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Fertilizer Market Trends Email:
Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] The Mosaic Company The Mosaic Company was formed October 25, 2004 through the merger of IMC Global & Cargill Crop Nutrition. Fertilizer Market Trends by Steve Biggar Canada Regional Manager The Mosaic Company The company is the world’s 2nd largest crop nutrition company with 1600 employees in Canada and over 8000 employees worldwide. Manitoba Agronomists Conference Winnipeg, Manitoba December 13th, 2005 Annual sales are ~5 Billion $US and are ~25 million tons of combined products. 1 2 Fertilizer Market Trends Presentation Mosaic: The Global Leader in Nourishing Crops World scale and low cost U.S. mining and processing operations Second largest miner of phosphate rock with capacity of more than 22 million tonnes at mines in central Florida (15% of the world production) 11) The Mosaic Company – Who are we? Largest phosphoric acid producer with capacity of 6.1 million tonnes P2O5 at The Largest Phosphate Player Worldwide 2) Market Analysis plants in Florida and Louisiana (14% of the world total) Largest phosphate fertilizer producer with capacity of 12.6 million tonnes of product at plants in Florida and Louisiana (19% of the world total) Second largest feed phosphate player with capacity of 1.0 million tonnes of product at plants in Florida Global focus with equity stakes in leading phosphate producers in Brazil and 3) Nitrogen S&D China and with downstream distribution channels in all major markets Second largest potash player with capacity of 10.2 million tonnes of product or 5.7 million tonnes of nutrient (K2O) at mines in Saskatchewan, New Mexico and Michigan (15% of the world total) 4) Phosphate S&D Six mines in North America -- four world scale and low cost mines in A Leading Potash Producer 5) Potash S&D Saskatchewan accounting for 89% of Mosaic’s nutrient capacity and two smaller scale mines in the United States at Carlsbad, NM and Hersey, MI accounting for the remaining 11% of capacity Carlsbad operations produce mostly K-Mag, a branded specialty product Both shaft and solution mining operations The Belle Plaine, Saskatchewan operation is the largest potash solution mine in the world 3 4 Mosaic: The Global Leader in Nourishing Crops Mosaic Market Coverage 50% equity stake in Saskferco Products, Inc., a world scale and energy Assets in key growth markets efficient nitrogen facility across the road from the large potash solution mine at Belle Plaine, Saskatchewan Strong North American Nitrogen Position North America Mosaic serves as the exclusive marketing agent for Saskferco Saskferco capacity totals 1.2 million tonnes of product with a sales mix of South America • Supply & Demand Info is collected from key markets in North/South America & Asia. roughly 880,000 tonnes of granular urea, 230,000 tonnes of 28% UAN solution, 50,000 tonnes of MicroGran feed urea and 30,000 tonnes of ammonia Saskferco owns and operates a new 80,000 tonne warehouse at Carmen, MB that provides next-day delivery to customers in its core market • Developing distribution businesses in France, Ukraine, Russia & Mexico also contribute data. Mosaic also manufactures ammonia at its Faustina, LA complex for use in the production of diammonium phosphate (DAP) and monoammonium phosphate (MAP). Capacity is 510,000 tonnes per year. Markets a complete line of fertilizer products and offers value added services Asia in nearly all of the major nutrient markets around the globe Brick and mortar distribution assets including port terminals, bagging lines, Global Footprint in Attractive Markets warehouses and blending/NPK plants in Argentina, Brazil, Canada, Chile, China, India, Thailand, Ukraine and the United States Warehouse Warehouse & Blender Warehouse & Blender Under Construction Production Warehouse Liquid Product Tank Ammonia Tank Approximately 1.0 million tonnes of owned storage capacity at two dozen facilities worldwide SSP and feed phosphate production in Brazil and NPK compound production and bulk blending plants in China 20% equity stake in Fosfertil, the largest phosphate and nitrogen producer in Brazil, and a 35% equity stake in a 600,000 tonne DAP granulation plant in Haikou China 5 6 1 Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] S&D Analysis Mosaic Potash Production Locations Colonsay Shaft ¾ Information from the geographies where we have a presence is collected on a monthly basis and analyzed by Mosaic’s Market Analysis team in Plymouth MN. ¾ Local pricing is a factor of local supply & demand factors that either lead or lag world fundamentals. ¾ Information is shared through Publication like the “Market Mosaic” and through our sales team. Esterhazy K1 & K2 Shaft Belle Plaine Solution Hersey Solution Carlsbad Shaft Red Muriate of Potash White Muriate of Potash K-Mag® Sul-Po-Mag™ 7 8 Nitrogen production is energy intensive Nitrogen: Headed for Phase II of the Transition Ammonia plants in W.Can will use between 31 & 38 MM Btu’s of natural gas to produce a ton of ammonia A typical large scale ammonia plant will produce 527,000 tons per year requiring 17.6 BCF of gas per year. A typical Winnipeg home burns 135-140 MCF of gas per year. The Transition of the World Nitrogen Market Gas used by a typical Winnipeg home (one year) would produce 4 tons of ammonia or OMIFO – train I Sur, Oman Gas used by a typical ammonia plant (one year) would heat 128,000 homes in Winnipeg for an entire year. 9 10 Impact of natural gas on N production costs Phase I: The U.S. industry shrunk by one-third Gas Cost ($ MM Btu) Estimated Cost fob Plant ($ ST) $4.00 $5.00 $6.00 $7.00 $8.00 $134 $142 $169 94% 80% $168 $176 $202 95% 83% $201 $209 $236 96% 85% $235 $243 $269 97% 87% $268 $276 $303 97% 89% $302 $310 $336 97% 90% $335 $343 $370 98% 91% $369 $377 $403 98% 91% $402 $410 $437 98% 92% $436 $444 $470 98% 93% $469 $477 $504 98% 93% $92 $110 $140 84% 66% $115 $133 $163 86% 71% $138 $156 $186 88% 74% $161 $179 $209 90% 77% $184 $202 $232 91% 79% $207 $225 $255 92% 81% $230 $248 $278 93% 83% $253 $271 $301 93% 84% $276 $294 $324 94% 85% $299 $317 $347 94% 86% $322 $340 $370 95% 87% Phase I $9.00 $10.00 $11.00 $12.00 $13.00 $14.00 Mil ST Anhydrous Ammonia Gas Cost Variable Cost Cash Operating Cost Gas Percent of Variable Gas Percent of Cash Op. Cost Gross ammonia production peaked at 18 mst in the late 1990s and dropped to just 11.5 mst in 2004/05. 15 12 9 6 3 $60 $69 $97 87% 62% $75 $84 $112 89% 67% $90 $99 $127 91% 71% $105 $114 $142 92% 74% $120 $129 $157 93% 76% $135 $144 $172 94% 78% $150 $159 $187 94% 80% $165 $174 $202 95% 82% $180 $189 $217 95% 83% $195 $204 $232 96% 84% High gas cost forced the closure of roughly onethird of the U.S. nitrogen industry. 18 Nitrogen Solutions Gas Cost Variable Cost Cash Operating Cost Gas Percent of Variable Gas Percent of Cash Op. Cost Source: TFI and Mosaic 21 Solid Granular Urea Gas Cost Variable Cost Cash Operating Cost Gas Percent of Variable Gas Percent of Cash Op. Cost North American Ammonia Production 24 $210 $219 $247 96% 85% 0 90 91 92 93 U.S. 94 95 96 97 Canada 98 99 00 Cash Operating Cost of urea @ 14.00 US/MMBtu is 370 $US or 473 $Cdn FOB the plant site. 11 12 2 01 02 03 04 Fertilizer Year Ending June 30 05 06F The U.S. industry, however, still was the fourth largest producer of nitrogen in the world during 2004, according to statistics published by the International Fertilizer Industry Association (IFA). Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] Imports filled the gap Imports of all three major products increased Mil ST 5.0 Source: USDC and Mosaic 8 Mil ST N Percent U.S. Nitrogen Use 18 15 75 12 60 9 45 6 30 3 15 0 0 90 91 92 93 94 95 96 97 98 99 Total Use 00 01 02 03 04 05 3.5 3.0 5 2.5 4 2.0 3 1.5 2 1.0 1 0.5 0 0.0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06F 90 91 92 Imports will jump again this year and likely account for more than 60% of U.S. nitrogen use in 2005/06 95 96 97 98 99 00 01 02 03 04 05 06F Despite concerns about logistical bottlenecks, imports of all three major nitrogen products increased to record levels during Phase I of the transition. Source: USDC and Mosaic 2.4 2.1 1.8 06F 94 US UAN Imports from Offshore Sources Mil ST 2.7 1.5 1.2 Imports as Percent of Use 93 Fertilizer Year Ending June 30 Fertilizer Year Ending June 30 Fertilizer Year Ending June 30 Net Imports 4.0 6 Imports accounted for more 50% of U.S. total nitrogen use last year, up from 10%-15% 10 years ago. Source: USDC and Mosaic 4.5 7 90 Source: TFI and Mosaic US Urea Imports from Offshore Sources Mil ST US Ammonia Imports from Offshore Sources 9 Imports are forecast to jump to record levels again this year due to the expected shut down of U.S. plants that have not forward priced natural gas at pre-Katrina levels or less. 0.9 0.6 0.3 0.0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06F Fertilizer Year Ending June 30 13 14 High U.S. gas prices will accelerate Phase II The gas market fretted about storage builds that were less than a year ago due to stronger-thanexpected demand for summer cooling, supply disruptions caused by Hurricane Dennis in July and disappointing gas and LNG imports. Henry Hub Natural Gas Price $ MM Btu Monthly Average of Daily Cash Price Index 14 13 Source: Enerdata 12 2002 2003 2004 2005 11 10 High U.S. gas prices have put a floor under urea prices Average 3.36 5.48 5.86 8.39 9 $ ST 260 240 220 8 200 Hurricanes Katrina and Rita ignited the gas market and sent prices to record levels during Q3 2005. 7 6 5 4 3 1 98 99 00 01 02 03 04 180 160 140 Cold US weather caused gas prices to spike to over 15.00/MMBtu last week. Gas prices are expected to remain very volatile over until the worst of winter is over(FH March). 2 05 NOLA Granular Urea Barge Prices 280 120 100 Source: Green Markets 80 60 91 92 93 94 95 96 97 15 99 00 01 02 03 04 05 06 16 The current forward curve sets a high floor price World Urea Export Supply MMT World Ammonia Prices vs. U.S. Ammonia Cost of Production $ MT 98 World Urea Export Supply 50.0 600 Source: IFA and Mosaic 550 The cost of U.S. natural gas will set a floor under world nitrogen values until enough low-cost capacity is built to displace the domestic industry or until U.S. producers switch to a lower cost feedstock such as imported LNG or domestic coal. Source: Fertecon, Enerdata, Gas Daily 500 45.0 450 400 350 300 250 200 150 World urea export supply is projected to increase to 43.6 mmt in 2015, up more than 52% or 15.0 mmt from 28.6 mmt in 2004. 40.0 35.0 30.0 25.0 Significant additional supply is projected to come from Middle East (e.g. Oman, Saudi Arabia, Iran, etc.) and Egypt. 20.0 15.0 10.0 100 5.0 50 91 92 93 94 95 96 97 U.S. Gulf plant cost 98 99 00 01 02 03 04 05 0.0 06 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Tampa C&F NH3 prices Middle East 17 FSU Europe Asia Latin America 18 3 Other Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] Significant new capacity has launched Phase II A growing destined for the N.American World Ureasurplus Importis Demand World Scale Nitrogen Projects 2004-07 Urea Capacity 1,073 0 785 1,858 Net Ammonia 50 640 0 690 Apr-05 Aug-05 1,156 396 1,552 1,650 570 2,220 215 70 284 Burrup Peninsular Bandar Assaluyeh Bandar Khomeini Al Jubail Kermanshah Ain Sukhna Abu Qir Jan-06 Jan-06 Apr-06 Jul-06 Oct-06 Oct-06 Oct-06 725 677 677 1,089 396 396 396 4,356 0 1,073 0 1,073 660 660 660 4,126 725 65 677 475 0 0 55 1,998 Bandar Assaluyeh Helwan Jan-07 Apr-07 677 396 396 1,073 635 635 65 0 0 Firm Qafco N-2000 Petrovietnam Facility Umm Said (Qafco IV) North Pt Lisas Phu My Oman Indonesia Total 2005 OMIFCO PT Pupuk Kujang Al Ghalila Cikampek Australia Iran Iran Saudi Arabia Iran Egypt Egypt Total 2006 Burrup Fertilizers NPC - Pars I NPC - Razi 2 SAFCO IV KPIC EFC 2 Alexandria Fertilizers Iran Egypt Total 2007 NPC - Pars II Helwan Fertilizers Expected Start-up Jul-04 Sep-04 Sep-04 MMT Ammonia Capacity 660 640 445 1,745 Country Qatar Trinidad Vietnam Total 2004 market World Urea Import Demand 50.0 Source: Fertecon and Mosaic Indian Import demand is projected to grow due to the development of JVs between domestic producers and distributors and efficient player in the Mideast and elsewhere. 45.0 40.0 35.0 30.0 25.0 20.0 Some Asian countries such as Vietnam and Pakistan will continue to develop projects to supply their own domestic needs. 15.0 10.0 5.0 0.0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 North America Europe Asia Latin America 19 Other 20 Will the U.S. stop producing solid urea in Phase II? Phosphate: Adapting to Rapid Change North America Urea Import Demand 8 7 6 The supply surplus, most likely destined for the U.S. market, is expected to increases more than 1.3 mmt in 2006. MMT 5 4 3 2 1 0 90 91 92 93 94 95 96 97 USA Mil ST 10 98 99 00 01 02 03 04 05F 06F Canada North America Solid Urea Production Source: TFI and Mosaic 9 8 U.S. solid urea production for agricultural use is forecast to end during Phase II of the transition. 7 6 5 4 3 2 1 Canadian producers have the advantage of lower gas prices and insulation from offshore sources, for now. Once the US industry is shuttered the less efficient Canadian plants will operate only seasonally. 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06F 07F U.S. Fertilizer Year Ending June 30 Canada 21 22 DAP prices have climbed to record highs this year Phosphate: Adapting to Rapid Change DAP Prices $ ST Surging raw materials costs fob Central Florida 240 230 220 Declining trade Source: Green Markets 210 200 Growing demand seasonality and volatility 190 180 170 Rising competition from government producers 160 150 140 Increasing environmental and regulatory requirements 130 120 110 100 90 90 23 91 92 93 94 95 96 97 98 24 4 99 00 01 02 03 04 05 06 Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] Cost-push pressure from ammonia Cost-push pressure also from escalating rock costs DAP and Ammonia Prices $ ST DAP $ MT NH3 240 $ ST 425 U.S. Average Rock Cost and BPL Content Percent 26 68% Source: The Fertilizer Institute Source: Green Markets and Fertecon 210 24 67% 22 66% 20 65% 18 64% 16 63% 14 62% 350 180 275 150 200 120 125 90 50 12 90 91 92 93 94 95 96 97 98 99 DAP Central Florida 00 01 02 03 04 05 These trends no doubt continued in 2004 and 2005. Mosaic published an average rock BPL content of 62.8% in 2004/05. More tons of higher cost rock are required to produce a ton of DAP or MAP today than 10 years ago. 61% 90 91 92 93 06 94 95 96 97 Non Cash Cost 98 99 00 Cash Cost 01 02 03 BPL Ammonia Tampa 25 26 World Processed Phosphate Import Demand China moves to phosphate self-sufficiency China Net Processed Phosphate Imports MMT 6.0 MMT Source: IFA and Mosaic Processed phosphates include DAP, MAP and TSP Processed Phosphate Import Demand China was a consistent net importer of more than five million tonnes of processed phosphate during the last half of the 1990s. 5.0 24 4.0 Source: Fertecon and Mosaic A rebound in Asian DAP imports will offset the drop in South American MAP imports this year. 21 18 Since then, net imports have declined steadily as a result of the start-up of new domestic phosphate capacity. 3.0 2.0 1.0 China is expected to transition from a small net importer to a small net exporter of processed phosphate in 2006. 15 0.0 Import demand is projected to drop in 2006 as a result of further declines in China, a pull-back in India and only a modest recovery in Brazilian imports next year. 12 9 6 -1.0 95 96 97 98 99 MMT 00 01 02 03 04 05E 06F China DAP Imports 6.0 5.0 Source: IFA and Mosaic 3 Exporters are projected to ship 1.5 mmt of DAP to China in 2005. 4.0 0 90 91 92 93 94 95 Asia 96 97 Europe 98 99 L Amer 00 01 02 Oceania 03 04 05E 06F Chinese DAP imports are forecast to drop another 900,000 mt to 0.7 mmt in 2006 due increases in domestic production. 3.0 Other 2.0 1.0 0.0 95 96 97 98 99 00 01 02 03 04 27 India and Pakistan Processed Phosphate Imports 4.5 Source: IFA and Mosaic 4.0 Brazil phosphate imports will drop 40% in 2005 Total processed phosphate imports by India and Pakistan are estimated to more than double to 3.5 million tonnes in 2005. MMT 3.5 2.5 2.0 1.5 0.0 96 97 98 99 India 00 01 02 Pakistan 03 04 05E 06F Farm economics have eroded as a result of the strong appreciation of the real, lower soybean prices, higher fuel, pesticide and other input costs and the severe drought in the southern Brazil. 2.5 TSP 1.0 0.5 Source: ANDA and Mosaic 3.0 Indian DAP imports are forecast to increase to 2.3 mmt in 2005 due to: 1) phosphate demand growth, 2) minimal stocks to draw on this year and 3) below-plan domestic fabrication. 3.0 Processed phosphate imports by Brazil are projected to plunge 40% or 1.4 million tonnes in 2005 due to the deep erosion of farm economics. Brazilian Processed Phosphate Imports 4.0 3.5 95 06F 28 India and Pakistan imports will double in 2005 MMT 05E 2.0 DAP 1.5 MAP MAP imports are forecast to drop 46% or 1.0 million tonnes from the record level in 2004. 1.0 Imports are forecast to decline next year but still exceed levels of the previous five years. The decline is due to increases in domestic fabrication and likely stock building this year. 0.5 0.0 95 29 96 97 98 99 00 01 02 30 5 03 04 05E 06F No recovery is expected in 2006 unless the real depreciates and/or soybean prices rebound to improve farm economics. Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] The U.S. industry adjusts to demand changes World Processed Phosphate Export Supply MMT 24 The U.S. industry adjusts to change Processed phosphates include DAP, MAP and TSP Processed Phosphate Export Supply Source: Fertecon and Mosaic U.S. Phosphate Plant Closures Unit: 1000 MT Phosphoric Acid (P2O5) The U.S. phosphate industry exported 12 mmt of processed phosphate per year during the last half of the 1990s. Exports have dropped to the 9 mmt range today. 21 18 15 12 Company Mosaic (IMC) Mulberry Phosphates Mosaic (IMC) USAC Total DAP Equivalent U.S. exports required to meet residual demand are forecast to drop further as new capacity in China, Morocco and Saudi Arabia outstrips growth in import demand. 9 6 3 0 90 91 92 93 94 USA 95 96 97 98 99 Africa & Mideast 00 01 FSU 02 03 Other 04 32 Seasonal demand in the world market Unplanned supply interruptions – 2005/06 MMT Changes in U.S. DAP/MAP Supply During 2005/06 Jul Aug Sep Oct -36 Production Losses from Hurricanes MissPhos (Sep-Dec) Mosaic Agrifos -9 -9 Nov Dec Jan Feb Mar Apr May -68 -27 -9 -100 -64 -27 The rise of India and Pakistan and the fall of China (in terms of their processed phosphate import demand) created significant seasonal swings in world trade in 2005 Source: IFA and Mosaic -14 -68 World Processed Phosphate Trade by Quarter 6.5 Jun Total 23 -64 -64 -9 Year Capacity 1999 255 2001 300 2001 300 2003 510 2005 550 1,915 4,120 05E 06F 31 1000 Tonnes Inventory Loss from Hurricanes MissPhos Facility Nichols Piney Point Mulberry Faustina Ft Meade 6.0 -299 -73 -9 2003A 2004A 2005A/F 2006F 5.5 5.0 Sulphur Related Production Losses Mosaic (Uncle Sam A-train failure) Mosaic (Florida sulphur shortages) Turnaround Changes CF (early turnaround) PCS (early turnaround) -41 U.S. Agri-Chemicals Closure -32 -36 -100 -59 Mosaic Inventory Control Total Change from Normal Op. Rates Total Change from Last Year 0 60 -54 60 -163 82 -249 -211 -18 77 41 4.5 -77 -41 -86 The trend is expected to continue in 2006 with heavy shipments mostly concentrated in Q2 and Q3 of the calendar year. 4.0 -64 -91 -91 -82 -91 -86 -91 -113 -113 -46 -43 -45 -45 -46 -712 -454 3.5 -277 -290 -290 -302 -164 -25 -125 -64 -18 -166 -132 -60 -137 -90 -86 -1696 -62 -1068 3.0 Q1 Q2 Q3 Q4 Agrium’s Redwater MAP facility has also lost ~60 MMT of production during the summer/fall months. 33 34 Increasing seasonality is an issue Potash: Supply plays catch-up with demand U.S. DAP and MAP Producer Total Stocks 2200 U.S. DAP and MAP stocks swung from the low end of the 10-year range last fall to the high end of the range last winter. Source: TFI and Mosaic 2000 1800 1000 ST 1600 1400 Losses from the Florida hurricanes coupled with a seasonal up-tick in both export and domestic shipments pulled down stocks to below the 10-year minimum during Q3 2004. 1200 1000 800 600 Stocks climbed to the upper end of the 10-year range due to the slowdown in shipments to Brazil and China in Q1 of 2005. 400 200 JUL AUG SEP OCT NOV DEC JAN MIN MAX Range (1994/95-2003/04) FEB MAR APR 04/05 Actual MAY JUN 3-Yr Avg Stocks are projected to fall to below the low end of the 10-year range this fall as a result of large shipments to India and Pakistan and significant production losses from Hurricanes Katrina and Rita in Q3 of 2005. U.S. DAP and MAP Producer Total Stocks 2200 2000 Source: TFI and Mosaic 1800 1000 ST 1600 1400 1200 However, significant reduction of U.S. domestic movements and low shipments to China are expected to push inventories back up to the high end of the range through Q1 of 2006. 1000 800 600 400 200 JUL AUG SEP OCT NOV DEC MIN MAX Range (1995/96-2004/05) JAN FEB MA 05/06 Actual APR MAY On-going seasonality in the market challenges U.S. producers. JUN 3-Yr Avg 35 36 6 Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] Surging demand has pulled prices to record highs $ MT Domestic prices also have increased to record highs Cornbelt-Saskatchewan Potash Prices c&f Brazilian Port Granular MOP Prices US$ ST Granular Grade 225 240 Surging demand has tightened the potash market and pulled international prices to record highs during the last two years. 215 Source: Decyfer 205 195 185 175 200 180 155 145 135 125 140 120 100 80 60 115 00 01 02 03 04 fob Vancouver 05 Domestic prices also have increased to record highs during the last two years. 160 Global prices appear to have stabilized during the last six months due to a strong supply response and a drop in Brazilian import demand. 165 Source: Green Markets 220 90 06 91 92 93 94 95 96 97 98 99 00 Cornbelt c&f Brazilian Port 37 World import demand surged 26% or 5.3 mmt K2O from 2001 to 2004 due to rapid growth in both Asia and Latin America. That is the equivalent of 8.8 mmt of KCL. World Potash Import Demand 27 Source: IFA and Mosaic 21 15 12 9 6 3 0 91 92 93 94 Asia 95 US 96 97 98 99 00 Latin America 05 01 02 Europe 03 04 05F 06F Other January - June Source: IFA 6 India and China are leading the increase in Asia this year. Export shipments to India and China increased 147% and 18%, respectively, during the first half of 2005. 5 2003 2004 2005 4 3 Export shipments to Brazil were off 26% during the first half of the year. 2 Import demand is forecast to increase 0.8% to 26.0 mmt K2O in 2006 driven by further but more moderate growth in Asia and a modest recovery in Brazil. 1 0 Europe Latin America North America Asia Other 40 Record Canadian exports required to meet demand Brazilian “Real”-ity Check After surging in 2003 and 2004, Brazilian muriate of potash imports are projected to drop 23% or 1.5 mmt KCL from 6.4 mmt in 2004 to just 4.9 mmt in 2005. Brazil Potash Imports 7 Source: ANDA and Mosaic 6 MMT K2O World Potash Export Supply 30 Exports from Canada to offshore destinations required to balance the world market are forecast to reach 5.3 MMT K2O in 2005, up almost 2.1% from 2004. Source: IFA and Mosaic 27 24 21 5 The appreciation of the real, lower soybean prices, higher input costs and a severe drought in the southern part of the country have combined to shrink demand this year. 4 3 2 1 0 90 91 92 93 94 95 96 97 98 06 7 39 MMT KCL 04 Potash Shipments by Region MMT K2O Demand growth is projected to slow in 2005 largely as a result of a significant decline in Brazilian imports. Shipments to China and India will set records again this year. 18 90 03 Increases in Asia offset declines elsewhere in FH 05 30 24 02 38 Demand growth slows MMT K2O 01 Saskatchewan 99 00 01 02 03 04 05F 18 15 12 Canadian exports are forecast to increase 3.2% to 5.4 mmt K2O in 2006. 9 6 3 Potash stocks increased sharply last year because record imports exceeded actual use. As a result, imports are projected to drop even more than the expected decline in use. 0 90 91 92 93 94 Canada 41 95 96 FSU 97 98 99 Europe 00 01 Mideast 42 7 02 03 04 Other 05F 06F Fertilizer Market Trends Steve Biggar, Canada Regional Manager, The Mosaic Company, 614-240 Graham Avenue, Winnipeg R3C 0J7 Email: [email protected] NA producers respond to strong demand MST K2O Stocks increase from record lows North American Potash Production Source: PPI and Mosaic 12 1000 ST K2O 2500 2300 2100 1900 1700 1500 1300 1100 900 700 500 300 10 North American potash producers, like their counterparts in Europe and Asia, have increased production in order to meet demand. 8 6 4 Stocks Held by NA Producers at On- and Off-Site Locations - 2005/06 Actual Stocks Held by NA Producers at On- and Off-Site Locations - 2004/05 Actual 14 2 1000 ST K2O NA Potash Stocks at Month End NA Potash Stocks at Month End Source: PPI and Mosaic 2500 Source: PPI and Mosaic 2300 2100 1900 1700 1500 1300 1100 900 700 500 300 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN MIN MAX Range (1994/95-2003/04) 2004/05 3 Year Average JUL AUG SEP OCT NOV DEC JAN FEB MA APR MAY JUN MIN MAX Range (1995/96-2004/05) 2005/06 0 90 91 92 93 94 95 96 97 98 99 Fertilizer Year Ending June 30 Canada 00 01 02 03 04 05 06F US North American potash inventories have increased from record low levels as a result of several factors including a jump in global production, a slowdown in demand growth (i.e. the Brazilian problem), ample pipeline stocks worldwide, a disappointing fall season in the United States and record U.S. imports from offshore suppliers (i.e. Uralkali ex Russia). Still North American stocks are projected to remain at the low end of the the 10-year range during the 2005/06 fertilizer year (particularly compared to the 10-year range a year ago). 43 44 The Market Mosaic Thank You! Visit us @http://www.mosaicco.com Fertilizer Market Trends by Steve Biggar Canada Regional Manager The Mosaic Company Manitoba Agronomists Conference Winnipeg, Manitoba December 13th, 2005 45 46 8 3 Year Average