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Published: March 2010
After many years of increasing demand, the world ammonium phosphate industry and fertilizer industry as a whole experienced a dramatic downturn in the fourth quarter of 2008 and in 2009 as a result of the depressed global economy. Consumption is not expected to return to 2007 levels until at least 2011. There are many causes for this, many having to do with pricing. First, fertilizer prices began to increase in late 2007, peaking in August 2008. Ammonium phosphate prices had increased nearly 400% in the first eight months of 2008 as prices were raised six times. Then, beginning with the global financial crisis in September 2008, the unavailability of credit prevented farmers from buying fertilizers, and fertilizer prices plummeted. DAP and MAP pricing declined 75% from the previous year, although from peak levels. The same occurred for urea and other fertilizers.
From 2005 to August 2008, the cost of raw materials used in DAP production increased from $144 per metric ton to nearly $1,100 per metric ton. The largest increases were in phosphate rock pricing, followed by sulfur pricing. Anhydrous ammonia also saw gains, but marginally compared with phosphate rock and sulfur. In addition to raw material price increases, there was a global shortage of phosphate fertilizers. Some of this was caused by the Chinese government’s dramatic increase in export tariffs on phosphate fertilizers to support Chinese domestic agriculture.The following pie chart shows world consumption of ammonium phosphates:
Global consumption of fertilizers has declined since the beginning of the international financial crisis, which peaked at the end of 2008, but continues to linger into 2010. Phosphate and nitrogen fertilizer prices, as well as volume, have declined as a result of high levels of inventory during this period. Pricing declines were particularly deep for phosphate and nitrogen fertilizers. The return to normal consumption and growth depends on the restoration of confidence among farmers globally and on financial institutions providing credit for agricultural applications. Availability of farm credit is key to a recovery in fertilizer sales and consumption. In late 2008 and into 2009, fertilizer companies curtailed production to reduce inventories. This was especially true for nonintegrated producers that had higher costs and lower margins. Integrated producers with their own mines fared better.
On the positive side, during the next five years and longer, the ammonium phosphate and fertilizer market looks strong. There will be increased global demand for agricultural products. Global food consumption is increasing, high oil prices are driving biofuel growth. Not only is the global population growing, disposable income is improving for more people in developing countries. As a result, more grains and meat are being consumed. This is happening when less land is being devoted to agricultural applications. As a result, to improve yields, fertilizer consumption will increase.