and a focus on China Global Fertilizer Short-Term Outlook Content 3/20/2014 Michel Prud homme IFA

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1 Global ertilizer hort-term utlook and a focus on China ichel Prud homme I 2th nnual ertilizer orum & Exhibition Egypt, ebruary 214 Content ertilizer emand ain fertilizer demand drivers hort-term demand forecast, global and top-5 countries utrient upply Global sales in 213 Capacity developments in ales and trade prospects in 214 China ertilizer-related Policy Urea balances P balances 1

2 Global utrient Uses t utrients ertilizer Use :.5% over on-ertilizer Use: +9% ources: I griculture and Production and International Trade 213 Global ertilizer emand : I hort-term orecast 2 t nutrients P25 K2 Change year-over-year 1 212/13 213/14 214/15 -.2% +1.8% +2.1% 1 P % +1.8% +2.7% K % +2.6% +4.9% Total.% +2.% +2.7% ources: I griculture 213 2

3 rivers of armers Purchasing ecision Relatively stable and attractive fertilizer/grain price ratio. With uncertain economic and agricultural outlook, farmers and distributors are risk averse. With declining crop prices, commercial farmers wait and see attitude. ertilizer subsidy changes greatly influence decision by smallholder farmers. (*) ertilizer prices are fob:. frica P; Yuzhnyy prilled urea; Vancouver (std) Potash (**) gricultural commodity prices are represented by a grain index calculated as follows: [(wheat price*7) + (maize price*8) + (rice price*4.5) + (soybean price*2.5)] / 22 Low/declining inventories in the distribution pipeline challenging to supply peaks in demand. ources: CRU; inancial Times, I, ct 213 World Cereal Production and Utilization 2,6 Billion tonnes 2,5 2,4 Production Utilization 2,3 2,2 2,1 2, 1,9 1, ources:, ov 213 3

4 Relative Evolution of gri-commodity Prices Relative price evolution from anuary 26 to anuary 214 Wheat aize Rice oybean Palm il Cotton ugar ources: PB; inancial Times; I 214 ertilizer utrient hort-term emand : Top-5 Countries 6 t utrients, including, P and K YY Var. 212 / / /13 China % 1% 1% India -3% -6% 4% 3 U 2% -1% -1% 2 WCE -2% 2% % 1 Brazil 8% 4% 3% ources: I griculture 213 4

5 ertilizer hort-term emand Trends : Top-5 Countries t utrients 212/ / /213 1,,6,2 -,2 -,6-1, China U WCE India Brazil 1,,6,2 -,2 -,6-1, China U WCE India Brazil itrogen Phosphate P 2 5 1,,6,2 -,2 -,6-1, China U WCE India Brazil Potash K 2 ources: I griculture 213 Key essages on ertilizer emand World economic activity seen progressively recovering from 214, including in India avourable weather in the main producing areas in 213 and high crop prices in the first half of the year boosted production Record harvest for all cereals and oilseeds in 213 Comfortable export availabilities for all crops but wheat eclining crop prices With contracting crop prices, farmers delay fertilizer purchasing decisions Uncertainty as to the evolution of the fertilizer subsidy scheme in India; progressive recovery of P and K demand assumed emand picking up again from 213/14 +2.% in 213/14 and +2.7% in 214/15 ources: I griculture 213 5

6 Global utrient Capacity and upply Trends t utrients 214 over 212 Capacity : + 5% upply : + 6% Production emand + 4% ources: I Production and International Trade 213 mmonia and Urea Global Capacity t 2 itrogen Capacity t urea 22 Urea Capacity Base year Expansion 5,7 167,7 167,7 3,8 173, ,8 193,7 193,7 8,6 198, Between 212 and 214, global ammonia and urea capacity will expand by 6% and 7% respectively. o new seaborne ammonia capacity in 214, but a potential reduction from audi rabia with the commissioning of a new stand-alone urea plant. In 214, large urea capacity increment occuring in lgeria, China, and audi rabia. ources: I Production and International Trade 213 6

7 Phosphates Global Capacity t P25 6 P cid Capacity Base year 6 Processed P Capacity Expansion 1,7 1,7 53, 53, 54,8 1,7 1,7 39, 39,, World phosphoric acid capacity expands by 4% per annum between 212 and 214. ew stand-alone capacity in Tunisia and ordan, both dedicated to Indian partners. In 213 and 214, capacity of Processed Phosphates virtually only increases in China and orocco. ources: I Production and International Trade 213 Potash Global Capacity t P P Capacity Base year Expansion 1,7 6,4 79, 72,6 72, Global potash capacity in 213 rose 8% over 212, to 49.6 t K 2, or 84.5 t products. In 214, global potash capacity is projected to expand moderately (+2%), to.4 t K 2 (equivalent to 86 t products). ain capacity additions in 213/14 would occur in a few countries, mainly: Canada Russia and Belarus China. ources: I Production and International Trade 213 7

8 214 Global ales and Trade Prospects Urea eaborne mmonia t Products Global Trade Urea ew urea supply in E, orth frica and West sia. Uncertainty prevails in China (supply) and India (demand). Potential nitrogen deficits expand in, E and L. trong urea demand seen in Brazil, India and Europe. Urea trade may expand by 2-3%, to 46 t in 214. P P cid P Rock Potash Phosphates Large supply emerges in China and orocco. Expanding P25 deficits in L, and E. Rising P imports in, C, and Europe P trade may expand by 1-13%, to 15 t. Potassium Large brownfield supply develops in Canada and EEC. Potential larger imports in L, and E. Potash P trade may expand by 4-5%, to t. ources: I Production and International Trade 213 World utrient upply 214 Global nutrient supply growing 2.2% over 213 Completion delays: 66% of planned expansions in 212/14 ew Capacity (,, W), P (, ); K (, EEC, ) emand picking up again:+2.% in 213/14; +2.7%,214/15 Global sales will recover in 214, growing 2-3% over 213 High producers stock, low levels in distribution & buyers Uncertainties: Export policy: China hortfalls of natural gas supply India subsidy policy Export restrictions ources: I Production and International Trade 213 8

9 China : ertilizer related Policies 6 t utrients China ertilizer Production ubsidies ubsidies to lower fertilizer price (subsidized input cost): Preferential rates on natural gas and electivity; Production exemptions of value added tax and exemption of storage loan interests; but no more subsidy on coal and fertilizer transportation. ubsidies to increase farmers affordability and nutrient use efficiency: ubsidies on farm inputs for all grain crops; ubsidies on prices for machinery related to fertilizer application and computer service systems; ubsidies for foliar application of fertilizers Policies Resource management: atural gas now restricted for incremental nitrogen capacity and no switch from coal; Phosphate rock production targeted with rising output taxes and new restrictions on mining permitting since 211. Trade management: Import consolidation of potash imports under CCCC; Export taxes on urea and processed phosphates based on seasonal export tariffs since 27. Environmental management: ince 211, new facilities to produce P/P and fertilizers are subjected to environmental standards, including on coal energy efficiency, water consumption, plants emissions and waste disposal. ince 21, new governmental targets on GHG emissions imposed on industrial sectors. Chinese government views fertilizers as a main contributor to greenhouse gas emissions in China. ources: usuo Zhang & Weifeng Zhang (CU); I Crossroads Conference, 213 China : ertilizer utrient emand t utrients K2 3 2 P t nutrient P 2 5 K ,5 3, 3,1 Growth % 47% 36% 94% avg annual % 7% 5% 13% ,1 1,5 1,7 Growth % 6% 14% 35% avg annual % 1% 2% 4% ources: I griculture 213 9

10 /2/214 China : itrogen ertilizers utput t ther P/P/ PK BC Urea p214e 215e216e 217e ources: I Production and International Trade 213 China : Urea Production, Use and Exports t urea Urea exports Consumption Production ,8 1,6 1,4 1,2 1,,8,6,4,2, t urea Urea Exports and Tariffs 12% 1% 8% 6% % 2% % ources: CCIC, I Production and International Trade 213 1

11 /2/214 China : Phosphate ertilizers utput t P ther P/ PK 1 8 P p 214e 215e 216e 217e ources: I Production and International Trade 213 China : P Production, Use and Exports t P25 P Export P Production P Consumption p 214e 215e 216e 217e 1,4 1,2 t P P Exports and Tariffs 12% 1% 1,,8,6,4 8% 6% %,2 2%, % ources: CCIC; I Production and International Trade

12 China : Potassium utput, Use and Imports 6 5 t K2 KgP Potassium Production in China 4 Primary P 3 P p 214e 215e 216e 217e t P eq P Imports Consumption Production p 214e 215e 216e 217e ources: I Production and International Trade 213 China uture Look China griculture University Current arket reform with subsidy ver-supply of fertilizers luctuating prices ver-use of fertilizers in most areas of China uture arket system without subsidy for industry dequate supply for food security, environment quality and energy saving High quality fertilizers and high efficiency in industry and agriculture. China itrogen and Phosphate ertilizers ssociations uture ddress over-capacity conditions Promote coal gasification advanced technology trict control on new capacity Enforcement of environmental standards Implementation of energy efficiency quotas Industry restructuring and consolidation upport government investment in infrastructure I China eminar 213_recommendations Expand range of fertilizer products to farmers Improve customized extension services ddress overuse of and deficiencies in K and ources: Heffer, I-213; CCIC-eb 214;.Zhang, I Crossroads-ov

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