For many commodities, the 2017 outlook is fairly positive; for the phosphate sector, the story is similar–which should no doubt excite those interested in the fertilizer material.
Since 2012, the phosphate sector has been on a slow–but upward–trend.
Demand for the fertilizer has risen from 40.6 million tons in 2012, and is expected to reach 46.6 million tons in 2018, at a growth rate of 2.2 percent per year, as per the Food and Agriculture Organization (FAO).
Phosphate outlook 2017: global supply and demand
As outlined above, the FAO is projecting demand for phosphate fertilizer consumption to continue growing in the coming years. In particular, out of the 3.9 million tons of phosphate demand that is expected from now until 2018, 58 percent of it is from Asia. 29 percent is projected from the US, nine percent from Europe, 4 percent from Africa, and a small 0.5 percent from Oceania.
In terms of supply, the FAO states phosphate supply is expected to grow to 61.5 million tons by 2018 as well. As such, of the total 5.9 million tons adding to world capacity, 63 percent is from Asia, 24 percent from AFrica, and 16 percent from Latin America, as the largest additions.
The FAO also notes that, according to the IFA, between 2013 and 2018, roughly 7.3 million tons of new capacity for phosphoric acid units are in the works for completion. A large portion of that will be in Morocco–approximately 1.8 million tons–with 1.5 million coming from Saudi Arabia and 1.7 million tons from China.
On that note, the US Geological Survey (USGS) projects global consumption of to increase from 43.7 million tons to 48.1 million tons by 2019.
Phosphate outlook 2017: confidence in the fertilizer
With the global supply and demand for phosphate poised to grow, some acquisitions in the sector could play a big role in the future of phosphate.
For example, Mosaic’s (NYSE:MOS) agreement to acquire Vale S.A.’s (NYSE:VALE) fertilizer business for $2.5 –which includes five Brazilian phosphate mines–is a big move in the phosphate industry. Vale’s fertilizer arm includes Vale Fertilizantes, which has the capacity to produce up to 4.8 million tons of phosphate per year.
“This deal enhances Mosaic’s position as the leading phosphate producer in the world,” Mosaic Chief Executive Joc O’Rourke said.
In Europe, Sun Group–one of India’s trading and consultancy organizations–has considered setting up a phosphate production plant in Egypt.
The plant would contribute to Egyptian phosphate and “boost local market share of exports to global markets.”
The project is expected to begin in the early stages of 2017, which will no doubt boost phosphate supply and demand.
Phosphate outlook 2017: demand revival in the US?
That said, as the leading producer and consumer of phosphate rock–having produced 27,600 tons in 2015–some say US phosphate demand is “set for spring revival.”
As per Argus Media, US phosphate demand looks to make a comeback in the coming months due to an increase in exports and “strong fall application period.” In terms of domestic phosphate usage, the article suggests 2017 is “slightly mixed” due to an increase in cash farm income, particularly for corn and soybean growers.
US producers could also likely receive price support from international markets early in the year, which would limit US imports.
“The global phosphates market is watching China,” the article reads, “where producers are set to consider a proposed curtailment plan that could cut production rates by up to 50 pc because of low prices.”
As it can be seen, there is lots to look forward to in the coming years for the phosphate sector, which should bode well for those interested in the fertilizer sector.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.