Vale still searching for partner in fertilizer industry

Provider: Valor Econômico

December 11, 2014 (08:28)

A year after admitting it was looking for a strategic partner for the fertilizer division, in line with its strategy of concentrating the focus on iron ore, miner Vale keeps giving no signals on the status of its search. Meanwhile, the company’s investments to increase the domestic supply of raw materials for the production of fertilizers are uncertain and make room for a continuous increase in imports, which now account for about 70% of a demand that continues to grow.
Market sources claim that Vale could partner with a single group or seek less ambitious one-time projects. Nevertheless, the miner seeks companies with know-how in fertilizers and does not want to get rid of the control of a business that it was “convinced” to buy during the government of Luiz Inácio Lula da Silva. Depending on the model chosen, one or more joint ventures are expected to be created.
Without offering clues on which path it will follow, in recent days Vale has been reinforcing statements about its search for partner in the sector. On Tuesday, Vale CEO Murilo Ferreira said the company continues to work “intensively” to reach an agreement in this segment.
Companies with bigger chances to be partner of Vale include Norway’s Yara, several industry representatives told Valor. Yara said “it did not comment on market rumors.” According to these sources, Yara is interested in increasing its stake in phosphate fertilizers. A step has been taken in this direction with the acquisition of a 60% stake in the Brazilian group Galvani earlier this month.
Worldwide, Yara is best known for its leadership in the nitrogenous fertilizer industry. The company began to operate timidly in Brazil in the 1970s. From the 2000s, it started making acquisitions in the country and today is a leader in the domestic distribution of fertilizers, with a 25% share.
The leading position in the Brazilian market was made possible with the acquisition of the fertilizer operations of American multinational Bunge last year. In Brazil, Yara has 33 fertilizer mixing units and three producing phosphate fertilizers.
The market has also speculated that its future partner in this sector would be an Indian company. Indian cooperative IFFCO, one of the world’s largest manufacturers and distributors of fertilizers in the cooperative sector, said it would not comment on the matter. Last year, the IFFCO announced a long-term contract with Vale for the supply of phosphate ore from the Bayóvar mines in Peru.
Vale returned to the fertilizer market after acquiring shares of multinational and Brazilian companies in Fosfértil, a former state-run company which was privatized in the 1990s. In 2010, Vale completed the purchase of Bunge’s assets in the segment and the acquisition of Fosfertil’s controlling interest in a $4.7 billion deal.
More so because of the government’s pressure, Vale’s investment generated huge expectations in the Brazilian market, historically dependent on imported fertilizers. But the company didn’t embark on an investment wave in the segment, as expected, and despite strong growth in domestic demand, the country’s fertilizer production lost space and even declined in 2013, down 4.3% compared to 2012.
From January to October this year, the country produced 7.350 million tonnes of intermediate fertilizers, a 6.5% drop over the same period of 2013, according to the National Association for the Promotion of Fertilizers (Anda). In the same comparison, imports grew 11%, to 20, 421 million tonnes, and domestic sales increased 5.7%, to 27.448 million tonnes.
These figures show that Brazil is still far from reducing its historic dependence on imported fertilizers. And the scenario should not change much in the coming years. It may even worsen, given that local sources of ore are in fact scarce and new exploration projects demand billions in investments.
Also, industry officials say a major reason for not investing in the production of raw materials for fertilizers in the country is the lack of tax equality, since the imported product is not taxed, unlike the one produced in the country. The demand for a change is old, but there the government gives no sign if it will announce new rules son.
Investments in production of raw materials for fertilizers in the country totaled $13 billion in 2013, to be disbursed by 2018, according to Anda. Of this amount, Vale is one of the largest investors. If materialized, these $13 billion investment would represent an additional production of 9 million tonnes of intermediate fertilizers and could reduce by $4.5 billion the deficit in the industry’s balance by 2018, according to calculations of Anda. Vale represented most of that amount. The trade group’s calculations forecast additional production of 9 million tonnes of intermediary fertilizers and could cut up to $4.5 billion from the segment’s trade deficit until 2018.
If Vale Fertilizantes sell its assets to some company, there would not happen a big change in the fertilizer market, as production in this case would only change hands, sources say. Unlike acquisitions in the fertilizer distribution business, which ended up being more concentrated in recent years

China Emerged as a Major Supplier of Phosphates to India

China’s phosphate demand has grown significantly as its agriculture has intensified. DAP/MAP consumption has experienced an annual growth rate of 15 percent over the past decade as phosphate fertilizer consumption grows and farmers use more high analysis products. During the same time period, investment in DAP/MAP production capacity produced an average annual capacity growth rate of almost 29 percent. This has resulted in China becoming a net exporter, supplying DAP to key countries in Asia, including India, but also selling some product to Latin America.
See more at: http://www.potashcorp.com/overview/nutrients/phosphate/market-overview/china-phosphate-profile#sthash.8SaBex30.dpuf

Global Phosphoric Acid Capacity Additions from 2014 to 2018

Majority of Capacity Being Developed in Saudi Arabia and Morocco.
New downstream phosphate capacity is expected to be developed in regions able to expand phosphate rock production.
The Ma’aden project in Saudi Arabia, with a capacity of 2.9 million tonnes of DAP per year, continues to ramp up following a lengthy series of start-up delays. A joint venture between Mosaic, Ma’aden and SABIC was recently announced, with plans to build a phosphate complex capable of producing 3.5 million tonnes of finished product annually.
In Morocco, OCP has built granulation capability to enhance its production flexibility. OCP is reportedly working on developing four projects at their Jorf Lasfar site which will house fully integrated phosphate plants capable of producing a variety of solid phosphate fertilizers.
Phosphoric acid capacity additions in China are expected to slow as Chinese producers near the end of the expansion boom that commenced in late 2009. 
See more at: http://www.potashcorp.com/overview/nutrients/phosphate/market-overview/global-phosphoric-acid-capacity-additions#sthash.PwD0UV7z.dpuf

ULTRAFERTIL, the legend goes on

(see brief history in Portuguese at http://www.novomilenio.inf.br/cubatao/ch100n.htm
Antes mesmo de concluir suas instalações industriais e portuárias, a Ultrafértil iniciou (em 1967) a importação de fertilizantes a granel pelo Porto de Santos, produzidos pela Phillips Petroleum. Foi acusada, na época, de participar dedumping, pois vendia o produto importado a baixo preço, com o objetivo de "limpar a área dos concorrentes nacionais de menor porte" (Bandeira, 1975:171).

O terminal marítimo da Ultrafértil entrou em funcionamento em 28 de julho de 1969. Localizado a 6 km da fábrica, tinha 240 metros de comprimento e 15 de largura. A exemplo da Cosipa, a Ultrafértil também teve que enfrentar o Sindicato do Portuários de Santos, bem como a Companhia Docas, para poder operar seu próprio porto.

A Ultrafértil foi solenemente inaugurada em 1 de junho de 1970, com o pomposo título de "maior complexo de fertilizantes da América Latina". Era constituída por sete fábricas integradas e pelo terminal marítimo, que quando em plena atividade seriam capazes de produzir 400 mil toneladas/ano.
Started up in 1970 Ultrafertil as a jv of Grupo Ultra (Igel family), and Philips Petroleum gone under state control as Petrofertil (an army of Petrobras), privatized as Fosfertil-Ultrafertil in 1993.

Now, since 2011, Vale Fertilizantes, Unit Cuabatao 2, the "Colossus of Piaçaguera" still produces NH3, HNO3, NH3NO3, H2SO4, H3PO4 and MAP. (Unity 3 produces SSP at same Av. Plinio de Queiroz at Jardim São Marcos, Cubatão).

Converted to Bayovar Phosphate Rock recently, its is doing great in developing this "new" rock to Phosphoric Acid Production.

Following the path of previous generations, its crew is promoting peruvian phosphate as a new "american standard" in the "high concentration" phosphates industry. 

CADE to reexamine Fosbrasil acquisition

A Superintendência Geral do Conselho Administrativo de Defesa Econômica (Cade) decidiu remeter para análise do tribunal do órgão a aquisição de 44,25% da Fosbrasil (participação anteriormente detida pela Vale) pela ICL Brasil. Com a operação, a ICL passará a deter 88,50% da Fosbrasil, consolidando seu controle no capital da empresa. A decisão da superintendência está presente em despacho publicado no Diário Oficial da União desta sexta-feira, 24.

Quando não gera preocupações concorrenciais, operações de natureza semelhante são aprovadas diretamente pela Superintendência. No caso ICL/Fosbrasil, entretanto, foi considerada a necessidade de o tribunal do Cade se pronunciar sobre o negócio.

A Fosbrasil é a principal fornecedora nacional de Ácido Fosfórico de Grau Alimentício(PPA), usado para a produção de sais de fosfato, matéria-prima utilizada em diversas indústrias, tais como alimentícia e de produtos de higiene e limpeza. A ICL, por sua vez, é a principal empresa atuante no mercado de sais de fosfato no Brasil, que utiliza o produto fabricado pela Fosbrasil como matéria-prima em sua atividade.

Diante da relação de fornecimento entre as duas empresas, a Superintendência considerou que esse ato de concentração, tal como estruturado, poderia incentivar a Fosbrasil a discriminar ou mesmo recusar o fornecimento do PPA a outras fabricantes de sais de fosfato, com o objetivo de favorecer a ICL.

A Superintendência informa que, após estudos e consultas ao mercado, verificou que a opção de importar o PPA ou a maioria dos sais de fosfato seria pouco viável para as empresas concorrentes, e isso facilitaria eventual estratégia de discriminação por parte da Fosbrasil. Foi identificado que a única concorrente da empresa no Brasil não tem capacidade produtiva e técnica para competir adequadamente nesse segmento. "A eventual redução da competitividade no mercado de sais de fosfato poderia resultar em restrições de oferta e aumentos nos preços do produto no Brasil, com potencial de prejudicar a cadeia produtiva que utiliza os sais como insumo, incluindo a indústria de alimentos", considerou a superintendência.

O tribunal do Cade, portanto, será responsável pela decisão final sobre a aprovação, reprovação ou adoção de eventuais medidas que afastem problemas concorrenciais. As determinações do tribunal podem ser aplicadas de forma unilateral ou mediante acordo com as partes. O ato de concentração foi notificado em 30 de abril deste ano. O prazo legal para a decisão final do Cade é de 240 dias, prorrogáveis por mais 90 dias.

What will happen in Brazilian Fertilizers soon?

Brazil is an enormously important player on the supply side of the fertilizer market with a number of exciting nitrogen, potash, phosphates and AP projects, it is also a very important importer of fertilizers and the largest producer of a range of agricultural products in Latin America.
Big multinationals like Mosaic, Potash, Yara, OCP, ICL, are making movements in order to consolidate with another local players like Vale, Anglo American, Galvani and Heringer. 
Transgas is talking about a US$ 2 billion site from coal to gas to NH3 and Urea, in the coal basin of South Santa Catarina. And Petrobrás is investing firmily in Nitrogen in Três Lagoas (Mato Grosso do Sul) and planning Linhares (in Espírito Santo).
Roullier, Mbac, B&A, are too in the "raw materials" side.
Besides, AMA congregates "blenders" all over the vast interior, where circa 30 million tons are shipped over the clock to prairies ("cerrado"), to the South ("planaltos", "serras" and "pampas"), up to the dry Northeast, and the Amazon, not to forget the central states of São Paulo, Minas and Rio.

Mosaic cuts phosphate fertilizers production

The Mosaic Co. is reducing production of phosphate fertilizer, citing high sulfur and ammonia prices.
The Plymouth-based crop nutrient producer said it doesn't expect to cut employees, though the move will lower operating rates at its mines and concentrates plants.