October 16, 2012
As fertiliser companies in China are busy coping with local demands, Malaysia could position itself as a major exporter player of nitrogen fertiliser in the region.
Adam Tomlinson, director of food and agribusiness research and advisory at Rabobank International, said Malaysia through Petroliam National Bhd (Petronas) could expand nitrogen production to fill the void left by major Chinese players in the international market.
"Obviously we see Malaysia as a cost-efficient producer of nitrogen fertiliser, and it could take advantage of the regional market to supply to Thailand, the Philippines and India, with nitrogen fertiliser," said Tomlinson.
Tomlinson was here to attend the Asian Nitrogen and Syngas Conference 2012 held at the Shangri La Hotel last week. He said China''s fertilisers are catering for the burgeoning demand at home as export of nitrogen fertilisers from China dropped to about four million tonnes last year, from seven million tonnes in 2010.
Malaysia currently is a net exporter of nitrogen fertiliser, one of the key components of the NPK (nitrogen, phosphate, potassium) mix, which is important for the growth of cash crops such as corn, wheat and rice, as well as rubber and oil palm.
Last year, Petronas Chemicals Group Bhd (PetChem) announced the construction of a 1.2 million-tonne per annum urea and ammonia plant in Sabah, with a total investment value of about MYR4.53 billion (US$1.5 billion).
PetChem''s annual urea capacity currently is about 1.43 million tonnes - with a total annual capacity of 685,000 tonnes from its two plants in Gurun, Kedah and 750,000 tonnes from Bintulu, Sarawak. Through Petronas, Malaysia exports about 500,000-600,000 tonnes of nitrogen fertilisers per year, said Tomlinson.
The total world trade of nitrogen fertiliser is around 42 million tonnes, with China, India, the US and Brazil make up 45% of demand worldwide. That makes Malaysia''s share of world nitrogen export market at only around 1%.
Major exporters of nitrogen fertiliser are still from China with 18% of total world export in 2010, followed by Russia (11%), Oman (9%), Egypt and Saudi Arabia with 8% market share respectively. While China''s domestic demand for nitrogen fertiliser is being satisfied by its own players, India is very much the biggest importer of nitrogen fertiliser in the world, followed by the US, Brazil and Thailand.
"If you look at the world fertiliser importers, India imports around six million tonnes, with the US at similar level at the moment, and then you have Brazil and Thailand at two million to three million tonnes. So those four importers make up about 45% of world trade of about 42 million tonnes last year.
"With Malaysia exporting something about 500,000-600,000 tonnes a year, it is a small percentage of that global 42 million tonnes," Tomlinson said.
The total fertiliser market in Southeast Asia amounts to US$10 billion per year he said, of which Indonesia, being the largest economy in the region, accounts for about 40% of the demand.
As nitrogen fertiliser is made by converting natural gas into nitrogen, which Indonesia has abundance, the country is producing nitrogen fertiliser on its own, mainly to cater to the needs of its farmers. Malaysia consumes about 15% of the Southeast Asian fertiliser market. In the region, importers of nitrogen fertiliser include Thailand, the Philippines and Vietnam annually.
While Malaysia is the biggest net exporter of nitrogen fertiliser in Southeast Asia, it is also one of the biggest importers of potassium. In 2010, Malaysia was the sixth largest importer of potassium in the world, with 4% of the total demand for the nutrient, according to Rabobank data.
"Potassium helps with fruit development, whereas nitrogen helps with vegetation growth and phosphate roots growth. So potassium is the key nutrient for productivity in palm plantation, and Malaysia is a key market," said Tomlinson.
Potassium is derived from potassium deposits that are largely available in North America and Eastern European. Countries like Canada, the US, Russia and Belarus are the biggest producers and exporters of potassium nutrients. In recent years, state-owned companies such as Sinochem of China and Rashtriya Chemical & Fertilisers Ltd of India have announced plans to acquire potassium and phosphate assets in other countries.
Tomlinson said these are understandable considering that these countries have huge needs for fertilisers. Acquiring resource assets will ensure security of supply in the long run.
"Whether or not Malaysia is doing that, I''m not sure but there are opportunities to invest in the upstream such as in Canada, or even in the US which has some deposits. We do know that Laos has some deposits of potassium, now that could be a key focus for the region," he said.