Nitrate is the most important fertilizer in Europe
Nitrate (NO3-) 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-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.
Urea (CON2H4)
Urea-N needs to be converted into
ammonium-N before it is plant
available.
Nitrates vs. urea
42
Urea and UAN underperformance compared with ammonium
nitrate Trial results for arable crops (cereals, UK)
100
118 114
AN UAN Urea
Extra N required for same yield
%
To maintain the same yield, significantly more nitrogen was needed from urea and
UAN than from ammonium nitrate
12.6
12.1
12.3
AN UAN Urea
Protein content at identical N rate %
Protein content was significantly lower on fields fertilized with urea or UAN than with
ammonium nitrate
8.6
8.3 8.3
AN UAN Urea
Yield at identical N rate
Yield was also significantly lower with urea and UAN than with ammonium nitrate
%
Source: DEFRA
43
Yield advantage of nitrates in tropical climate Brazil, main season corn
2.0
4.0
6.0
8.0
10.0
12.0
0 50 100 150 200 250 300
Fertilizer N rate (kg/ha)
• Research shows that the benefits of nitrates
are even more pronounced in the tropics than
in colder climates
• YaraBela nitrate provides direct and efficient
uptake of nitrate-N
• Consistently lower NH3 volatilization losses
• Reduced acidification in the root zone,
supporting root growth and nutrient uptake
Urea
YaraBela Nitrates
Grain yield (t/ha)
Source: Fundation Bahia (2013)
Optimum N rate
44
Nitrates’ agronomic advantage has higher value for cash crops than
for commodity crops
100
1,016
Wheat/UK Oranges/Brazil
Index
Increase in crop production value using nitrates instead of urea
(160 kg N/ha) (180 kg N/ha)
1,553
3,192
Wheat/UK Oranges/Brazil
€/ha
Crop value with nitrates
45
NPKs
46
NPK bulk blends Compound NPKs
Even spreading of all nutrients
All nutrients in each and every particle A mix of products with different
spreading properties
Compound NPKs contain all nutrients in one particle
Risk of segregation and uneven
spreading
47
Bulk blend segregation during loading and unloading
Segregation due to differences in specific weight and granule size
Urea + DAP + MOP
15-15-15
Compound NPK
15-15-15
20 - 15 - 10
13 - 17 - 15
12 - 13 - 20
Compound NPK
15 + 15 + 15
Compound NPK
15 + 15 + 15
Compound NPK
15 + 15 + 15
N – P2O5 – K2O analysis
in a pile of poor quality blend
N – P2O5 – K2O analysis
in a pile of compound NPK 15-15-15
48
Better spreading with compound NPKs
Spreading width
DAP
Urea
MOP
Compound
NPK
Poor spreading patterns
cause striped fields
and significant yield losses
Spreading width of light particles
like Urea is less than those of
heavier particles like DAP
and MOP
49
Bulk blend
Urea-DAP-MOP
fewer particles,
longer distance to roots
Compound NPKs
16+16+16
more particles and
better distribution
P
K
N
NPK
NPK
NPK
NPK
Compound NPKs give and excellent spatial distribution of
nutrients and as a result higher crop yields
39
41
Bulk blend NPK Compound NPK
Average yield of potato (n = 9 years) Potato yield, tonne per ha
Source: Yara field trials
50
5.3
3.3 2.7 2.7
1.9 1.8 1.8 1.5 1.5 1.1
Million tonnes
47.1
6.8 6.2 4.2 3.7 2.6 2.6 2.5 2.5 2.2
Million tonnes
10 largest producers
Compound NPK capacities
Source: IFA 2013/2014 Source: Yara estimates, company info
51
10 largest producers by company (ex. China)
Industry value drivers
52
Key value drivers
6.4 5.9
5.6 6.3 6.0 5.6 5.7 5.9 6.3
8.1 8.4
06 07 08 09 10 11 12 13 14 15 16
NOK/USD exchange rate
245 264
525
240
357
516 545
477 496
387
236
06 07 08 09 10 11 12 13 14 15 16
Ammonia fob Black Sea (USD/t)
223
308
499
249
289
423 407
341 318
272 198
06 07 08 09 10 11 12 13 14 15 16
Urea prilled fob Black Sea (USD/t)
214
244
466
240
261
379 337
316 329
268
195
06 07 08 09 10 11 12 13 14 15 16
CAN cif Germany (USD/t)
6.7 7.0
8.9
4.0 4.4 4.1
2.8
3.7 4.7
2.6 2.5
06 07 08 09 10 11 12 13 14 15 16
Henry Hub (USD/MMBtu)
65
73
97
62
80
104 105 104 96
51 43
06 07 08 09 10 11 12 13 14 15 16
Oil Brent blend spot (USD/bbl)
Average 2006 – 2016 Source: The Market, Fertecon, CERA, World Bank, Norges Bank
53
Supply-driven price for urea
Urea demand
Urea supply
Urea price (above floor)
Most other nitrogen fertilizer prices
Value-added fertilizer premiums
Nitrogen fertilizer value drivers
Chinese coal prices Grain inventories/prices New urea capacity vs. closures Global urea demand vs. supply Urea price
Cash crop prices
Drivers Effect on
Gas cost in Europe
Fixed cost
Unit cost
Oil product prices and LNG capacity
expansion
Manning and maintenance
Productivity and economies of scale
Revenue
drivers
Cost
drivers
54
Drivers of demand
55
Drivers of fertilizer consumption growth
• Food demand drives fertilizer consumption
• Population growth of about 80 million each year
• Economic growth change diets
• Higher 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)
56
Key crops by producing by region
United States 36%
China 23%
Brazil 8%
EU-27 6%
Ukraine 2%
Other 25%
Maize-global production 975 mt
EU-27 21%
China 18%
India 12%
Russia 8%
US 8%
Other 33%
Wheat-global production 733 mt
China 31%
India 22% Indonesia
8%
Bangladesh 7%
Vietnam 6%
Other 26%
Rice-global production 473 mt
USA 35 %
Brazil 31%
Argentina 18%
China 3%
India 3% Other
11%
Soybeans-global production 321 mt
Source: USDA, 2015/16 season
57
Mio. tons Direct cereal consumption, Mill. tonnes
0
200
260
-2%
p.a.
1990 2005
Growing meat consumption increases demand for cereals China example
Meat consumption, Mill. tonnes
1990 2005
+4% p.a.
0
35
Mio. tons Total cereal demand, Mill. tonnes
0
+5% from
1990 to 2005
1990 2005
350
370 • The example of China illustrates that changing
diets towards higher meat consumption increases
overall demand for cereals
• Higher meat consumption requires more feed grain
Source: McKinsey
58
Steady growth in grain consumption, while production growth is
more volatile due to weather variations
59
1,950
2,000
2,050
2,100
2,150
2,200
2,250
2,300
2,350
2,400
2,450
2,500
2,550
2,600
07 08 09 10 11 12 13 14 15 16E 17F
Mill. tonnes
Consumption Production
Grain consumption and production Days of consumption in stocks
55
60
65
70
75
80
85
90
95
07 08 09 10 11 12 13 14 15 16E 17F
Days
Source: USDA December 2016
Source: USDA December 2016
China drives recent years’ increases in global grain stocks
0
50
100
150
200
250
300
350
400
08 09 10 11 12 13 14 15 16E 17F
Mill. tonnes
China Rest of world
Grain stocks – China versus the rest Days of consumption in stocks
0
50
100
150
200
250
08 09 10 11 12 13 14 15 16E 17F
Days
60
Profitability of investment in mineral fertilizers
• The investment in nitrogen fertilizer is highly
profitable for growers
• Fertilizer investment: 126 USD/ha
• Net return: 973 USD/ha
• Net return > 8 x investment
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
0
500
1,000
1,500
2,000
2,500
3,000
0 50 100 150 200 250 300
Yield, tonne/ha
Income USD/ha
Fertilizer application, kg N/ha
Source: Winter wheat yield data: Long term trial, Broadbalk, Rothamsted (since 1856).
Yield response (monetary value) to N fertilizer rate
61
Breakdown of grain production costs
Source: USDA (Cost-of-production forecasts March 2016)
Example: 2016F average US corn production costs
2001 2003 2005 2007 2009 2011 2013 2015 2017F
0%
5%
10%
15%
20%
25%
30%
Fertilizers as proportion of US corn production costs
62
Seed 15%
Fertilizer 21%
Chemicals 4%
Labour 5% Power & Machinery
22%
Land 26%
Other 7%
Large variations in yields across regions
10.7
6.6 6.0 5.2
3.3
US Argentina China Brazil Mexico
Tonnes/Ha Maize yields
7.4
5.0
3.0 2.9 2.5
France China India US Russia
Tonnes/Ha Wheat yields
6.7 5.8
5.1 4.4
3.6
China Viet Nam Indonesia Bangladesh India
Tonnes/Ha Rice yields
3.2 2.9 2.8
1.8
1.0
US Brazil Argentina China India
Tonnes/Ha Soybean yields
Source: FAOSTAT 2014
63
Seasonality in fertilizer consumption
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
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
64
N-fertilizer consumption from biofuels production
2.2
0.6
0.3 0.4
US - maize for ethanol Europe - rapeseed for biodiesel Brazil - sugarcane for ethanol Others
Million tonnes nitrogen
Source: IFA 2013/2014
65
Organic farming represents a marginal share of total cultivated
land
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
-
5
10
15
20
25
30
35
40
45
50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ha, millions Share of cultivated land
• The principles of crop nutrition are also valid for
organic farms
• Organic farms use manure and crop residues to
deliver minerals to their crops
• Organic farming is a niche market, mainly for
consumers in the developed world
Source: Organic-world.net
66
Drivers of supply
67
Nitrogen value chain
Nitrates
Nitric acid
Urea
Ammonia
C02
H, Ar, CO etc
Industrial nitrogen
chemicals
Environmental
products
Industrial gases
Ammonia
Industrial
products
Calcium
Nitrate
Natural gas
Nitric acid
Raw material Intermediate
products
Finished
products
68
Fertilizer production routes
Ammonia plant
Nitric acid plant
Phosphoric acid plant
Natural gas
(coal, oil)
Air
Rock (P)
Ammonium Nitrate (AN)
Calcium Ammonium Nitrate (CAN)
DAP / MAP
Air
Ammonia
CO2
Nitric acid
Ammonia
Urea
Triple Super Phosphate (TSP)
Ammonia
Single Super Phosphate (SSP)
H3PO4
Finished fertilizer products
Sulphuric acid plant Sulphur (S)
69
NPK production routes
Ammonia plant
Nitric acid plant
Nitrophosphate plant
Phosphoric acid plant
Natural gas
(coal, oil)
Air
Phosphate
rock1
MOP/SOP
Air
Nitric acid
H3PO4
Sulphuric acid plant Sulphur
Urea
AN/CAN
MAP/DAP
SSP/TSP
MOP/SOP
1. Igneous and calcined sedimentary
Dry blend 3
Phosphoric acid based NPK
+ gypsum 2
Nitrophosphate based NPK
+ Calcium Nitrate (CN)
Steam granulated NPK
(also compound) 4
1
Ammonia
70
Nitrogen technology evolution
0
50
100
150
200
250
300
350
400
450
1910 1915 1930 1950 1960 1975 2000
GJ/tN
Birkeland-Eyde electric arc method
Cyanamid method
Haber-Bosch synthesis Steam reforming natural gas
Theoretical minimum
71
Projected nitrogen capacity additions outside China
72
2018
3.8
2019 2021 2020
0.2
2017
5.3
2016
8.0
3.5
2013
2.1
2014
2.3
2015
3.6
5.7
Capacity additions, excl. China
(mill. tonnes urea1)
Source: CRU, December 2016. Numbers include both additions and closures of capacity. 1) Using 50% operating rate in new plants’ first year of production.
Indonesia 0.7
Malaysia 0.6
Egypt 0.6
Saudi Arabia 0.5
Bangladesh 0.2
Romania -1.8
Vietnam -0.2
USA 3.1
Nigeria 0.7
Iran 1.5
Algeria 1.2
Russia 0.5
Nigeria 1.3
India 0.7
Mexico 0.5
Tajikistan 0.2
Uzbekistan 0.2
USA 1.3
India 0.7
Turkmenistan 0.6
Bolivia 0.5
Azerbaijan 0.4
Indonesia 0.3
Kuwait -0.6
Iran 1.9
Russia 0.2
India 0.7
Turkmenistan 0.6
Mexico 0.5
Azerbaijan 0.4
Indonesia 0.3
Uzbekistan 0.2
Russia 1.0
Nigeria 1.3
Iran 0.9
Iran 0.5
Tajikistan 0.2
~3 Mt = 10 year historical trend
consumption growth
Algeria 1.2
Nigeria 0.7
Russia 0.3
Iran 0.1
USA 0.6
India 0.7
Malaysia 0.6
Indonesia 0.5
Bangladesh 0.3
Bolivia 0.2
Kuwait -0.6
30% of announced nitrogen projects realized on time Likely and probable ammonia projects in pipeline 2002-2008; Million tons
11
35
22 22
17
30
-70%
Realized Due after 08 Total projects
in pipeline
between 02-08
Due within 08 Cancelled Delayed
2
52
Added to
pipeline
from 02-08
Projects in
02 pipeline
Note: Chinese projects are excluded from pipeline
Source: 2002, 2004, 2006, 2007, 2008 Fertecon Ammonia Outlook Reports
73
Business
development
Gas
agreement
5 year typical construction time for nitrogen fertilizer projects*
Feasibility
phase
Concept
selection
phase
Prepare
for execution Construction Operation
4–6 years
6-12 months
- check cost assumptions by approaching market
- bidding for contracts and/or equipment
12-24 months
depending on complexity
* Ammonia and urea plant example
30-36 months
74
Price relations
75
0
100
200
300
400
500
600
700
800
900
Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
USD/tonne
Urea fob Black Sea 0.6 * Ammonia fob Black sea + 15
Upgrading margins from ammonia to urea
Source: Average of international publications
76
0
100
200
300
400
500
600
700
0
50
100
150
200
250
300
350
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Urea USD/t Corn USD/t
Corn Urea fob Middle East
Grain prices important for fertilizer demand
Source: World Bank, Fertilizer publications
77
The urea market has been supply-driven since 2014
0
100
200
300
400
500
600
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Europe oil index Ukraine (Fertecon) US China
Urea price, fob Yuzhny
Source: Fertecon (Ukraine), Yara estimates
USD/t
78
Nitrate premium is mainly a function of crop prices and
marketing
0
50
100
150
200
250
300
350
400
0
50
100
150
200
250
300
350
400
450
05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16
Wheat price, USD/t CAN price, USD/t
Adjusted urea* Nitrate premium, USD/t Wheat price
* Urea fob Black sea adjusted for import costs into Europe and nitrogen content similar to CAN
79
Grain/oilseed prices – yearly averages
0
2
4
6
8
10
06 07 08 09 10 11 12 13 14 15 16
USD/bu Wheat (HRW US Gulf)
0
200
400
600
800
06 07 08 09 10 11 12 13 14 15 16
USD/t Rice (Thailand)
0
2
4
6
8
06 07 08 09 10 11 12 13 14 15 16
USD/bu Corn (US Gulf)
Source: World Bank, December 2016
0
5
10
15
20
06 07 08 09 10 11 12 13 14 15 16
USD/bu Soybeans (cif Rotterdam)
Average prices 2006 - 2016
80
Cash crop prices – yearly averages
0
1
2
3
4
06 07 08 09 10 11 12 13 14 15 16
USD/kg Cocoa
0
2
4
6
8
06 07 08 09 10 11 12 13 14 15 16
USD/kg Coffee (arabica)
Source: World Bank, December 2016 Average prices 2006 - 2016
0
1
2
3
4
06 07 08 09 10 11 12 13 14 15 16
USD/kg Cotton
0.0
0.5
1.0
1.5
2.0
06 07 08 09 10 11 12 13 14 15 16
USD/kg Orange
81
10-year fertilizer prices – monthly averages
82
0
200
400
600
800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t Urea prilled fob Black Sea/Urea granular fob Egypt
Average prices 2006 - 2016
0
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t DAP fob US Gulf/MOP granular fob Vancouver
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t CAN cif Germany
0
200
400
600
800
1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t Ammonia fob Black Sea
Source: Average of international publications
Production economics
83
11.8
79.1
0
10
20
30
40
50
60
70
80
90
100
Yara’s operating cash costs are mainly variable
• Temporary plant closures can be carrie out
with limited stop/start costs
• Example for ammonia/urea plants:
• Typically half a week to stop and a week to start
• Cost of stopping is 2 days energy consumption
• Cost of starting is 3 days energy consumption
Operating cash cost 2015 NOK
Billions
Variable costs (87%) - Dry raw materials
- Energy
- Freight
- 3rd party finished fertilizer
Other cash cost (13%)
84
Ammonia (NH3)
(82% N)
Ammonia cash cost build-up – example
Gas price: 4 USD/MMBtu
x Gas consumption: 36 MMBtu/mt NH3
= Gas cost: 144 USD/mt NH3
+ Other prod. cost: 29 USD/mt NH3
= Total cash cost 173 USD/mt NH3
Source: Blue Johnson & Associates.
Typical natural gas
consumption for ammonia
production
36 MMBtu natural
gas/tonne ammonia
85
Ammonia (NH3)
(82% N)
Urea
(46% N)
Urea cash cost build-up – example
36 MMBtu natural
gas/tonne ammonia Ammonia price: 173 USD/mt NH3
x Ammonia use: 0.58 NH3/mt urea
= Ammonia cost 100 USD/mt urea
+ Process gas cost* 21 USD/mt urea
+ Other prod. cost**: 25 USD/mt urea
= Total cash cost 146 USD/mt urea
Source: Blue Johnson & Associates.
0.58 mt ammonia per
tonne urea
CO
2
** Including load-out
* Process gas cost is linked to natural gas price
86
* There are many NPK formulas; 15-15-15 is one example
Theoretical consumption factors
Ammonia
(82% N)
Urea
(46% N)
AN
(33.5% N)
CAN
(27% N)
NPK
(15-15-15)*
P and K
• Price comparisons should always be based on nutrient tons, not product tons
87
* P2O5 content of phosphate rock varies. This is an example.
** 1 ton of phosphoric acid requires 1 ton of sulphur.
***2013 figures
Main phosphate processing routes
Phosphoric acid (100% P2O5)
DAP (18% N, 46% P2O5)
MAP (11% N, 52% P2O5)
TSP (46% P2O5)
Phosphate rock (72% BPL*, 33% P2O5 )
Ammonia ( 82% N)
Rock production: 201
Rock exports: 30
Production: 44
Export: 4
Production: 36
Export: 17
Production: 23
Export: 9
Production: 5
Export: 3
2015 production and exports, million tons product
Source: IFA
SSP (15-22% P2O5)
Sulphuric
acid**
Production***: 26
Export: 2
88
Industrial applications
89
Ammonia
Nitric
acid
CN
Melamine
DIPCAL®
NITCAL®
H2S abatement
in sewage
Concentrated
nitric acid
Combined
products
Urea
Cleaning/
scrubbing Aqueous
ammonia
Glue
AdBlue ®/heavy-duty vehicles
Stationary sources
Industrial gases
N2O abatement
Emulsions
ANFO TAN
Nitrogen Oxygen
Argon
Propane
Formates
Dry ice
Applic. LIC
LIC wholesale
NH3
Vessels
CO2
H2S abatement
in oil fields
NOX
abatement
Acrylonitrile
Technical nitric
acid
Nitrogen has many industrial applications
90
Industrial use accounts for 21% of global nitrogen consumption
~30 million tonnes N
~21% of total nitrogen consumption
Environment 10%
Melamine 21%
Glue 58%
Other 11%
~9.5 million tonnes N as urea
~12-13% of total urea consumption
Source: Yara estimates 2015, IFA, Fertecon, CRU
Environment 6 %
Explosives 18%
Chemicals 76%
91
18.8 20.5 23.4
8.5 9.5
11.3
2013 2015 2020E
Urea Ammonia
CAGR
3% Million tonnes nitrogen
Demand growth for Industrial applications
is estimated to ~3 % annually
Global demand development of nitrogen chemicals for industrial
applications is strong
Source: Yara estimates 2015, IFA, Fertecon, CRU
92
Reagents, technology and services to improve air quality
• Air 1™ AdBlue/DEF is a generic name for urea-based solution (32.5% liquid
urea) Air 1 is Yaras brand name for AdBlue that is used with the selective
catalytic reduction system (SCR) to reduce emissions of oxides of nitrogen
from the exhaust of diesel vehicles such as trucks, passenger cars and off-
road vehicles
• NOxcare™ As a world leader in reagents like urea and ammonia in
combination with our experience in abatement systems like SNCR and SCR
technology Yara offers its clients one of the most comprehensive and effective
solutions to reduce NOx emissions in industrial power plants and utilities.
• In the maritime segment Yara offers SCR and scrubber technologies to abate
NOx and SOx (sulphuric oxide) emissions.
Nitrogen oxides (NOx) are a major air quality issue causing serious problems mostly in urban centers related to both the
environment and human health. Legislation around the world drives the business growth.
93
Calcium Nitrate applications in wastewater treatment, concrete
manufacturing, oil fields and latex industries
• Nutriox™ provides H2S prevention for Corrosion, Odor and Toxicity control
of municipal and industrial waste water systems
• Nitcal™ is a multifunctional concrete admixture serving concrete admixtures
companies around the world
• PetroCare™ prevents well souring and supports drilling in oilfields around
the world, for both the oil majors and the service companies that serve them
• Dipcal™ is the premier dipping coagulant for the latex industry
• Other important applications are in the ceramics, bio-gas and solar CSP
industries
94
Technical Nitrates for Civil Explosives
• Various grades of Ammonium Nitrate and Calcium
Nitrate for use in the civil explosives and mining
industries
• Largest customer segment are civil explosives
companies and open-pit coal and iron mining sectors
95
Animal Feed industry with several nutritional products based on
core chemicals
Feed Phosphates
– Macro-minerals such as phosphorus and calcium are essential elements to sustain healthy
and productive animal growth
Feed Acidifiers
– Antimicrobial effect and lowering pH, replace AGP (antibiotic growth promoter) and
effective against salmonella and moulds
Feed Urea
– Source of NPN (non-protein nitrogen) used by rumen micro-organisms forming
proteins, replacing part of vegetable protein
Ammonia for fermentation
– Amino acids like lysine, methionine, threonine are essential to add to lower total use of
protein
96
Sources of market information
• Fertilizer market information • FMB www.fmb-group.co.uk
• Fertecon www.fertecon.com
• Fertilizer Week www.cruonline.crugroup.com
• Profercy www.profercy.com
• The Market www.icispricing.com
• Green Markets (USA) www.greenmarkets.pf.com
• Beijing Orient Business (China) www.boabc.com
• China Fertilizer Market Week www.fertmarket.com
• Fertilizer industry associations • International Fertilizer Industry Association (IFA) www.fertilizer.org
• Fertilizers Europe (EFMA) www.efma.org
• Food and grain market information • Food and Agriculture Organization of the UN www.fao.org
• International Grain Council www.igc.org.uk
• Chicago Board of Trade www.cbot.com
• World Bank commodity prices www.worldbank.org
• US Department of Agriculture (USDA) www.usda.gov
97