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Blog Post
31 Jul 2024

Four key takeaways from IFA’s Global Markets Conference

In today’s complex global landscape, understanding the fertilizer market requires in-depth analysis of many drivers, from agriculture and energy dynamics to geopolitical tensions and economic shifts. On 9-10th July 2024, IFA held its Global Markets Conference in London, UK, designed to shed light on these issues and provide insights into themes including changing land use, evolving agricultural practices, fertilizer shipping disruptions, and volatile energy markets. The program also addressed emerging trends in the fertilizer sector such as decarbonization opportunities, new demand centers, and the role of data automation and artificial intelligence in analyzing markets. Almost 30 speakers shared their expertise with delegates and this blog post summarizes the key themes from their presentations.

1. Farmers face continued economic and operational pressures, but have embraced sustainability and efficiency improvements

Farmers around the globe face substantial hurdles, including fluctuating commodity prices, rising production costs, extreme weather, and geopolitical tensions. Surveys show that increased input costs and severe weather were major threats to profitability in recent years. In response, farmers are turning to more efficient practices and biological products, particularly in the USA and India. The adoption of technology such as digital agronomy and precision agriculture is on the rise, especially among younger and larger growers. Soil health has become a focal point for farmers who view fertilizer producers and other input suppliers as key educators in making the transition to more efficient and sustainable practices.

A global land use crisis is worsening, with cropland expanding and tree cover shrinking. The intensity of land use is increasing due to climate change and competition for agriculture and energy demand, leading to significant degradation. Rising populations and incomes are shifting diets towards meat and vegetable oils in developing economies, increasing pressure on land. These trends underscore the role of fertilizers in land productivity. Land use is one of the greatest challenges of the 21st century, and overcoming associated risks will require international and cross-sectoral collaboration.

2024 IFA Global Markets Conference

2. Economic conditions have been pressured further by geopolitical tensions

Global economic growth has been uneven in recent years, kick-started by government responses to Covid-19 and, in particular, China’s response. Global GDP growth has recently averaged 0.8% which reflects a reasonable pre-covid rate, and the forecast for the next five years suggests a stabilization around this level. Despite tighter lending standards in recent years, effective interest rates are expected to decrease by 2025 as central banks lower rates. In the wake of the pandemic, household savings have diminished, and consumer confidence remains low across advanced economies. These parameters indicate that the global economy will be less resilient to a new crisis should one arise. Chinese exports of manufactured goods have been stable, increasing the country’s global market share, but future growth is expected to be at a slower pace. Structural issues within China's construction industry also pose risks to long-term economic stability.

Looking ahead, the main global risks in 2024 are mainly geopolitical and will be strongly influenced by many elections around the world. Beyond political instability, tensions between China, Taiwan, and the Philippines, and crises in the Middle East all have the potential to put further strain on the global economy. The transition to greener technologies is accelerating, driven by rising physical climate risks, but it will require substantial initial investments for long-term gains.

3. Freight markets have experienced major shocks while decarbonization challenges are on the horizon

Shipping fertilizers has become increasingly challenging due to global freight disruptions, leading to tighter supply and higher transport costs. Smaller bulk vessels are especially impacted. The ongoing Red Sea crisis, marked by rising piracy threats and increased rerouting via the Cape of Good Hope, has notably driven up costs. Since October 2023, fertilizer shipments through the Suez Canal have sharply declined, exacerbating the situation. The effects of rerouting are significant. For example, rerouting from Morocco to the Middle East via the Cape of Good Hope extends the journey from 17 to 31 days, increasing charter and fuel costs and route emissions. Similarly, Panama Canal restrictions due to drought have raised crossing prices, further tightening the freight market.

Regulatory and technological changes in shipping will be substantial. With strengthened decarbonization goals targeting net-zero greenhouse gas emissions by 2050, shipowners are investing in fuel flexibility and other efficiency measures. However, the transition to carbon-neutral fuels poses risks, including potential cost spikes and the need for extensive training and regulation. These disruptions and regulatory changes present a complex challenge for the fertilizer and shipping industries, requiring innovative solutions and global cooperation to manage rising costs and maintain stable supply chains.

2024 IFA Global Markets Conference 2

4. Energy and decarbonization

Energy feedstocks play a major role in the production costs of all fertilizers, primarily nitrogen. Fertilizer industry analysts need to watch European natural gas prices in particular, as nitrogen producers in the region operate at the margin of the industry cost curve and are sensitive to input costs which, in turn, shapes the industry cost curve and sets a market floor. The energy market has been highly volatile due to geopolitical events and shifting supply and demand dynamics. Since mid-2021, the global recovery in energy consumption has raised demand for natural gas, driving up prices. This situation was worsened by the Russian invasion of Ukraine, which strained supply chains further. Europe's reliance on Russian gas has decreased significantly, although this has been partially offset by increased LNG imports from the USA, Qatar, and Norway. Despite these efforts, geopolitical risks continue to inject high volatility into gas markets, with disruptions potentially causing sharp fluctuations. Europe's gas market remains vulnerable; Russian gas still flows through Turkey and intermittently through Ukraine, while a few EU countries continue to transship Russian LNG.

2024 IFA Global Markets Conference 3

The gas market crisis is expected to ease beyond 2024, although, according to analyst forecasts, prices may not revert to pre-crisis levels until 2028. European gas markets are now influenced by more expensive coal imports from the USA, Colombia, and South Africa, following the ban on Russian coal.

In conclusion, the energy market is navigating a period of high volatility and transformation. Geopolitical risks loom large, but the push towards decarbonization offers a path to a more sustainable energy future.

Key takeaways

The fertilizer market is facing multiple challenges. Farmers are increasingly adopting sustainable practices amid economic pressures and evolving land use challenges. Growing geopolitical tensions and successive economic instabilities have undermined the resilience of global commodity markets. Disruptions in freight and the steps towards decarbonization have raised the risk of transport cost inflation which disproportionately affects fertilizers given the large volumes of global trade. Energy market volatility, particularly in natural gas, continues to impact fertilizer production costs.

IFA’s Market Intelligence Service is tracking these drivers and more, and members can look forward to the next Market Update Report being published in August for more comprehensive analysis. For more information, visit www.IFASTAT.org.

Author(s): Etienne Achard, Fertilizer Market Analyst, IFA Market Intelligence Service