Annual Review of the Global Crop Nutrition and Bio-stimulants Industry 2016

In 2016, the situation of the agrochemicals industry, including crop nutrition, experienced drastic upheavals due to the global exchange rate fluctuation, decline of bulk agricultural products, overcapacity of agricultural products, and extreme weather changes. Traditional fertilizer companies adopted such measures as integrating resources, reducing production capacity, cutting down costs, optimizing product structure, adjusting organizational structure and divesting non-core assets to cope with declining performance. However, the special fertilizer and bio-stimulant industry is still seeing a rising development trend. More and more European and American companies have begun to get involved in Latin America, Asia Pacific, Africa, and other emerging markets, to meet the diversified needs of these new markets for improving the crop yield and quality through diversified and professional product technologies and solutions.

 

 

In August 2015, US nitrogen fertilizer giant CF Industries announced the acquisition of OCI's nitrogen fertilizer and methanol assets in Europe and North America as well as the global distribution business. This is expected to expand CF Industries’ production capacity by 65 percent in the next two years, and the company will be capable of producing up to 12 million tons of nitrogen fertilizer per year, and thus become the world's largest nitrogen fertilizer production enterprise. However, the global nitrogen business expansion program of CF Industries was halted after the United States (US) Treasury Department issued new rules to crack down on the so-called Tax Inversion (Tax inversion is the practice of relocating a corporation's legal domicile to a lower-tax nation to avoid high taxes). In May 2016, CF Industries announced the termination of the deal worth around US$800 million and relocated its registration legal domicile to the United Kingdom. CF Industries will pay OCI $150 million under the terms of the original agreement. In fact, the competition and cooperation regarding nitrogen fertilizer resources had never stopped. As early as 2010, CF Industries had competed for the control of Terra Industries with Norway YARA and finally won with an offer worth $4.7 billion. In July 2015, CF Industries once again started the cooperation with YARA by investing $648 million to purchase 50 percent stake in GrowHow UK, a subsidiary of YARA. For the global nitrogen fertilizer industry in the future, the production cost will determine the export capacity, and the manufacturing sector cannot survive if the price of raw materials is not low enough. An enterprise without the strengths in resources can hardly gain a foothold in the international market, and manufacturing based on raw materials with high prices will be gradually driven out of the market.

 

 

In August 2016, YARA International acquired Tata Chemicals' Babrala urea plant in India for USD 400 million. The plant is located in Uttar Pradesh, India, with an annual output of 700,000 tons of synthetic ammonia and 1.2 million tons of urea.  The acquisition will further expand YARA's market share in India, in particular to promote the sale of high-end products. YARA's pace of development in developing countries began a few years ago. In October 2014, YARA acquired OFD Holding Inc., a Latin American fertilizer company for USD 377 million, to increase its market share in Latin America, a rapidly growing agrochemicals region. This acquisition also supplements its purchase of the Bunge Limited chemical business in 2012. In December 2012, YARA purchased a 60% stake in Brazilian phosphate fertilizer company Galvani for USD 318 million. The latter has two new phosphate mining projects and mainly serves the southeastern, mid-western and northeastern Brazil markets. YARA then invested USD 275 million for the expansion of its fertilizer plant in Brazil. To further expand the fertilizer market in Africa, in December 2015 YARA acquired Africa's largest fertilizer retailer, Greenbelt, for USD 51 million. With the growing population of developing countries and rising living standards, the demand for agricultural products is also more diversified, but requiring high quality products. At the same time, as the pattern of agriculture in developed countries is basically fixed and the use and production of chemical products is subject to many policy constraints, the development potential is bound to be limited. In the context of global trade, YARA's strategies of seizing the markets of big developing agricultural countries, manufacturing products by the use of local resources and influencing surrounding countries, while deploying the products based upon its global logistics resources, have become a model to succeed.

 

 

After the largest quarterly loss in decades, in October 2016 Vale considered selling its fertilizer assets to raise funds for cutting down its USD 10 billion debt. The US phosphate giant Mosaic once planned to acquire Vale's fertilizer business to open up markets in South American and Africa.  After the acquisition, Vale became the largest shareholder of Mosaic, with the shareholding ratio of 12% to 15%. Mosaic is the world's largest phosphate fertilizer producer, with an annual output of 11.7 million tons of phosphate fertilizer production capacity, and currently has distribution channels in Brazil and Peru, as well as joint phosphate fertilizer ventures in Saudi Arabia. Vale is Brazil's largest producer of phosphate and nitrogen fertilizers, and owns the only potash mine in Brazil, which has a capacity of 625000 tons per year. Vale also operates a phosphate mine in Peru, with an annual output of up to 3.9 million tons, of which Mosaic is a shareholder. Vale's majority holding of fertilizer assets, including its distribution facilities, were obtained after acquiring Fosfertil in 2010. In fact, the acquisition of Vale's fertilizer assets can be regarded as a further extension of Mosaic's strategy to expand the Brazilian market, as Mosaic has acquired the fertilizer distribution business of agricultural giant Archer Daniels Midland Co (ADM) in Brazil and Paraguay for USD 450 million in 2014. As part of the transaction, Mosaic agreed to continue to meet ADM's fertilizer needs in Brazil and Paraguay within five years.

 

To cope with the current downward trend in the potassium fertilizer market, in September 2016 PotashCorp and Agrium announced that they will work together to create a global agricultural giant worth USD 36 billion. PotashCorp and Agrium will hold 52% and 48% of the new company, respectively. The new company will monopolize potash resources in North America and use PotashCorp’s extensive network to increase the sales volume and set footprints in 18 countries. A synergistic benefit of USD 250 million is expected to be generated by the combined company in its first year of operation, accompanied by a USD 500 million annual operating synergy. Overcapacity is the top problem in the global potassium fertilizer market. In 2015, the global potassium fertilizer production capacity was 52 million tons, while the consumption was 35.5 million tons. Excess capacity led to long-term potassium fertilizer prices remaining low. As early as December 2014, PotashCorp began its global potassium fertilizer market expansion plan by investing USD 4.5 billion in ChinaChem, Arab Potash Company, Israel Chemicals Limited and Chile SQM. In 2015, PotashCorp announced the plan for the acquisition of K+S, which was rejected by the latter. However, PotashCorp would not stop its expansion plans. On August 10, 2015, PotashCorp announced the completion of the acquisition of a 9.8% controlling stake in Heringer, the largest fertilizer company in Brazil. The merger with Agrium can enable the two companies to reduce costs and resume their growth track. The market will deem the merger as an example of the bottoming out of the industry’s cycle. It can be expected that the new company, created after the merger of PotashCorp and Agrium, will reduce the production of potassium fertilizer, which is good news for the global excess capacity of potassium fertilizer.

 

 

In 2016, Chinese fertilizer giant Kingenta accelerated its internationalization strategy. Through overseas mergers and acquisitions, construction of overseas centers, cooperation with internationally renowned institutions and other initiatives to promote technological progress, Kingenta has promoted the Chinese special fertilizer and plant nutrition industry to reach the leading level worldwide. In January 2016, Kingenta acquired EKOMPANY, the second largest slow/controlled-release fertilizer producer in Europe for EUR 6.1 million; in July, Kingenta acquired Compo GmbH, a German fertilizer company and the largest provider of horticultural fertilizer and plant protection products in Europe for EUR 116 million, and in September, Kingenta bought a 70% stake in Navasa, a Spanish agricultural services provider for EUR 5.565 million. Back in 2006, Kingenta set up a special fertilizer research and development center in Washington DC. In 2014, the Kingenta-LIFNAT Center for Agricultural Science and Technology was established in Israel, representing Kingenta’s initial presence in the countries making up the “Belt and Road Initiative” area. In 2015, the Kingenta North America Office was opened in the United States. Kingenta has also established longterm strategic cooperative relations with well-known scientific research institutions in Germany, Norway and other countries. In 2016, Kingenta announced that the company planned to build 10 controlled-release fertilizer demonstration factories throughout the world. Through direct acquisition, Kingenta will effectively integrate its technologies, brands, channels and talents, further perfecting the layout of the global production base through the reference and fusion of technologies, brands and channels with partners, thus enhancing the company's competitive ability in product differentiation in the international market, taking the lead in the global competition in controlled-release fertilizers, plant nutrition and planting, and contribute to the restructuring of China's fertilizer industry.

 

 

Driven by the European Bio-stimulants Industry Council (EBIC), the European Union introduced in June 2016 a proposal to revise a regulation, focusing on the development of biological stimulants, to promote the development of circular agriculture model in the Union. 

 

The relevant laws and regulations are expected to be formally introduced in 2018. As of November 2016, the membership of the EBIC has increased to 54, with Ad Terram (Dutch), EuroChem Agro (Germany), Iden Biotechnology (Spain) and Soiltech (Dutch) becoming members in 2016. According to the EBIC statistics, Italy, Spain and France are the main countries which produce and use bio-stimulants in the Union. In 2015, the sales volume of bio-stimulants in the Union amounted to about EUR 578 million while the export volume was about EUR 250 million. It is expected that by 2019, the European market will be worth EUR 1 billion. In addition to the EU market, the North American, Asia-Pacific and Latin American markets are also experiencing rapid growth. The main business development activities of the related enterprises in 2016 were as follows:

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Till date, there is no Chinese term for bio-stimulants in China, but fertilizers containing different bio-stimulant components, such as seaweed extracts, humic acid, amino acid and micro-organisms, have been widely used in agricultural production in China and have produced very good results. A growing number of biostimulant companies such as Acadian Seaplants, AfriKelp, Agrinos, AgritecnoFertilizantes, ArystaLifeScience, Biolchim, Bio Huma, GroupeRoullier, COMPO EXPERT, Cytozyme, FMC Corporation, Green Has Italia, Humintech, Isagro, Italpollina, Koppert Biological Systems, Novozymes, SICIT 2000, Sipcam, Tradecorp and Valagro have entered the Chinese market in recent years to expand the sales and application of the related products in the high value-added crop market. Data showed that China has a bio-stimulants market capacity of USD 400 to 500 million, most likely to become the largest market for bio-stimulants’ application.

 

 

 

 

 

 

 

 

 

 

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