The Integer View 06 June 2017 - Global Urea Market Update; OCP Host Site Tour; Copper Smelter Up For Privatization; Potential Jansen Production Date - Integer
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The Integer View 06 June 2017 – Global Urea Market Update; OCP Host Site Tour; Copper Smelter Up For Privatization; Potential Jansen Production Date

Posted On: 06-06-2017 By: Grahame Turnbull

The struggling global urea market can’t look to India for respite this year

By Alistair Wallace – Fertilizer and Chemical Research Manager
alistair.wallace@integer-research.com

Falling domestic urea sales in India over the last 18 months reduced Indian urea imports from 10.0 million tonnes in 2015 to just under 7.0 million tonnes in 2016. This figure looks set to fall further this year. Annualised data for the year-to-April shows that the import requirement has collapsed to just 5.0 million tonnes. A stunning reversal of India’s role as the world’s largest urea import market.

What has driven this collapse in Indian urea sales? The government has loudly proclaimed that its switch to 100% production of neem-coated urea in 2015 has been a driver of this sales reduction through greater use efficiency. However, we believe that a more likely reason for the fall in sales is that the record imports in 2015 merged with poor monsoons that lowered farm-level consumption, allowing significant inventories to build up throughout the supply chain. This carried inventory continues to overhang real consumption, limiting sales activity amongst co-ops and wholesalers.

Click to enlarge

Indian production looks relatively stable at just under 24.5 million t/y, so consumption will be the key decider this year. Integer is assuming that annual sales will be flat at around 30.0 million tonnes. Accounting for volumes already secured in the three tenders so far this year, and assuming stable production from Omifco, it looks like the government need only secure around another 1.5-1.6 million tonnes of urea this year.

The major demand-side risk to this outlook is that record grain production in 2016/17 has destocked the supply chain more than we are anticipating (the data does not indicate this). While on the supply-side, the uncommissioned (but mechanically complete) Matix plant remains a concern; its 1.4 million t/y capacity could lower imports by around 500,000 t if it were to start this summer.

Read more on Integer’s Nitrogen Cost and Profit Margin Service, Nitrogen 10-Year Outlook Service and Check out our Nitrogen Webinar Page

OCP host pre-IFA site tour

By Ibi Idoniboye – Lead Phosphate and NPK Analyst
Ibi.Idoniboye@integer-research.com

As an aperitif to the International Fertilizer Association (IFA) annual conference in Marrakesh, phosphate major Office Cherifiens de Phosphates (OCP) hosted a two-day analyst tour of its mining and processing assets in Khouribga and nearby Jorf Lasfar. This was followed by an invite-only Q&A session with senior OCP management. Throughout the two days, the Group emphasised its growth strategy, based on three core pillars: capacity leadership, cost leadership, and industrial and commercial flexibility. The strategy is being implemented in three phases and it is now entering the final phase (2017-2025).

From 2007-2017, OCP has spent approximately US$8 billion in phosphate capex, adding 14 million tonnes of mining capacity at Khourigba, while tripling fertilizer capacity at Jorf Lasfar to 12 million tonnes. An additional 3 million tpy fertilizer capacity will be added at relatively low capex to 2020, due to some revamping and efficiency gains. The Group aims to maintain exportable phosphate rock capacity at 18 million tpy (although export volumes are typically around half that level). According to the company,  the 38 million tonnes capacity slurry pipeline connecting Khouribga to Jorf Lasfar has reduced phosphate concentrate cash FOB cost to around US$20/tonne, positioning the Group as the lowest-cash cost rock producer globally.

Several tie-ups are being pursued aimed at improving the Group’s fertilizer cost position, one being a potential partnership to build an ammonia plant in Nigeria. OCP management were keen to stress the flexibility of the business model and the ability to switch capacity utilisation rates between products, both upstream and downstream, when necessary.  Given the scale of its recent investments and plans, by 2025 OCP will exert a strong influence across the entire phosphates supply chain, particularly if, as expected, Chinese phosphates exports slow significantly.

Read more on Integer’s The Chinese Phosphate Industry, addressing the global impactPhosphate Cost and Profit Margin ServicePhosphate Rock Outlook Report and Check out our Phosphate Webinar Page

Serbian copper smelter up for privatization

By Meena Chauhan – Sulphur and Sulphuric Acid Research Manager
Meena.Chauhan@integer-research.com

The Serbian government has called a tender to consider management services to run the local RTB Bor copper smelter. The initial deadline was set for February this year; this was subsequently extended to April and then reportedly extended once again. The Hengkang Group in China was heard to have shown interest in the smelter, with meetings taking place to explore potential privatization. Further developments are expected later in 2017.

RTB Bor is a state-owned copper and precious metals producer, with a smelting complex in operation since 1903, leading sulphuric acid production in the country. Its original acid plant was shut down following a review of its environmental impact in line with European Union (EU) and Serbian regulations. A new sulphuric acid plant was constructed in a smelter modernization project that began in 2010. The project included a new flash furnace and was upgraded with a 1,830 tonne per day sulphuric acid plant capturing 98% of sulphur from SO2 emissions. The acid plant became operational in 2015. Copper production capacity at the plant doubled through the upgrade, from 40,000 tonnes of copper to 80,000 tonnes per year.

Acid produced at the plant is mostly absorbed into the local market but small volumes are exported to markets such as Romania and Bulgaria.

Read more on Integer’s Sulphur Market Dynamics Service, Sulphur Quarterly Insight or our Spotlight Report – Chinese Sulphur and Check out our Sulphur Webinar Page

BHP Billiton CEO suggests Jansen could produce in 2023

By Rebecca Hayward – Lead Potash Analyst

BHP’s plans for Jansen have been somewhat elusive, but in May the mining giant floated a potential production date for the 10m tpy capacity mine in Saskatchewan. Of course, progress is still subject to the company’s board approval to commit to the necessary capital expenditure to complete the project.

CEO Andrew McKenzie spoke at a conference in Barcelona on Tuesday and said,

“As we currently see it, we’re looking at a phased expansion with an initial stage of 4 million tpy”, he added “it could be something that we’ll seek board approval for as early as June of next year with possible first production in 2023”.

The revelation is not an official announcement of BHP’s plans but it does provide some insight to its promising view of Jansen at present.

By 2023, a swathe of capacity expansion will have already been realised in Russia, North America, Turkmenistan and possibly the Republic of Congo. The impact of BHP bringing online further volumes from Jansen from 2023, albeit smaller in scale, will doubtless have a significant impact on the amount of spare capacity in the industry. It’s possible that BHP wants to have production capacity in place ready to capture demand growth in fast growing regions such as Southeast Asia, Latin America and South Asia, likely at the expense of other suppliers.

And finally….

We are delighted to learn that legendary football superstar Didier Drogba has joined the fertilizer industry. Drogba has been appointed as a member of the board of junior miner Encanto Potash Corp, which is developing potash resources in Saskatchewan, Canada.  He is also a UN Goodwill Ambassador, and has worked extensively to overcome development and political challenges in Africa, notably in Ivory Coast, his home country. Drogba is joining the Encanto board to help promote sustainable agriculture and safe fertilizers. He has played football worldwide, but his legend is greatest at Chelsea Football Club, the preferred team of the Integer View editor (who is willing to travel long distance at short notice, if an opportunity arises to join Drogba for a discussion on fertilizer and football matters!).

Read more on Integer’s Potash Market Service or SOP Outlook Report and Check out our Potash Webinar Page

Integer has made available free concise and insightful fertilizer and chemical market outlook analysis webinars. >> Click Here to see a full list of the coverage across Nitrogen, Phosphate, Potash, Sulphur, and Sulphuric Acid

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