A/08/87b July 2008

76th IFA Annual Conference Vienna (Austria), 19-21 May 2008

Medium-Term Outlook for Global Fertilizer Demand, Supply and Trade 2008 2012 Summary Report
Patrick Heffer and Michel Prudhomme International Fertilizer Industry Association (IFA)
International Fertilizer Industry Association (IFA) 28, rue Marbeuf 75008 Paris France Tel. +33 1 53 93 05 00 Fax +33 1 53 93 05 45/47 ifa@fertilizer.org www.fertilizer.org
Copyright 2008 International Fertilizer Industry Association All Rights Reserved

This public Summary Report was prepared by Patrick Heffer, Executive Secretary of the IFA Agriculture Committee, and Michel Prudhomme, Executive Secretary of the IFA Production and International Trade Committee. The first part looks at the global context and agricultural situation. The second part provides global and regional fertilizer consumption projections for the period 2007/08 to 2012/13. The third part provides IFA projections of fertilizer supply and supply/demand balances for the period 2008 to 2012. This report is available to the general public on the IFA web site or by request to the IFA Secretariat. The Summary Report draws on the revised versions of two reports presented at the 76th IFA Annual Conference held in Vienna in May 2008: the IFA report Medium-Term Outlook for World Agriculture and Fertilizer Demand: 2007/08 2012/13 (A/08/85), and the IFA report Global Fertilizers and Raw Materials Supply and Supply/Demand Balances: 2008 2012 (A/08/73b). These two comprehensive reports are strictly reserved for IFA members.

Copyright 2008 International Fertilizer Industry Association - All Rights Reserved

PART 1 GLOBAL ECONOMIC CONTEXT AND AGRICULTURAL SITUATION

1.1. Global Context 1.1.1. Economic Situation In 2007, the global economy remained strong with, however, a marked slowdown during the last quarter. Growth of the world gross domestic product (GDP) is assessed at 4.9%, as buoyant economic growth in emerging Asia has offset the deceleration registered in the USA. Global expansion is losing speed in 2008, with GDP growth forecast at some 3.7% by the International Monetary Fund (IMF). This decline is driven by the current crisis in the US housing and financial sectors, which is partly counterbalanced by continuous robust development in most developing countries. The outlook for the global economy might be revised down further if the situation in the USA continues to deteriorate. Under a pessimistic scenario, the United Nations projects a drop in world economic growth to 1.6%. The beneficial impact of GDP growth could be mitigated by fast-increasing inflation in a number of developing countries, including China. Income growth in emerging economies triggers food diversification towards more meat, fish, fruits, vegetables, sugar and vegetable oils and fewer cereals and pulses per capita. More meat production requires greater amounts of feed ingredients (feed cereals, oilseed meals, distillers grain, etc.). Furthermore, production of oilseeds, fruits, vegetables and other cash crops strongly competes with that of cereals for land. Crude oil prices surged in 2007 and continued to rise during the first half of 2008, to reach more than US$ 135 per barrel. These unprecedented levels impact fertilizer production and trade and, therefore, fertilizer prices. In addition, they provide a strong rationale for developing biofuel production. 1.1.2. Policies and Regulations Food inflation and food security are currently very high on the policy agenda. Prices of most agricultural commodities have soared over the past 12 months, leading to unrest in a number of low-income and food-deficit countries.

With the objective of improving food availability and affordability, the Food and Agriculture Organization of the United Nations (FAO), the World Bank and many other bodies are considering options for easing current very tight market conditions in respect to virtually all cereal and oilseed crops. In the short term, many countries have taken unilateral actions to keep domestic food inflation under control and to ensure adequate food supply. Thus, a number of major grain producers have recently imposed various forms of export restrictions (taxes, quotas, bans, etc.), which result in even higher grain prices on the international market. In that context, environmental objectives are temporarily lower on the agenda of many countries and international organizations, with the notable exception of objectives related to greenhouse gas emissions and climate change. Despite the food vs. fuel debate, biofuel production has been increasing rapidly. Decision makers in the USA and in the European Union (EU) have recently adopted new policies on renewable energies. These policies set new mandates for biofuels that are more ambitious than previous ones. Whether the mandates can be achieved, and whether they will be maintained in the current policy context, is questionable. In any case, over the next five years the pace of biofuel expansion is expected to slow, according to the United States Department of Agriculture (USDA) and the Food and Agricultural Policy Research Institute (FAPRI). For instance, from 2008/09 there will be little potential for increasing the share of US maize being converted to ethanol. Future expansion of biofuel production in the USA would have to come from other technologies, such as biodiesel and cellulosic ethanol. Similarly, in the EU the expansion of biofuel production would have to come mostly from ethanol production using cereals and sugar beet as feedstocks, rather than from further growth in the production of rapeseed-based biodiesel. In contrast, Brazil has much greater potential in the short term, as land and water availability in that country is less limiting. Environmental concerns have a much greater impact on agriculture and fertilizer demand in developed countries than in developing ones. Increasingly, farmers in developed countries are being requested to reduce nitrogen and phosphorus losses in order to preserve or improve water and air quality.

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At the same time, increasing emphasis is being put on soil fertility. Optimizing the recycling of organic nutrient sources and producing nutrient budgets are common requirements in many developed countries. A growing number of developing countries are also paying due attention to better management of manufactured fertilizers and other nutrient sources, with the objective of preserving the environment, finding alternatives to tight fertilizer supply and enhancing farmers income. The impact of soil nutrient mining due to underuse of fertilizers in Sub-Saharan Africa is attracting increasing interest; urgent action is needed to prevent further soil fertility degradation and make it possible to raise productivity in the region. Increasing fertilizer prices influence fertilizer application rates and nutrient ratios. Countries with fertilizer subsidy schemes are in general less impacted. Currently, out of the 25 largest fertilizer-consuming countries, ten (mostly developing Asian countries) implement some form of fertilizer subsidisation. 1.1.3. Weather Conditions Weather conditions in the northern hemisphere have been favourable overall during the winter and spring. The main concern relates to wet conditions in the US Corn Belt, which are significantly delaying maize planting operations. This could result in a smaller area planted to maize, to the benefit of soybean, or in yield potential losses. Cyclone Nargis has flooded one of the key rice producing regions of Myanmar; it is too soon to estimate the impact of this flooding on the 2008 rice harvest.

Preliminary forecasts for the 2008 harvest point to a new record cereal crop, up 2.8% from the previous year to 2.16 Bt.
World Cereal Production and Utilization (Mt)

Source: FAO

The wheat output is seen as strongly rebounding (+8.2%) after two consecutive disappointing harvests. Coarse grain production would only increase marginally (+0.3%) from the previous years record, and the rice crop is projected to increase by 1.1%. Oilseed production is seen as rising sharply (+8.2%), while sugar and cotton crops would contract by 2% each. Despite the anticipated record harvest, world cereal inventories would hardly recover in 2008/09, as world consumption would increase by 1.7%, to 2.15 Bt. World stocks could further decline in case of disappointing spring cereal crops. According to preliminary forecasts, wheat and rice ending inventories would increase in 2008/09 while maize stocks would drop. The global cereal stock-to-use ratio would evolve only marginally, by close to 15%, according to USDA.
Global Cereal Stock-to-Use Ratio

1.2. Agricultural Situation 1.2.1. Short-term Prospects Despite a record world cereal output, estimated at 2.1 billion metric tonnes (Bt) sharp in 2007, a small deficit is anticipated at the end of the 2007/08 marketing campaign. This would result in a contraction of world inventories, and in an aggregate stock-to-use ratio for cereals reaching record lows for at least two decades. In this context, prices for most cereals strengthened in 2007 and have continued to do so during the first half of 2008, with the exception of wheat prices, which peaked during the first quarter of 2008.

Source: FAO and USDA

The coarse grain ratio would be much lower (12%) than the ratios for wheat and rice (19% each). World soybean and sugar inventories are seen as modestly increasing, while cotton stocks would drop.

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Because tight market conditions are expected to prevail in 2008/09, cereal and oilseed prices are likely to remain high. Sugar and cotton prices are not as firm, but are still attractive compared to some years ago. 1.2.2. Medium-term Agricultural Outlook In a medium-term perspective, there is a need to quickly increase agricultural production in order to meet the food, feed, fiber and biofuel requirements of the world population. It is anticipated that the expansion of biofuel production will decelerate until new technologies such as cellulosic ethanol production are commercially competitive. This is projected to result in a progressive slowdown of world grain consumption. Nevertheless, supply/demand balances for most agricultural commodities are seen as remaining tight, and crop prices are not expected to evolve dramatically from current levels. With increasing food diversification, production of meat, dairy products, fruits and vegetables would also increase steadily, in particular in emerging Asia where average income is steadily rising. At the country level, the following changes are anticipated: a large maize area to the detriment of other crops in the USA; more soybean, sugar cane and maize in Brazil; more soybean and cereals in Argentina; the end of the mandatory set-aside in the EU; more cereals, oilseeds and sugar beet in the Commonwealth of Independent States (CIS); more cash crops in India; more maize, fruits and vegetables and less wheat and rice in China; more oil palm in Indonesia and Malaysia. Few changes are anticipated in Sub-Saharan Africa, despite the huge untapped potential of this region. Output gains are anticipated to come from increases in cropped area and yields. The cultivated area is seen as essentially increasing in Argentina, Brazil, Indonesia, Malaysia, Russia and Ukraine. Abolition of the mandatory set-aside in the EU and release of Conservation Reserve Program (CRP) land in the USA are also expected to open additional areas for cropping.

PART 2 GLOBAL FERTILIZER DEMAND

2.1. Short-term Prospects In response to very attractive agricultural commodity prices in 2007 and the first half of 2008, as well as to policies promoting fertilizer use in many Asian countries and favourable weather conditions in the northern hemisphere over the past few months, global fertilizer demand is seen as up 4.1% in 2007/08. World demand would reach 169.4 million metric tonnes (Mt) nutrients, compared to 162.7 Mt the year before. Potash consumption would increase by 6%, compared to 4% for nitrogen and 3% for phosphate. At the regional level, demand is seen as surging in Latin America (+12.8%) in response to very favourable crop prices. It is also projected to rise in Eastern Europe and Central Asia (+6.3%), East Asia (+6.1%), South Asia (+3.4%) and Western and Central Europe (+2.0%). Consumption would stagnate in Africa, and drops are anticipated in West Asia (-6.3%), North America (-1.3%) and Oceania (-0.5%). Together with world population increase and average income growth in emerging Asia, biofuel production is one of the key drivers of the outlook. However, the direct contribution of biofuel crops to world fertilizer consumption is relatively modest. Worldwide, it is estimated that some 4.1 Mt nutrients is applied to crops used as biofuel feedstock. Crops grown for biofuel purposes would account for some 2.4% of world fertilizer applications in 2007/08. The impact of biofuel production on world fertilizer demand is mostly indirect through its influence on international cereal, oilseed and sugar prices, which provide strong incentives for increasing fertilizer application rates on crops grown for food or feed purposes.
Estimates of Global Fertilizer Use on Biofuel Crops in 2007/08 (Mt nutrients)

Source: IFA

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With market conditions expected to remain exceptionally favourable in the coming months, global fertilizer demand is projected to further grow in 2008/09 by some 3.1%, to reach 174.7 Mt. Contrary to the previous year, growth in demand is forecast to be stronger for nitrogen (+3.6%) than for phosphate (+2.7%) and potash (+2.2%). The fertilizer market is anticipated to expand in all the regions but West Asia (-0.5%), with Oceania (+5.0%) and Eastern Europe and Central Asia (+4.9%) recording the highest year-on-year growth rates. Consumption growth would be modest in Western and Central Europe (+0.6%). In all the other regions, demand is seen as up by 3 to 4% from the previous year.

Projected Medium-Term Evolution of Regional Fertilizer Demand (Mt)

Source: IFA

2.2. Medium-term Fertilizer Demand Outlook In the medium term, world fertilizer demand is projected to grow steadily. Compared to average consumption between 2005/06 and 2007/08, global demand in 2012/13 is seen as increasing by 3.1% annually on average, to reach 194.3 Mt. In view of anticipated tighter market conditions for phosphate and potash vs. nitrogen, as well as the need to boost yields to meet world food, feed, fiber and biofuel requirements, nitrogen demand is seen as rising slightly faster (+3.2% p.a.) than consumption of potash (+3.0% p.a.) and phosphate (+2.8% p.a.).
Global Fertilizer Consumption (Mt nutrients) 2007/08 2008/09 2012/13 Change (e) (f) (f) N P2O5 K2O Total 100.0 40.1 29.3 169.4 103.5 41.2 30.0 174.7 +3.6% +2.7% +2.2% +3.1% 115.6 45.7 33.0 194.3 Average Annual Change* +3.2% +2.8% +3.0% +3.1%

In East Asia, regional demand is seen as firm over the outlook period (+3.3% p.a.), essentially under the impulsion of China, Indonesia, Malaysia and Vietnam. Emphasis on food security is projected to boost nitrogen fertilizer demand. Rapid expansion of oil palm plantations combined with efforts to rebalance fertilization would stimulate potash consumption, while increasing recycling of organic nutrient sources would result in a progressive slowdown of phosphate demand growth. Demand is anticipated to remain strong in South Asia (+4.2% p.a.) as larger amounts of fertilizer are required to achieve food selfsufficiency objectives. With greater attention being paid to balanced fertilization and to nitrogen use efficiency, growth rates for potash and phosphate are seen as higher than for nitrogen. In response to rising demand for maize from the ethanol and livestock sectors, fertilizer consumption in North America is seen as increasing steadily over the next five years (+1.5% p.a.). Fertilizer demand in Latin America and the Caribbean is strongly stimulated (+4.6% p.a.) by current attractive agricultural commodity prices, as it is one of the few regions that can quickly respond to market signals. After about two decades of decline or stagnation, fertilizer consumption in Western and Central Europe is projected to rise modestly in the next five years (+0.5% p.a.) in response to high grain prices and the expansion of regional biofuel production. Eastern Europe and Central Asia is another region with potential to substantially increase its agricultural output over the outlook period. Regional fertilizer demand is seen as initiating a strong rebound (+5.4% p.a.) after the long lag period that followed the sharp decline in the early 1990s.

(e) estimated; (f) forecast * Compared to the average 2005/06 to 2007/08 Source: IFA

At the regional level, the bulk of the increase in demand is forecast to come from Asia and, to a lesser extent, from Latin America. South Asia and East Asia together would account for twothirds of total growth. If Latin America is added, the three regions together would account for 81% of the increase in demand in the next five years.

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Fertilizer demand in West Asia would increase by 2.1% p.a., as limiting the food import bill is a key issue for many countries in the region. Most of the increase would be in demand for nitrogen fertilizers. Fertilizer consumption in Africa is projected to increase by only 3.2% p.a. from its current very low base, despite the huge untapped potential of Sub-Saharan Africa. High agricultural commodity prices are likely to benefit only those farmers who are well connected to the input and output markets. Fertilizer consumption in Oceania is seen as recovering slowly (+1.4% p.a.) from the two consecutive droughts that have severely impacted Australian agriculture.

The supply of raw materials has become tight, boosting production rates and resulting in higher prices for intermediates and finished fertilizers. In early 2008, several exporting countries implemented export taxes on fertilizers, exacerbating the prevailing tight supply situation and adding upward pressures on prices. Fertilizer prices have increased dramatically since the beginning of 2008, generating concerns over possible demand destruction in the short term. A combination of factors explain the rapid increase in fertilizer prices. The main ones are a surge in agri-commodity demand and prices, resulting in a major increase in fertilizer demand over the past two years; rising energy costs and ocean freight rates; higher steel and equipment prices; a shortage of specialized labour; a historical lack of investments in the fertilizer industry; and the recent devaluation of the US dollar. Since 1985, the global fertilizer market has experienced moderate demand growth, large capacity surpluses and few positive prospects for a favourable investment climate. Similarly to the metal mining sector, the mineral fertilizer industry has been confronted with rising costs and more stringent regulatory processes, which are associated with societal and environmental considerations. Meanwhile, the nitrogen sector has faced various constraints such as rising energy prices, ageing equipment and competing supply from low-cost natural gas regions. A more positive outlook since 2004 has led to capacity investments in the fertilizer sector, albeit at different levels for the three major nutrients. However, the very rapid changes in market conditions since 2006 have not left enough time for the industry to react on the supply side given the timeline required for developing greenfield operations, which could take from three to ten years depending on products and processes. A shortage of available supply does not necessarily translate into scarcity of resources. There are sufficient raw material resources to meet, for several generations, the needs of the fertilizer industry and the nutrient requirements of farmers and breeders worldwide, using current production technology and advanced exploration and extraction technologies. However, these resources are not immediately available, as considerable time and large investments are required in order to access and develop economic reserves.

PART 3 GLOBAL FERTILIZER SUPPLY

Since early 2007, the global fertilizer market has entered a new demand-pull cycle, driven by a surge in overall consumption and a shortage of available supply. Indeed, 2007 was a record production year for most products, as buoyant demand stretched the fertilizer industrys capability to meet global plant nutrients requirements. The prices of fertilizer products have reached record levels in the past ten years. Global supply/demand balances for most fertilizers, intermediates and raw materials were tight during 2007 and entering 2008. Demand prospects in the medium term look bullish, with global consumption expanding at an annual rate of 2.7 per cent between 2008 and 2012, which is above the five-year average growth rate of the past decade. World fertilizer consumption is projected at 173.5 Mt nutrients in 2008, reaching 193.1 Mt in 2012.
Global Fertilizer Consumption Calendar Year Basis
Mt nutrients

2007 (e) 99.4 40.2 29.1 168.7

2008 (f) 102.9 40.8 29.8 173.5

2012 (f) 114.9 45.4 32.8 193.1

N P2O5 K2O Total

Annual Change Over 2008* +2.8% +2.7% +2.4% +2.7%

(e) estimated; (f) forecast * Based on estimates of future demand in 2008 and 2012 Source: IFA, June 2008

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3.1. Nitrogen Outlook 3.1.1. World Nitrogen Situation in 2007 Nitrogen supply/demand conditions in 2007 remained very tight, driven by strong nitrogen fertilizer demand worldwide. Production outages in exporting countries and delays in the commissioning of new capacity further tightened supply availability, as most producers operated at close to capacity. Ammonia imports rose moderately, but much of the growth in import demand concerned urea. World ammonia production in 2007 was close to 154.4 Mt NH3, a 4.5 per cent increase over 2006. On a global basis, ammonia producers operated at an average of 88 per cent of capacity during 2007. Global ammonia trade was close to 19.2 Mt NH3, while world seaborne trade was stable at 16.6 Mt NH3. 3.1.2. Global Nitrogen Capacity and Balance During the period 2007 to 2012, nitrogen capacity developments will be shaped by the cost differential of feedstock between regions, governments policies fostering downstream developments from the hydrocarbon sector, industrys desire to improve factories energy efficiency and, more recently, strong demand projections. According to the IFA 2008 world capacity survey, global ammonia capacity will increase from 176.3 Mt NH3 in 2007 to 210.3 Mt NH3 in 2012. One-third of this increase will come from revamping activities. The remaining two-thirds will be generated from the commissioning of close to 50 units worldwide, of which half will be located in China. In terms of regional distribution, the bulk of capacity growth will occur in East Asia (mostly China), West Asia, EECA, Africa (Egypt and Algeria) and South Asia (India and Pakistan). Ammonia capacity is tentatively projected to increase in North America by 2013 and would be relatively static in Europe and Oceania. Between 2007 and 2012, world nitrogen supply is projected to expand from 134.4 Mt N in 2008 and 156.2 Mt N in 2012. Taking into account nitrogen fertilizer uses, industrial uses and distribution losses, global nitrogen demand would reach 131.4 Mt N and 146.7 Mt N in 2008 and 2012, respectively.

Global Nitrogen Supply/Demand 2008-2012 Mt N Nitrogen Supply Nitrogen Demand Global Balance 2008 134.4 131.4 +3.0 2012 156.2 146.7 +9.5

Source: IFA, June 2008

IFA estimates that the global nitrogen supply/demand balance will show a surplus of 3.0 Mt N in 2008, rising to 9.5 Mt N in 2012. However, the potential surpluses in 2008 and 2009 are equivalent to 3 per cent of global supply, a level which could be considered as marginal when taking into account idle capacity and unexpected plant outages.

3.1.3. World Urea Situation in 2007 With the increasing share of urea in the nitrogen fertilizer mix, overall urea use reached a record level in 2007, driven by firm consumption in the agricultural and industrial sectors. The positive tone of the fertilizer market since 2006 has led to rising production and exports. At the same time, longer turnarounds and widespread production outages, combined with delays in the commissioning of new exportoriented facilities, has tightened overall supply availability. World urea production in 2007 rose by 6.6 per cent to 144 Mt. China contributed twothirds of the global increase. On a global basis, the industry ran at 91 per cent of capacity. Global trade was very robust, increasing by 15 per cent over 2006 to 36.4 Mt.

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3.1.4. Global Urea Capacity and Balance IFAs 2008 global capacity survey shows that the world urea capacity is forecast to reach 200 Mt in 2012. This corresponds to a compound annual growth rate of 5.5 per cent over 2007. New units will add about 30 Mt of capacity, while revamping and debottlenecking programmes will add another 13 Mt of capacity. Due to slippage in the completion of several projects, limited capacity will be added in 2008, 2010 and 2012, and significant export tonnage will emerge in 2009 and 2011. World urea supply is estimated at 150.6 Mt in 2008 and 184.3 Mt in 2012. The global demand for urea is forecast to increase from 150 Mt in 2008 to 180.2 Mt in 2012, representing a net growth of 30.2 Mt.
Global Urea Supply/Demand 2008-2012 Mt urea Urea Supply Urea Demand Global Balance 2008 150.6 150.0 +0.6 2012 184.3 180.2 +4.1

3.2. Potash Outlook 3.2.1. World Potash Situation in 2007 The global potash market became very tight in 2007, in the light of stronger than anticipated demand for potassium fertilizers and logistical constraints in a few exporting countries. Importers potash stocks were at very low levels. Most producers operated at close to capacity, and several customers were notified of the availability of supply on sales allocation. Global potash production in 2007 was 55.4 Mt MOP eq., increasing by 14 per cent over 2006. In K2O terms, world total production was estimated at 34.1 Mt (including all primary output of MOP, SOP and KMgSOP). Global potash exports accounted for 80 per cent of total deliveries and domestic sales for the remaining 20 per cent. Potash exports in 2007 totalled 45.2 Mt MOP eq., representing an 18 per cent increase over 2006. 3.2.2. Global Potash Capacity and Balance During the period 2007 to 2012, potash capacity will expand in virtually all producing countries. IFA forecasts that global potash capacity will increase by 22 per cent over 2007, to 50.3 Mt in 2012. Expansion will mostly occur in Canada, China and Russia, along with a greenfield operation in Argentina. On an annual basis, capacity addition will be very limited in 2008 but will accelerate thereafter at an average of 1.2 Mt/a K20 between 2009 and 2011. However, close to 5.0 Mt would be added between 2011 and 2012. The bulk of the addition to capacity will be for potassium chloride (MOP), especially granular grades.
Global Potash Supply/Demand 2008-2012 Mt K2O Potash Supply Potash Demand Global Balance 2008 35.5 33.3 +2.2 2012 43.7 36.6 +7.1

Source: IFA, June 2008

IFA estimates of the urea supply/demand balance show a tight market situation from 2008 to 2010. A growing surplus will emerge by 2011, averaging 4.3 Mt/a, assuming that all announced projects proceed as planned and that urea uses attain a 64% share of all demand for nitrogen nutrient fertilizers.

Source: IFA, June 2008

It can already be assumed that some projects planned during the period 2008 to 2012 would be delayed or even cancelled in the near term, and that some further rationalization could occur in Europe and South Asia.

IFA estimates that the world potash supply will increase from 35.5 Mt K20 in 2008 to 43.7 Mt K20 in 2012. The global demand for potash is estimated at 33.3 Mt K2O in 2008 and 36.6 Mt K2O in 2012. The global potash supply/demand balance will remain tight through 2011. During this period, all capacity increases will be absorbed by the growth in demand.

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The prospects for firmer demand than projected, or delays in the commissioning of new capacity, could lead to a tighter balance. By 2012, large capacity additions will exceed demand growth if all projects proceed as planned.

While the international supply of phosphate concentrates is considered tight in the short to medium term, upcoming capacity projects and the availability of resources are more than adequate to meet growing demand in the longer term. 3.3.2. World Phosphoric Acid Outlook Global production of phosphoric acid in 2007 was estimated at 36 Mt P2O5, representing a 5.6 per cent increase over 2006. For the sixth consecutive year, China accounted for most of the increase. The global trade of phosphoric acid declined for the third consecutive year. Much of the reduction was caused by lower imports into India. According to the IFA 2008 capacity survey, global phosphoric acid capacity is forecast to increase by 10.2 Mt to 53.1 Mt P2O5 between 2007 and 2012. Close to three-quarters of this net expansion will be dedicated to domestic downstream processing. The main additions to domestic capacity will occur in China, Saudi Arabia and India. Very little tonnage of noncommitted merchant phosphoric acid capacity is expected to be available before 2012. 3.3.3. Global Phosphoric Acid Balance The global supply of phosphoric acid is estimated at 38.7 Mt P2O5 in 2008 and 46.4 Mt P2O5 in 2012, which is equivalent to a compound annual growth rate of 5 per cent. Taking into account fertilizer and industrial uses and processing losses, the global demand for phosphoric acid is forecast to grow at an annual rate of 3.3 per cent over 2008, to reach 43.4 Mt P2O5 in 2012.
Global Phosphoric Acid Supply/Demand 2008-2012 Mt P2O5 Phosphoric Acid Supply Phosphoric Acid Demand Global Balance 2008 38.7 38.1 +0.6 2012 46.4 43.4 +3.0

3.3. Phosphate Outlook The world demand for phosphate fertilizers in 2007 grew by 4.5 per cent over 2006, pressuring the industry to operate at high rates during the whole year. Production of raw materials, intermediates and processed phosphate fertilizers rose to near record levels while input costs started to escalate, notably for sulphur and phosphate rock. The global production of processed phosphates (MAP, DAP and TSP) grew by 5.5 per cent over 2006, to 25 Mt P2O5. MAP production accounted for all of the increase. 3.3.1. World Phosphate Rock Outlook World production of phosphate rock in 2007 was estimated at 176.1 Mt, growing by 4.6 per cent over 2006. Most producers increased output, but China alone contributed three-quarters of the net increase. Global trade recovered in 2007, after registering two years of decline, and reached 31.4 Mt, representing an increase of 5.7 per cent over 2006. Based on the IFA 2008 survey of future phosphate rock supply, world phosphate rock capacity is expected to reach 242 Mt in 2012, representing an overall 28 per cent growth over 2007. On a regional basis, future rock supply is projected to grow in West Asia, Africa, East Asia (China) and Latin America (Brazil, Peru and Venezuela). As a single country, China will account for one-fifth of the increase during this period.
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Source: IFA, June 2008

The global phosphoric acid supply/demand balance shows tight market conditions during the period 2008 to 2011, with marginal annual surpluses ranging between 0.7 and 1.8 Mt. This tightness is the consequence of sustained demand growth worldwide and limited capacity additions through 2010.

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However, a larger surplus may emerge in 2012 as a result of new capacity coming on stream in 2011/12.

3.4. Elemental Sulphur Outlook 3.4.1. World Sulphur Situation in 2007 In 2007, the global sulphur market showed remarkable strength in the light of strong demand in the fertilizer and industrial sectors combined with lower than anticipated growth of world production. World elemental sulphur consumption grew by 6 per cent over 2006, to 49.2 Mt S, while production rose to 47.9 Mt S. 3.4.2. Global Sulphur Supply/Demand Balance Between 2007 and 2012, world production of elemental sulphur is projected to increase at an average annual rate of 6.3 per cent, to reach 65 Mt S in 2012.
Global Elemental Sulphur Supply/Demand 2008-2012 Mt S Elemental Sulphur Supply Elemental Sulphur Demand Global Balance 2008 50.2 50.9 -0.7 2012 65.0 60.8 +4.2

Following another year of a deficit in supply in 2007, the global sulphur market will face a certain imbalance again in 2008, due to firm sulphur demand and some shortfalls in supply caused by delays in several oil and gas projects worldwide. In the following years, the supply/demand balance shows a gradually expanding surplus from 1.0 Mt in 2009 to more than 4.2 Mt in 2012. However, considering that some production is not all available for delivery, the potential surplus might be lower than 1.0 Mt in 2009 and would start to become more significant after 2010.

Source: IFA, June 2008

Global consumption of elemental sulphur is projected to grow at an annual rate of 4.4 per cent between 2007 and 2012, reaching 60.8 Mt S in 2012. This increase will come from higher consumption of sulphuric acid in the manufacture of phosphoric acid-based fertilizers and growing usage for ore leaching.

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