The GCC Fertilizer Industry s Landscape & Growth Dimension. By Dr. Abdulwahab Al-Sadoun Secretary General, GPCA

Transcription

1 The GCC Fertilizer Industry s Landscape & Growth Dimension By Dr. Abdulwahab Al-Sadoun Secretary General, GPCA

2 Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities

3 Early Fertilizer Production in the GCC Key driver/enabler for developing a GCC chemical industry was to capture the value wasted by flaring significant volume of associated gas throughout the region Country Volume of Flared Gas in the GCC Year 1976 Volume of Flared Gas (Bn SCF) Flared Gas Share of Total Gas Produced Abu Dhabi % Kuwait % Qatar % Saudi Arabia 1, % Source: OPEC Statistical Bulletin, 1979 To turn waste to value, the Chemical Industry presented the best option from: Economical, Social and Environmental perspectives

4 Early Fertilizer Production in the GCC Creating a Domestic Market for the gas in the GCC has a clear benefit in terms of employment and GDP contribution Employment Creation 1 (Jobs/ 1 million MMBTU) GDP contribution 1 ( SAR/ Mmbtu) Petro/chemicals 2 Aluminum 3 LNG Exports Power Generation 1 Including direct, indirect and induced effects 2 Including C1 and C2 only, for average product portfolio of GCC producer 3 Includes refinery, smelter and rolling mill Source : McKinsey, 2010

5 Early Fertilizer Production in the GCC Abundant supply of natural resources has enabled the development and consistent capacity expansion of the fertilizer industry in the Arabian Gulf GCC Fertilizer Capacity Expansion (Million tons)

6 Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities

7 Current Industry Landscape The GCC fertilizer industry is predominantly focused on mainstream fertilizers with Saudi Arabia having the lion s share of regional fertilizer capacity Diammonium phosphate (DAP) 13% Fertilizer Capacity by Product, 2017: 42.3 Million Tons Others 16% Ammonia 31% Urea 40% Source: GPCA Analysis, 2017 Note: Others include intermediate products (Phosphoric Acid, PPA, Sulphuric Acid, and Specialty Fertilizers) Fertilizer Capacity by Country, 2017 Total: 42.3 Million Tons Oman 11% UAE 8% Qatar 24% Kuwait 4% Bahrain 2% Saudi Arabia 51%

8 Current Industry Landscape Product Portfolio In its first three decades, the industry s product portfolio was predominantly N-based fertilizers, which accounted for > 90% of total output From 2007, P-based fertilizers were added to the product mix Between ( ), change in the industry s mix: Ammonia (-21%) Urea (-8%) DAP (+13%) Others (+16%) GCC fertilizer capacity & product portfolio ( ) % 61% 3% 2% 11% 16% 42% 45% 2% 38% 54% 53% 50% 13% 31% 40% % = MT Others DAP Ammonia Urea 9 Source: GPCA Analysis, 2017

9 Million GCC Fertilizer Landscape Focus on Export The GCC fertilizer industry is export oriented with over 90% of mainstream fertilizers exported overseas, making the GCC a major global export region 25 GCC Fertilizer Export (Million Tons) GCC s Share in Global Export; Y % 86% 89% Source: United Nations, % 14% 11% Urea DAP Ammonia GCC Others Source: IFA, 2017

10 GCC Fertilizer Landscape Focus on Export Fertilizers produced in the GCC are exported to over 80 countries worldwide Asia is the largest importer of GCC fertilizers followed by North and Latin America respectively Despite being one of the main importing regions of fertilizers globally, the EU s imports of GCC fertilizers is negligible (1%)! GCC Fertilizers Export by Destination (2016) Total: 20.5 mt North America Europe 19% 1% 17% 6% Africa South America 56% Asia Others 1% Source: GPCA Analysis, 2017

11 Current Industry Landscape Global Positioning The GCC has established itself as a global production hub for inorganic fertilizers its global position is significant and growing steadily GCC 6% Global Ammonia Production Capacity 2016 = Million Tons Africa 5% Latin America 5% West Europe 6% Central Europe 4% North America 9% Rest of West Asia 2% South Asia 10% Oceania 1% East Asia 38% Eastern Europe and Central Asia 14% GCC 8% Global Urea Production Capacity 2016 = Million Tons North America 6% Rest of West Asia Latin America 4% 4% Africa 6% Eastern Europe and Central Asia 8% West Europe 3% Central Europe 2% South Asia 16% East Asia 43% Global DAP Production Capacity 2016 = 62.2 Million Tons GCC 5% West Asia (excl GCC) 8% Eastern Europe and Central Asia 2% South Asia 15% Latin America 2% Africa 16% Oceania 2% Central Europe 1% East Asia 30% North America 19% 10 Source: IFA, 2017

12 Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities

13 Growth Dimension ( ) Production Capacity & Export volume growth trajectory ( ), in numbers: Over 18 million tons of production capacity was added, representing 93% of production capacity in 2006, a CAGR of 6.9% Over 10 million tons of export volume was added, doubling the export volume of the Y 2006, a CAGR of 7.3% Capacity and Export Growth Pattern, ; Million Tons CAGR % 7.3% Capacity Export

14 Growth Dimension Global Context In a global context, GCC fertilizer capacity has been growing at the fastest pace globally over the past decade Between Production capacity growth rate of GCC fertilizers (ammonia, urea and DAP) was 6.9%, the highest globally Over the same period, the corresponding growth rate of the global industry was 1% As a result, GCC s global share in fertilizer production increased from 4% to 7% Source: GPCA, IFA, 2017 Global Ammonia, Urea, DAP Capacity Growth Million Tons ( ) Others Africa GCC N. America E&C Europe South Asia East Asia GCC % 7% Note: Growth rate 6.9% p.a. includes only 3 products: ammonia, urea and DAP CAGR (%) 0.3

15 Growth Dimension Projected ( ) Phosphate fertilizers will drive capacity additions in the region, as Saudi Arabia s Maaden continue its aggressive expansion drive Oman 5% Source: GPCA Analysis, 2017 Saudi Arabia 95%

16 Growth Dimension ( ) Four GCC projects currently in the pipeline will add 7.4 million tons of production capacity at an estimated capital investment of USD 8 billion 1 Phosphate Fertilizers Plant 3 3 Urea Formaldehyde 2 Ammonia Plant 4 Salalah Methanol Co. Ammonia Plant

17 Agenda Early Fertilizer Production Current Industry Landscape Growth Dimension Challenges and Opportunities

18 Key Challenges Key challenges facing the GCC fertilizer industry include: Changing Competitiveness Lower coal and gas prices have pulled down the floor price for N, P, and K fertilizers by ca. 60% (vs level), affecting profitability and intensifying competition in markets Increasing Regional Self-Sufficiency Challenging Regulatory Policies Challenging Trade Developments Drive for self-sufficiency in key markets (China, USA, India) leveraging low prices of shale gas, oil and coal India: Drive to revise current fertilizer subsidy regime China: Export tax policy EU: Circular Economy with emphasis on organic fertilizers Development of trade blocs in different geographies has led to increased competition for GCC fertilizer exports

19 Key Challenges Shrinking export markets; key nitrogen importers targeting self-reliance South Asia Urea Imports (2015), Million Tons 12.7 Urea Capacity Additions ( ), Million Tons South Asia 3.9 North America Latin America East Asia West Europe Oceania West Asia North America Latin America SE Asia EECA Africa Africa 2.1

20 Key Challenges. India & USA are targeting self reliance in N-account, jointly the two countries account for almost half of the GCC N-fertilizer exports. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 55% 52% 57% 56% 60% 57% 45% 48% 43% 44% 40% 43% India and USA Others New market segments and geographies need to be explored to offset possible market share shrinking

21 The Opportunities ahead Investment opportunities for GCC players exist in regions looking to capitalize on low cost gas assets or growing fertilizer markets (e.g. Africa and the Americas) Innovations in technology have led to increases in energy efficiency and capacity gains which in turn can improve margins and environmental performance Further diversification of product portfolio towards speciality fertilizers to remain competitive is critical Fertilizers are key for Africa's agricultural transformation; population and economic growth in Africa should also generate opportunities in this bourgeoning market

22 Thank you