Global fertilizer markets are ending the year in a bearish mood on the back of weak demand exacerbated by economic uncertainty, and the outlook for the first quarter of 2012 looks set to remain gloomy, ICIS news reported Thursday. Markets have generally been firm this year, with prices showing their highest levels since the peak of 2008, but this led to some fears that a re-run of the market crashes seen that year could be on the cards again, particularly with rising economic uncertainty. The worsening eurozone crisis and broader economic slowdowns seen in developed countries worldwide has destroyed some European demand, and also had a knock-on effect on international currencies, decreasing purchasing power for major fertilizer users in markets such as Latin America and southern Asia. Hesitant buyers, particularly in the US, have adopted conservative purchasing behavior, more akin to the post-crisis behavior seen in 2009, opting to buy on a hand-to-mouth basis. Fertilizer demand is expected to return, but buyers are not likely to step back in strongly until February and therefore prices will remain under pressure until then. According to the International Fertilizer Industry Association (IFA), forecasts for demand levels in 2012/2013 are highly speculative at present due to the depressed economic context in many developed countries. However, global agricultural commodity prices remain attractive, driven by a disappointing US harvest and robust food, fuel and feed demand. Consequently, global fertilizer demand is still expected to grow by around 2.3 percent to 182.2m tons next year. But IFA notes there is a downside risk as the economic downturn may impact fertilizer demand in the first half of 2012. This year has been a volatile one for urea, and global prices are on a downward trend as 2011 draws to a close. But by the end of 2012, an expected additional 4m tons of annual granular urea capacity is due to come online and the market will be oversupplied, which will no doubt help keep prices at lower levels than seen over the past year. Qatar Fertilizer Co. (Qafco) is scheduled to start up its 1.3m ton/year Qafco V urea plant in January 2012, and then a second 1.3m toe/year Qafco VI plant in the fourth quarter of 2012. Additionally, in Algeria, Sorfert is due to start up a 1.1-1.2m ton/year plant in the first quarter of 2012, and MOPCO in Egypt is due to start two 660,000 ton/year plants in the second half of the year. Additional capacity is also due on-stream in Vietnam and Venezuela. While there may be some delays to the projects, it is clear that the urea market looks to be moving into an oversupply situation over the next year or so.
