Global food prices continue to rise and remain high in 2022, with the stock-to-sales ratio of international grain and oil hitting a fifteen-year low. Driven by tight supply and inflation, food prices are prone to rise but not fall. On the demand side, food prices remain high will drive demand in the fertilizer industry. In the short term, the global and Chinese phosphate fertilizer inventory is at a low level, while the Russian-Ukrainian conflict will further exacerbate the global fertilizer supply shortage, some in the industry believe that under the current agrochemical cycle, the good market for fertilizer is expected to last at least 1-2 years, and the high profits of fertilizer will lay the foundation for the performance of phosphorus chemical companies.
European fertilizer crisis intensifies
The energy crisis is impacting the high energy-consuming industries in Europe, among which the fertilizer industry is hardly immune. Ammonia capacity in Europe has shrunk further, with more cuts expected. In July alone, 10 fertilizer plants in Europe closed or reduced production, and the situation continues to get worse from now on. Concerns are growing that there won't be enough fertilizer next year.
BASF, the global chemicals leader, and two Polish companies have recently joined a growing list of fertilizer makers in cutting production due to soaring energy costs. Grupa Azoty, Poland's largest chemical company, cut ammonia output amid record gas prices, while Anwil, a unit of oil company PKN Orlen SA, halted ammonia production.
That means about 38 percent of Europe's capacity for key fertilizer feedstocks is now being cut or cut altogether, said Chris Lawson, an analyst at research Institute CRU Group. And, recently, fertilizer makers YaraInternational, K+S AG, Borealis AG and Fertiglobe Plc all warned that further restrictions on fertilizer production in Europe will follow.
European farmers may choose to increase imports to make up the shortfall in order to meet the demand for fertilizer, which may have a knock-on effect in other parts of the world. If European farmers import more fertilizer products from other exporters, that could worsen more vulnerable agricultural markets in sub-Saharan Africa, South Asia and parts of Latin America and strain global food markets.
The United States Department of Agriculture recently released a report on "The Impact and Consequences of Price Rise on the Global Fertilizer Market", and the International Fertilizer Industry Association (IFA) released a report on "Medium-term Fertilizer Outlook 2022-2026". Supply pressure still exists, fertilizer prices will remain high.
The Federal Reserve raised interest rates, the macro economy tightened, and commodity prices fell; fertilizer prices were high in history, and downstream purchasing power was generally insufficient; the impact of geopolitical conflicts still existed, and supply effectiveness was insufficient. Therefore, in the short term, although the price of chemical fertilizers has dropped a lot, there is still room for adjustment until supply and demand are balanced; Or there will be shortages of chemical fertilizers and prices will rise or remain high, and there will also be shortages of food in the world.
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