Global N-P-K. November 5, 2015

Transcription

1 Global N-P-K November 5, 2015

2 Today s Speaker Neil Fleishman, CFA Head of Research Green Markets Neil Fleishman is the Senior Industry Analyst for Green Markets. Previously, he worked at the Susquehanna Int. Group as a trading desk Sector Specialist covering both the industrial and energy markets for the firm. He also has experience as a portfolio analyst for Evergreen investments. Neil developed three Green Markets Global Supply & Demand Models for nitrogen, DAP/MAP and potash, exclusive new research that gives users unprecedented visibility into global commodity markets. He also authored Cost Curve & Analysis research on urea, potash and phosphates, detailing how supply and demand will effect pricing dynamics. Along with these models, Neil regularly provides custom consultations on fertilizer supply and demand, and is a featured speaker at numerous industry events. Neil holds a B.S. in Business Administration (Finance concentration) from Drexel University, and is a Chartered Financial Analyst.

3 Global Outlook Fertilizer is cyclically over-supplied across all major N-P-K markets. Potash (MOP) Phosphate (DAP/MAP) Nitrogen (Ammonia/Urea) Macro Themes suggest potential headwinds. Lower utilization levels leading to increased interest in consolidation (M&A). Producer Discipline is key theme.

4 Major Macro Themes Stronger Dollar vs. major fertilizer markets. Currency Volatility EURUSD Curncy USDBRL Curncy USDCNY Curncy USDINR Curncy Source: Bloomberg

5 Major Macro Themes Commodities Markets Broadly lower. Moves by China weigh on sentiment. Commodities Broadly Lower Core Commodity Index VIX Index China Stock Index Source: Bloomberg

6 Major Macro Themes Global GDP estimates continue to drop. Long run fertilizer demand is highly correlated to GDP. 4 Global GDP Consensus Est Global GDP 2015 est. Global GDP 2016 (est.) 0 Source: Bloomberg

7 Major Macro Themes Fertilizer prices and global agriculture prices have trended lower this year. This fits into broader macro themes of lower global commodity pricing Fertilizer Prices Trended Lower in 2015 Green Markets North American Fertilizer Index Source: Green Markets, Bloomberg

8 Potash (MOP) Potash prices pressured on supply and competition for market share. Macro is now weighing sentiment; threatening year end demand Potash Gulf NOLA (st) Source: Green Markets

9 Potash (MOP) Over-supply on recent Brownfield with Greenfield now in sight Global Potash Supply and Demand e 2016e 2017e 2018e 2019e 2020e 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Capacity (Name Plate) Implied Demand (total) Utilization, % Source: Green Markets

10 Potash (MOP) K+S one of the higher cost producers. Cost USD $350 $300 $250 $200 $150 Global Potash Cost Curve 2015 Vale Intrepid Potash K + S Mosaic Corp Israel Chemicals $100 Agrium $50 $ mln mt Source: Green Markets SQM Various Other

11 Potash (MOP) Strong contract volume from China and India. Increased competition with Russia and Belarus running close to full capacity. Strong exports from Canada on strike from ICL/loss of Russian mine. Increased imports into North America, Belarus in focus with potential legislation in the works. M&A in focus: Already consolidated market makes large transactions difficult. GreenField capacity start-ups in focus with K+S and Eurochem ramping in the coming years.

12 Phosphate (DAP/MAP) DAP trending sideways; producers showing some signs of discipline. DAP Gulf NOLA (st) Source: Green Markets

13 Phosphate (DAP/MAP) Producers showing discipline. Utilization outlook could stabilize with continued project delays DAP/MAP (Nutrient mln mt P205) e 2015e 2016e 2017e 2018e 2019e 2020e 62.0% 61.0% 60.0% 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% 52.0% Capacity Implied Demand Utilization, %

14 Phosphate (DAP/MAP) Lower cost MENA capacity in the drivers seat Global DAP/MAP Cash Costs per mt (nutrient) USD $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $ Capacity mln mt (nutrient) ROW India China Middle East (ex Saudi Arabia) North America

15 Phosphate (DAP/MAP) Strong Indian demand this year. Brazil not picking up into year end. Strong Exports from China again. Decreased exports from North America. Main supply growth still coming from MENA (OCP); while potential projects in North Africa likely at risk. China capacity appears to be peaking. Discipline from largest producers.

16 Nitrogen Urea prices trending lower as global supply is increasing Urea Gulf NOLA (st) Source: Green Markets

17 Nitrogen (Urea) Global capacity increasing rapidly Global Urea S&D % % % World Capacity % World Demand e e 2016e 2017e 2018e 2019e 2020e 65.0% 60.0% Capacity Utilization, %

18 Nitrogen Urea to see increased localization of production Global Urea Import/Export Balance of Key Regions Urea mln mt The export market is set to become more competitive as capacity growth Import Levels Export Levels e 2016e 2017e 2018e 2019e

19 Nitrogen China producer discipline key to direction of pricing as capacity rises. Their seat as a swing producer at risk in the medium/long term. Global Urea Cost Curve 2015 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $ Source: Green Markets Western Europe Oceania China Central Europe East Asia (Ex-China) South Asia Eurasia Latin America North America

20 Nitrogen Urea prices fading in North America. China urea exports continue. Capacity expansions are now imminent and already weighing on sentiment. China s position as a global swing producer at risk in the long run. Over-supply leading toward consolidation talks. CF/OCI in the media and the combined company would control ~10% of global urea capacity outside China and ~30% of UAN capacity.

21 Ammonium Sulfate AS Pricing has seen general softness in recent years on increased Chinese (CPL) capacity. Prices appear to have stabilized and demand is growing (North America in particular) AS Cornbelt (st) /5/2015 2/5/2015 3/5/2015 4/5/2015 5/5/2015 6/5/2015 7/5/2015 AS Cornbelt (st) Source: Green Markets

22 Ammonium Sulfate AS utilizations appear to have bottomed out. After recent rapid expansion by China new sources are limited. Global Ammonium Sulfate S&D % 84.0% 83.0% 82.0% 81.0% 80.0% 79.0% 78.0% 77.0% 76.0% 75.0% 74.0% e 2015e 2016e 2017e 2018e 2019e 2020e Source: Green Markets

23 Brazil Brazilian currency weakness dragging on imports Brazil Imports Potash DAP/MAP Urea Source: Ministerio da Industria e do Comerico Exterior

24 India Surprising to the upside particularly in Phosphates (DAP) India Imports Improving this year Potash (Year End) Potash (Through September) DAP (Year End) DAP (Through September) Urea (Year End) Urea (Through September) Source: India Ministry of Chemicals and Fertilizers

25 China Exports tracking strongly again this year. Vat tax and Yuan devaluation muddy outlook. China DAP/MAP and Urea Exports DAP (Year End) 12 DAP (Through August) MAP (Year End) MAP (Through August) Urea (Year End) Urea (Through August) Source: CNCIC

26 China China MOP imports started well; strong contract volume. Could taper into year end (Vat tax and yuan). China MOP Imports (Through August) MOP (Through August) Year End Source: CNCIC

27 Conclusions Potash Greenfield is on the way. Phosphate - Producer discipline key/projects looking more uncertain. Nitrogen Increased localization of production; China as swing producer in focus. Ammonium Sulfate utilizations to increase. Macro-risks appear to be rising leading toward uncertain fall applications. Consolidation likely to continue across the N-P-K spectrum.

28 Thank You Neil Fleishman Senior Industry Analyst Green Markets