Annual Report 2012

Complex fertilisers

Overview

2.6 mt

complex fertiliser produced

 

The Group produced a total of 2.583 million tonnes of complex fertilisers in 2012 (down 1% year-on-year).

In December 2012, the Group’s Russian facilities started producing complex fertilisers using apatite concentrate supplied from the Oleniy Ruchey mine.

In June-July of the reporting year, production of complex fertilisers by Novgorod-based Acron and Dorogobuzh was suspended due to disputes with their supplier, Apatit, over pricing issues.

Key trends in the complex fertiliser market

In 2012, NPK demand and prices remained strong despite fluctuations on the nitrogen, phosphate and potash markets. Major NPK consumers – China, Thailand and CIS members – increased their purchases in the reporting year, demonstrating the popularity of complex fertilisers. In parallel, NPK consumption by emerging economies in Asia, Africa and South America is on the rise.

Last year, certain DAP producers with a flexible product range partially switched to NPK production. While this depressed global prices for complex fertilisers in late 2012, it also demonstrates stronger demand for three-component fertilisers. This market is known for demand for highquality fertilisers and active interaction with final customers. Only producers focusing on NPK production can meet these requirements.

Development plans

By the middle of 2013, the Group’s Russian complex fertiliser units will receive all their phosphate inputs from wholly owned sources.

The Group will provide its own potash supplies after the Talitsky mine commissioning.

Production performance (‘000 t)

  NPK Bulk blends
Acron (Veliky Novgorod) 1,135
Dorogobuzh 508 88
Hongri Acron 593 259
Total 2,236 347

Operating performance

Acron

op-review-cf-op-performance.jpg

In the reporting year, NPK output at Novgorod-based Acron facility shrank 2% to 1.135 million tonnes due to reduced supplies of apatite concentrate from Apatit in June. In December 2012, Acron gradually switched to NPK production using apatite concentrate supplied from its Oleniy Ruchey mine.

Dorogobuzh

NPK output was down 16% to 508,000 tonnes due to reduced supplies of apatite concentrate from Apatit in June-July and repairs in the NPK shop. Bulk blends output was down 2% to 88,000 tonnes. In December 2012, the facility began producing complex fertilisers using the Group’s own commodities.

Hongri Acron

In 2012, NPK and bulk blends output was up 13% to 852,000 tonnes. This is the facility’s all-time high, achieved in an environment of great demand for complex fertilisers in the Chinese domestic market, uninterrupted commodity supplies and sustainable operation of equipment at a high utilisation level.

2012 NPK sales geography

 
    %
1 China (Hongri Acron sales) 26
2 China (Russia exports) 20
3 Thailand 27
4 Russia 12
5 Ukraine 5
6 Brazil 5
7 Other 5

Russia’s 2012 complex fertiliser production by producer*

 
    %
1 Eurochem 9
2 Uralchem 8
3 Acron 26
4 Phosagro 34
5 Minudobreniya (Rossosh) 18
6 Other 5

*Source: Azotecon-Plus.

Market overview

NPK remains one of the most popular fertilisers globally, with strong demand and prices (the average price in 2012 was USD 451 per tonne FOB FSU spot, in 2011: USD 452 per tonne). The nitrogen, phosphate and potash markets influence the complex fertiliser market, but NPK prices are always less volatile since NPK combines all three basic nutrients. Another important feature of the NPK market is a high degree of loyalty on the part of consumers, who consistently purchase this type of fertiliser.

China is the world’s largest producer and consumer of NPK; in addition to large-scale domestic production, China annually imports considerable volumes of complex fertilisers. In 2012, despite lower consumption of phosphate and potash fertilisers, China imported 1.3 million tonnes of NPK, up 30% year-on-year. Acron Group accounted for 30% of the country’s imports.

Emerging economies prefer NPK for its practicability, easy storage and introduction into the soil. Following China, other Asian countries (Thailand, Vietnam, and Indonesia), South American and African economies are aggressively ramping up NPK consumption. Complex fertilisers are very popular with CIS states, specifically Russia and Ukraine, where consumption of single-component phosphate and potash fertilisers is traditionally low.

The growing popularity of NPK and its low volatility have resulted in escalating competition. Complex fertiliser producers can be divided into two groups: those that solely focus on NPK production, and others that are capable of diversifying their product range to adjust to DAP or NPK market environment. Over the past year, companies with flexible product ranges increased their output of complex fertiliser, boosting market competition and, in the short term, affecting prices in certain markets. However, over the medium and long term, companies focusing on NPK production drive the global fertiliser market because they have two key competitive advantages that secure customer loyalty: high quality products and NPK-focused marketing policy.

NPK global prices (USD/t)

550
500
450
400
350
300
250
200
07/01/2010 03/06/2010 04/11/2010 07/04/2011 01/09/2011 02/02/2012 05/07/2012 06/12/2012

.NPK, FOB FSU ports

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