In June 2015 FAO/Fertilizer Organizations Working Group reviewed the prospects for fertilizer demand until 2015/19 and the supply and request balances. It was estimated that world demand for total fertilizer is expected to grow at 1.6 percent per annum from 2015 to 2019.
In response to the economic slowdown in many emerging and developing countries, persistent low international prices for most agricultural commodities, and dry conditions across South Asia, Southeast Asia, Latin America and Africa, world fertilizer demand is expected to contract by 1.0% in 2015/16, to 181 million tonnes (Mt) nutrients. Drops are seen of similar magnitude for the three nutrients: -1.0% for N, to 108 Mt; -1.0% for P, to 41 Mt; and -0.8% for K, to 32 Mt. Aggregate demand in 2015/16 is anticipated to rebound in the three regions where it contracted in 2014/15: Eastern Europe & Central Asia (EECA), West Asia and North America. The sharpest decline is expected in Latin America, reflecting unfavorable economic, political and weather conditions in Brazil and Argentina. African demand was hit by widespread El Niño impacts and cuts to fertilizer subsidy budgets in several countries. The poor monsoon in South Asia strongly influenced the 2015/16 winter season.
The outlook for 2016/17 is more optimistic in view of slightly improving market conditions, the expected more favorable weather, and a better political and economic situation in some sizable markets. Global fertilizer demand in 2016/17 is seen as rebounding (+2.9%) to 186 Mt, with growth rates of relatively similar magnitude for all three nutrients: +3.0% for N, to 111 Mt; +3.0% for P, to 42 Mt; and +2.3% for K, to 33 Mt. Fertilizer demand would remain almost unchanged in North America and would increase elsewhere. Demand growth in EECA is seen as firm, as grain exports are expected to benefit from the current weakness of regional currencies. Thanks to prospects for normal monsoon rains, demand in South Asia would fully recover from the downturn in 2015/16. Driven by recent political change in Argentina, demand would firmly rebound in Latin America but would not fully recover owing to persistent recession in Brazil. Expected increases in the rest of the world would be smaller.
In the absence of major economic or policy changes in the main fertilizer-consuming markets, the current context supports moderate fertilizer demand and growth prospects in the years to come. According to the baseline scenario, world demand would rise on average by 1.6% per annum (p.a.) between the base year (average of 2013/14 to 2015/16) and 2020/21. Aggregate global demand is projected to reach 199 Mt at the end of the outlook period. K demand would expand firmly (2.3% p.a. to 37 Mt); P demand would grow more moderately (1.7% p.a. to 45 Mt); and N demand growth would continue to progressively decline (1.2% p.a. to 117 Mt). This rebalancing of the N:P:K ratio reflects progressive adoption of better fertilizer management practices by farmers. The highest growth rate would be in Africa (3.6% p.a.). Demand would also expand firmly in Latin America (2.9% p.a.), South Asia (2.9% p.a.) and EECA (2.8% p.a.). Latin America would benefit from the competitive advantage of Brazil and Argentina on the global soybean, maize and sugar markets. Similarly, EECA has the potential to increase its share of global cereal trade. South Asian demand is strongly influenced by fertilizer subsidy regimes, whose evolution is highly unpredictable; high uncertainty is therefore associated with forecasts for this region. In East Asia, fertilizer demand growth is forecast to slow further (0.9% p.a.), as Chinese N and P demand is likely to reach a plateau by the end of the outlook period. Demand in developed countries is anticipated to rise marginally, with stronger prospects in Oceania. With N and P demand in China levelling off, about half the world market can be considered ‘mature’. In volume terms, South Asia, East Asia and Latin America would account for 33%, 22% and 22%, respectively, of the global increase in total fertilizer demand anticipated in the next five years.
As regards the EU the total production of fertilizers in 2007 was close to €17 billion, up from €13.6 billion in 2004. In the EU however, the overall use of mineral fertilizers has declined in recent decades. A 2015 study by the European Parliament’s Policy Department B, Structural and Cohesion Policies, indicates that mineral fertilizer use declined by 20 % from 1995 to 2012, mainly as a result of a decrease in the use of phosphorus and potassium-based products. In the fertilizer sector 1,058 enterprises were acting, with a total of 100,000 employees. Spain, Italy and France have the largest number of enterprises (228, 187 and 175 respectively) but small and medium size companies dominate in all three countries. In contrast, 54 companies in Germany, have in total over 10,000 employees and represented more than 17% of the total production value of the EU. Some of the newer Member States (i.e. Poland, Romania, Lithuania and Bulgaria) also have a small number of large sized companies employing on average more than 2,000 employees each. However, the level of production in these countries is rather low and output does not represent more than 3% of the total EU value of production (with the exception of Poland with 8%). Besides Germany, France represents 13% of the total EU production, Netherlands, UK and Italy (each with around 10%) also account for significant parts of the European market.
The fertilizers industry - especially the segment related to the production of the main nutrients - went through a consolidation phase during the late 1980s and early 1990s as a response to changing market conditions and other factors such the costs of the basic raw materials. Currently, the fertilizers industry in Europe can be grouped in three main categories:
Use of mineral fertilizers in agriculture represents the main segment of the market (Figure 1). In 2008, the total consumption in agriculture in the EU27 was 17.9 million tons of nutrients (11.2 million tons N, 3.1 million P and 3.6 million K). France, Germany, the UK and Poland consume the largest quantity (nitrogen, phosphate and potash) representing together close to 50% of the total. However, the current levels of production in Europe do not match demand. Europe is a net importer of nitrogenous and phosphatic fertilizers (mainly from Russia, Ukraine, Morocco and Egypt) although it has a positive trade balance as far as potassic fertilizers are concerned.
At the same time, there has been a significant overall decrease in the use of fertilizer’s among EU15 Member States during the last decade (a 14% fall). In contrast, in most EU12 Member States total consumption increased between 5% (Hungary) and 24% (Latvia). To a certain extent, this reflects changes in the intensity of the use of fertilizer’s and soil improvers (expressed in terms of spending per hectare of arable land) and the different levels of horticulture and permanent crops in total agricultural land use. The economic crisis led to an even more dramatic decrease in the total consumption of fertilizer’s. It fell further by 23.5% over the period 2008 and 2011 because of collapsing agricultural prices and falling agricultural production. The consumption of nitrogenous fertilizer’s in the EU27 decreased by 13.5% while that of phosphoric and potassic fertilizers fell approximately by 40%.
Figure 1: Development of fertilizers consumption in the EU
Finally, concerning the price of fertilizers, while the level of demand is an important determinant, energy, raw material and transportation costs also play a very important role in the cost of the production of fertilizers and their respective prices. Natural gas represents 50-70% of total production costs of nitrogenous fertilizers. The increase in the price of natural gas during the last years led to an increase in the price of fertilizers in the EU27 by around 25% and an even higher increase is expected (almost doubled in comparison to 2000).
Current data showed that in many developing countries, fertilizer applications are imbalanced, i.e. farmers apply too little phosphate and potash in relation to nitrogen, especially in Asia and Europe. In other countries, the „mining‟ of soil nutrients is severe, and yields have fallen as nutrients removed by the crops are not replaced. This problem is most serious in sub-Saharan Africa, the Caribbean and parts of Asia. Most high-quality agricultural land is already in production. The marginal benefit of converting new land diminishes. Available land and water resources are declining in many developing countries. Future food production growth will primarily depend on further intensification of agriculture in high potential areas and to a lesser degree in low potential areas. Variations in fertilizer production and imports by China, the world’s largest consumer, continue to have a major impact on world consumption. In the last decade, China has decreased its fertilizer imports by 18 percent and increased its production by about 14 percent. In EU counties (e.g. Denmark and Italy), the organic matter in soil is significantly reduced to below acceptable levels (3%).
Global competition for resources is increasing worldwide. Concentration of phosphorus mines and gas fields outside the EU makes the EU fertilizing product industry and the European society dependent and vulnerable on imports, high prices of raw materials as well as the political situation in supplying countries. The transition to nutrient recycling would therefore be a key element to increase the European food security.
The production of inorganic fertilizer is high energy intensive. It has been estimated that 2% of the world's energy production is devoted to the production of inorganic nitrogen fertilizers. In 2007, the global inorganic fertilizer industry (including nitrogen and phosphorus fertilizers) generated 465 million tons of CO2. Nutrient recycling would contribute to mitigation of climate change via less energy demanding technologies which can combine sometimes the production of alternative energy sources (e.g. digestion of bio-wastes generating biogas and heat) thereby contributing to a transition towards a low-carbon and more sustainable economy.
Disrupted nutrient recycling is a problem for Europe and all over the world. Phosphorus and nitrogen are lost across environmental media during food production or are wasted instead of being used for plant nutrition. The leaks of nitrogen and phosphorus from human activities have led to ecological deterioration of surface water via eutrophication and "dead-sea" bottoms in coastal oceans along the EU coastlines close to mined phosphorus factories. The total losses to water and landfill are substantial and would account for 30% to 35% of the annual usage of phosphorus.
By maintaining the value of the raw materials and energy used in products from extraction to recycling, the transition towards a more circular economy can promote innovation, increased competitiveness in the sector and lead to job creation.
All of these factors anticipated the fast development of biofertilizers market size. Shift towards adopting renewable products, by periodically phasing out synthetic, toxic products and reducing carbon footprints are likely to drive this demand.
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