Looking East

Global ammonia demand is estimated to be 186 million t, driven primarily by urea consumption, which, in turn, is mainly a function of fertilizer demand. In 2017, the consumption of urea globally was an estimated 180 million t. Clearly, these are high volume commodity chemicals. Fertilizer demand growth has historically been linked to food consumption through GDP and population growth. This trend is expected to continue, although in recent years this dynamic has begun to change somewhat, due to the strong growth in biofuels production (mainly bioethanol) made from corn and wheat, and biodiesel made from soya, palm and rapeseed oil.

Given the high correlation between size of population and fertilizer consumption, India is naturally one of the most important fertilizer markets globally. With an estimated population of over 1.3 billion, it is no surprise that India is one of the largest consumers of urea in the world, particularly as urea is an important fertilizer for rice crops, which constitute an important part of the Indian diet.

In terms of supply, feedstocks for ammonia production are principally natural gas and coal. The rising demand for urea and ammonia will be met by new investment with new capacity coming on-stream. Coal is predominantly a feedstock used in China, but interest in this technology can also be found elsewhere, including in India. In most parts of the world, however, natural gas is still the main source of hydrogen for the production of ammonia and consequently urea. This is also the case in India. As with other primary energy sources, natural gas is also used to a large extent in power production, for heating and cooking purposes, as well as in other industrial applications. Hence every country has to allocate its natural gas resources (domestic and imported) to various different industries. This can be done via government or through market forces. Ammonia and urea production is of great importance in India and the country has a sizeable domestic production base. However, India also has strong requirements for increasing its power production capacity to support its growing economy. Given that India is an importer of natural gas, allocation of this resource and the attached pricing mechanisms are of great importance to the many industries that require it. Availability and affordability of natural gas will ultimately determine any future ammonia (and urea) capacity additions.

This is an article written for World Fertilizer's May/June 2018 issue and abridged for the website. Subscribers can read the full issue by signing in. Non-subscribers can access a preview of the issue here.

Read the article online at: https://www.worldfertilizer.com/special-reports/20062018/looking-east/