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The rigid demand for chemical fertilizers will gradually recover. Affected by the crisis in 2008/09, farmers' income from crop cultivation has declined. Farmers in most countries have reduced or postponed input from agricultural inputs, resulting in a decline in demand for N, P, and K. This phenomenon is very rare. We forecast global NPK demand to increase by 3.3%, 5.1% and 7.8% respectively in 11 years. The main driving force for growth is the increase in the amount of fertilizer applied by developing countries such as China, India, and Brazil. IFA forecasts that NPK demand will increase by 1.9%, 13.2% and 20.6% respectively in 11 years, and demand for phosphorus and potash will significantly exceed our forecast.
Affected by the weather for 10 years, the global grain output was reduced, and Russia's restrictions on exports further pushed up grain prices. We believe that the increase in agricultural product prices will further stimulate demand for chemical fertilizers. Historical data shows that there is a short-term positive correlation between agricultural product prices and fertilizer application rates.
Global fertilizer stocks are at a low level. In the first half of the year, North American NPK stocks were below the 5-year average. The domestic nitrogen fertilizer and phosphate fertilizer stocks gradually simulated consumption: consumption + inventory = output - net exports, and the inventory in the off-season was declining. The inventory of domestic potash fertilizer in July was about 1.3 million tons, which is at a historically low level.
Global phosphate utilization rate will reach 80% in 11-13, just below 85% in 2008. Affected by export tariffs, domestic phosphorus chemical industry will share the global phosphorus fertilizer economy, and the phosphate fertilizer industry will benefit from the low tariff period. As the domestic phosphate rock resources are concentrated from decentralization, phosphorus chemical companies with resource advantages benefit the most.
In the short-term view of the highly monopolistic supply pattern of potash fertilizer, prices are significantly driven by demand. However, the long-term demand growth of the demanding countries will weaken the existing monopoly pattern of supply. In the medium-to-long term, the potash fertilizer industry will be decentralized and the excessively high gross profit level of potash fertilizer production enterprises will also be reduced.
We expect that the overall global natural gas situation will be relatively stable in 10 years, and domestic urea costs will not be advantageous under the current natural gas price of 6f//MMBtu. At the same time, domestic urea production companies may have the possibility of by-products, and prices are unlikely to rise sharply. When the international natural gas price exceeds 7f/Mmbtu, domestic coal-head urea will show a cost advantage.