Global Investment House: MENA Fertilizer Industry
The fertilizer production capacities in MENA (Middle East and North Africa) region during the past 7 years have increased at a CAGR of 3.5%, against the world CAGR of 2.8%, resulting in an increase in the region’s share in the world’s total capacities to reach 12%. Moreover, in 2007, the fertilizer production capacity in the region remained constant at 27.7mn tons. The major reasons for the increase in the MENA region capacity, during the last 7 years, were (i) the ample availability of gas in the region and (ii) the high demand of fertilizer in South & East Asian regions.
Among the MENA region countries, in 2007, Egypt has the largest capacity of 10mn tons of fertilizers per annum, which accounted for 36.4% of the total MENA capacity. Next to Egypt, Saudi Arabia ranked 2nd largest, with a designed capacity of 6.8mn tons (24.6%), followed by Qatar with a production capacity of 5.3mn tons (19.4%). It is worth mentioning that these countries are among the major gas countries in the world and have ample supply of gas.
MENA region has witnessed capacity utilization of more than 100% during the last 7 years, which has led the regional production to increase at a CAGR of 4.8%. Major reasons for higher capacity utilization are the rising demand for fertilizers in the South & East Asian region, for the proximity of the Middle Eastern imports.
MENA region has planned for a massive expansion in fertilizers capacity of different types with an estimated cost of US$15.7bn (SR57.6bn). Based on the given expansion plans, the production capacity in MENA region will increase to 30.7mn tons in 2008 and 34.9mn tons in 2009. Moreover, the capacity is expected to increase further to 53.7mn tons in 2011 at a 4-year CAGR of 18.1%. The region is expected to have 57.1% of total world fertilizer capacity expansions. The major capacity expansions in fertilizer products is expected from Saudi Arabia, which is expected to lift the country designed capacity from 6.8mn ton in 2007 to 20.3mn tons in 2011.
Major increases in the production capacity in the MENA region will come from Saudi Arabia, Egypt and Algeria, which is expected to come on stream during 2010 and 2011. We expect the production capacity will further increase to 55.3mn ton by 2012.
The MENA region is expected to have major increase in the capacity of ammonia, which will lead to increase the capacity of urea. Moreover, the region is expected to commence production of Di Ammonium Phosphate (DAP) and phosphate, while a massive expansion is expected in sulphuric acid.
The MENA region has posted the capacity utilization rate of 115% in 2007, which was mainly due to an increase of 53.7% in demand on fertilizers in South & East Asia, which has raised the region imports by 24.9%. Utilization rate, in 2008, is expected to remain at the same level of 115%, as new capacities in South & East Asian regions will remain under process. Consequently, the production in the MENA region will show a YoY increase of 11.1% in 2008.
The expected commencement of massive expansion in the capacity of MENA will lead to huge production of fertilizer. Consequently, the region will lower down its capacity utilization from to 106.1% in 2009 to 94.7% by 2011. Based on the expected capacity utilization rate, we expect an improvement in local consumption to import ratio of the region from 56.4% in 2007 to 70.3% 2011.