Year in Review

Weaker Indian demand and increased global supply more than offset reduced Chinese exports

Global phosphate markets were challenged in 2016. In India, the world’s largest importer of phosphate products, demand slowed due to uncertainty surrounding fertilizer policy and increased domestic production. In addition, pricing for solid fertilizer products eroded through much of the year on lower ammonia and sulfur feedstock costs and increased competitive pressures from new capacity in Morocco. This combination more than offset reduced Chinese solid phosphate exports.

Tighter supply for feed, industrial and liquid fertilizer products supported more stable demand and prices relative to solid fertilizers through much of 2016. However, liquid fertilizer and feed prices declined more significantly in the second half as markets adjusted to the deterioration in prices for solid fertilizer products earlier in the year, in addition to the impact of increased competition.

In this environment, our phosphate gross margin of $32 million was well below 2015. While our cost of goods sold benefited from lower input prices, the impact was more than offset by significantly weaker realizations and impairment charges. During the year we sold 2.7 million product tonnes, slightly below our previous year total.

Outlook

New supply expected to keep markets subdued

While we expect healthy demand growth of nearly 2 percent in 2017 and potential for seasonal strength, phosphate markets could remain subdued due to strong competitive pressure.

We expect a reduction in Chinese solid phosphate exports as environmental and economic conditions put pressure on its higher-cost producers, although we expect this decrease will largely be offset by new capacity in Morocco and a project in Saudi Arabia anticipated to come online late in 2017. The level of supply from these sources, along with the potential for variability in ammonia and sulfur input costs, will remain key factors to watch through 2017.

Similar to the second half of 2016, we anticipate pressure on liquid fertilizers and feed as markets adjust to the decline in solid phosphate fertilizer prices and increased supply.

Phosphate Prices (2016)

($/mt)
Graph of Phosphate Prices (2016)

Phosphate Prices (2016)

($/mt)
Graph of Phosphate Prices (2016)

Global Phosphate Capacity Additions (2017)*

(million tonnes P2O5)
Graph of Global Phosphate Capacity Additions (2017)*

Global Phosphate Capacity Additions (2017)*

(million tonnes P2O5)
Graph of Global Phosphate Capacity Additions (2017)*

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