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List of contents

Fertilizer industry overview


What is fertilizer? p. 2
Why mineral fertilizer? p. 5
Environmental impact of fertilizer p. 9
The fertilizer industry p.17

Fertilizer industry dynamics p. 28

Ammonia p. 30
Urea p. 35
Nitrates p. 40
NPKs p. 47

Industry value drivers p. 52


Drivers of demand p. 55
Drivers of supply p. 67
Price relations p. 75
Production economics p. 83

Industrial applications p. 89

lllJI 1
li1iij


2
Fertilizers are plant nutrients, required for crops to grow

Crops need energy (light) CO2, water and minerals to


grow

The carbon in crops originates from CO2 absorbed 1


through the leaves C02 /
1

Crops absorb water and plant nutrients from the soil

Plant nutrients are building blocks of crop material.


'~
\\:

Without nutrients the crops can not grow

Mineral fertilizers provide plant nutrients for crops

Three main nutrients: Nitrogen, Phosphorus and


Potassium are primary nutrients

3
Principle of crop nutrition: crop growth is limited by the most
deficient nutrient
Soil conditions
Law of the Minimum (Liebig, 1843): Crop yields
& other growth
are proportional to the amount of the most
factors

YIELD
limiting nutrient.

Plant nutrients have specific


and essential functions in crop metabolisms

Phosphorus

Calcium
Potassium
They cannot replace each other, and lack of any
one nutrient limits crop growth

It is therefore essential to focus on a balanced


nutrition of all plant nutrients



5
Mineral fertilizer replace nutrients removed with the harvest

Supply of crop residues and


organic fertilizer

NPK

Export of nutrients with the


Organic N K
P harvest
material,
humus Mineralisation
S
Ca
Mg Growing demand for food
& feed
Crop residues are decomposed to minerals

Mineral fertilizers are necessary to replace those nutrients that have been removed from the field

6
Mineral fertilizer characteristics compared to organic fertilizer

Characteristics Mineral fertilizer Organic fertilizer

Nutrient Nitrogen from the air,


Crop residues and animal manures
source Phosphate and Potassium from deposits / mines

Nutrient High nutrient concentration Low nutrient concentration


concentration Low logistical cost Large volumes to transport and store

Nutrient Variable, organic material needs to be


Immediately available for the crop
availability decomposed to release nutrients

Often inconsistent
Quality Traceable and consistent
Dependent on source

7
Nitrogen the most important nutrient
Nutrient characteristics

Primary benefit Application Industry structure

Potassium (K) 18% Improve Application Fewer suppliers, production


crop quality can be varied discipline

Phosphorus (P) 23%

Increase crop size Annual application Fragmented Industry, under


critical consolidation
Most important and
Nitrogen (N) 60% commonly lacking More dynamic prices, but
nutrient stable volume

Total 181 million


tons nutrients

Source: IFA 2015/2016 season (June 2016 estimates)



0
0 0
0 0
0
9
Fertilizer reduces the carbon footprint of farming
Fertilizer - an efficient solar energy catalyst
Production is a marginal part of the carbon footprint; efficient application is more important
Huge positive effects of fertilizer use, since higher yields enable lower land area use

Production Application
Yaras production is more energy-efficient than competitor average Higher efficiency with nitrates
Precision farming tools

3.6 kg 0.1 kg 5.6 kg 75 kg 75 kg


CO2 eqv CO2 CO2 eqv CO2 CO2

PRODUCTION TRANSPORTATION FARMING HARVEST CONSUMPTION CAPTURE


Yara 2010

10
The right nitrogen fertilizer rate is key to avoid nitrate leaching

Grain yield (t/ha) Nitrate in soil after harvest (kg N/ha)


Leaching of nitrate into groundwater 10 100
affects water quality and contributes to
eutrophication 9
80

Oversupply of organic and mineral 8


nitrogen fertilizer represents the main 60
driver for nitrate leaching 7
40
Nitrogen fertilizer application according 6
to crop demand does not increase 20
nitrate leaching 5

4 0
none medium right too much

Supply of N fertilizer to the crop

11
Choosing the right nitrogen fertilizer to avoid ammonia
volatilization losses

Volatilization of ammonia gas contributes Ammonia volatilization in % NH3-N per unit N applied
to pollution, affects air quality and induces
soil acidification
19.9
The use of organic or urea-based nitrogen
fertilizer represents the main driver for
ammonia losses
10.8
Nitrate-based N fertilizer or immediate
incorporation of urea into the soil avoids
volatilization losses
3
1.8
0.7

CN CAN AN UAN Urea

N fertilizer

Reference: EMEP/EEA emission inventory guidebook 2013


12
Water availability is the main constraint on agricultural production
in many important growing areas
Agricultural water use has to The segment has seen
Water scarcity is a clear issue become more intelligent strong growth historically

Rio Grande 17% of cropland is irrigated, it is twice as Expansion of Micro-irrigation


failed to reach productive as other land and contributes
Gulf of Mexico in 2001 40% of world food production Mill.ha
for first time
0.2
1
but it uses 70% of all freshwater
thus, productivity growth from irrigation
Lake Aral has to come from better use of water CAGR
Only ~25% of 6.2
11.9%
original size

3.2
Yellow River 1.8
Dry on last 100km: 1.0
0.4
1972: 15 days
1997: 226 days
1981 1986 1991 2000 2006 2009

Source: Kulakarni et.al., 2006; Gopalakrishnan,


Source: World Bank, 2008 Source: Center Pivot: carrot production in Brazil
2008; USDA, 2008; MOI, 2009
13
Good crop nutrition enables increased water efficiency:
more crop per drop

Water is a key input for crop growth Water requirement (liter per kg of wheat grain)

About 70 % of global water consumption is


for agriculture
600

Sub-optimal crop nutrition tends to drive 510


450
over-consumption of water
380

Optimized crop nutrition improves water use


efficiency

No fertilizer low medium right

Supply of fertilizer to the crop

Source: Yara research

14
Carbon footprint of urea production differs by region

kg CO2 equivalents per kg urea nitrogen


6.53

4.14
3.99
3.78
3.50 3.61

EU 27 Russia US Africa China China


(coal-based) (gas-based)
Source: Fertilizers Europe (2016) for production in 2014

15
Carbon footprint of ammonium nitrate production by region

kg CO2 equivalents per kg AN nitrogen

11.06

8.61

7.23
6.82

3.42

EU 27 Russia US China China


(coal-based) (gas-based)
Source: Fertilizers Europe (2016) for production of granulated AN in 2014

16



0
0 0
0 0
0
17
Consumption trend per nutrient

Million tonnes nutrient


140

120 N 1.2% growth pa.*

100

80

60
P 1.6% growth pa.*
40

20
K 2.3% growth pa.*
0
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017F 2020F

Source: IFA, June 2016 * CAGR avg. 2013-2015 to 2020

18
Key global fertilizer products

Nitrogen N

Other
Ammonia 11%
4%
DAP/MAP Urea
7% 58%
Potash K2O Phosphate P2O5
NPK
6%
Other Other
3% AN/CAN
9% TSP 10%
NPK 6%
UAN
21% 5% SSP
9% DAP/MAP
108 million tonnes* 57%
MOP/SOP NPK
76% 18%

32 million tonnes 41 million tonnes

Source: IFA 2015 (nutrient totals) and 2014 (product split) * Does not include industrial nitrogen applications

19
Nutrient application by crop
By tonnes nutrient

N+P+K Nitrogen

Other Wheat Other


Wheat
12% 16% 12%
18%
Fruit & veg
Fruit & veg Rice 15%
15% Rice
14% 15%
Sugar crops Sugar crops
4% 4%Cotton
Cotton Maize 4% Maize
4% 16% Roots/Tubers
3% 17%
Oilseeds Oilseeds
Other cereal 7% Other cereal
11%
5% 5%

Source: IFA (2010/11)

20
Fertilizer consumption by region 5 key markets
Million tons nutrient consumption
Russia
West/Central
1.5
United States Europe
11.4
11.8
0.6
0.4

4.1 4.4 2.6 2.9 China


N P K 32.9

N P K
N P K
India 11.4
Brazil 7.4
16.8
5.4
4.8
3.9 N P K

6.0
2.5

N P K N P K
Source: IFA 2014

21
Nitrogen consumption in key regions

Million tonnes nitrogen


80
Asia: 1.4% *
70

60

50

40

30
0.8 *
Europe: 0.8%
20
North Am
America: 0.4%*
10
Latin America:
Am 4.4%*
0
2000 2004 2008 2012 2016F 2020F

Source: IFA, June 2015 * CAGR 2015-2020

22
The N industry is fragmented, while the P and K industries are
more concentrated
2015 figures1, million tonnes nutrient Yara CF Agrium
TOAZ PCS
Other non- Orascom Despite a consolidation trend, the industry is
Chinese Eurochem
still higher fragmented
Nitrogen1 Uralchem
Koch
(N) Top 3 producers account for only ~15% of
Chinese Sabic world capacity
players

Mosaic
India
OCP More concentrated than N-industry
Other PhosAgro
Phosphate GCT Top 3 producers account for ~24% of capacity
(P) PotashCorp
China
Vale Ma'aden
(excl.
JPMC
Mosaic)

Other PotashCorp Highly concentrated industry

Potash Top 3 producers account for ~48% of capacity


China Belaruskaly
(K)
K+S Kali
Mosaic
1) Nitrogen: 2013 figures Uralkali
Source: IFA 23
Nitrogen fertilizer application by region and product

West /central Europe (11.4 mt) China (32.9 mt)


USA (11.8 mt) Other
DAP/MAP 11% DAP/MAPOther
Other 9% 1%
DAP/MAP 3% NPK
7% Urea
NPK 6% 21% 6%
Urea NPK
7% 11%
22% ABC
UAN 17% Urea
12% Nitrates 70%
UAN Ammonia 43%
28% 27 %
Nitrates
2%
India (16.8 mt)
Brazil (3.9 mt) Other
DAP/MAP 1 %
AS NPK 13%
12% 3%

DAP/MAP
22% Urea
Urea
NPK 55% 84%
1% Nitrates
12%
Source: IFA 2014

24
Nitrogen fertilizer application by region and crop
Russia
EU-27
USA
Other
Oilseeds 21%
Other Wheat 2%
Other 27% 28% Wheat
Maize
33% 48%
7%
Maize Fruits & Sugar crops
49% vegtables Maize Other China
Other 8%
7% Other 13% cereals
cereals Oilseeds cereals
14%
3% Fruits & 10% 15% Other
vegtables Wheat Cotton 3% Fruits &
16%
2% 13% India Oilseeds vegetables
Brazil 6% 30%
Wheat
Other 13% Rice
24% Wheat Maize 15%
Other Maize 24%
25% Fruits & 15%
30%
vegtables
6%
Sugar Rice
Rice crops Cotton 30%
5% 22% 9%
Fruits &
vegtables Cotton Oilseeds
Source: IFA 2010/11 8%
10% 4%
25
Fertilizer company comparison
Revenues - USD billion

12.2
Yara
13.4
13.9
Agrium
14.8
7.5
Mosaic*
8.9
5.3
PCS
6.3
3.9
K+S
4.6
5.5
ICL 5.4
3.9
CF 4.3 L4Q 2015

Source: Thomson Worldscope

26
Yara the leading nitrogen fertilizer company
2016 production capacity, excl. Chinese producers1 (mill. tonnes)

Global no 2 in ammonia Global no 1 in nitrates Global no 1 in NPK

9.9
7.4
8.42
7.2
5.3
4.5
4.2 4.1 3.2 3.3
2.7 2.7 2.7
2.3
1.9

1) Incl. companies shares of JVs * Incl. TAN and CN * Compound NPK, excl. blends
2) As of end 2016
Source: Yara estimates, company info 27
Yara the European cost leader
Production cost index: 100 = European industry average excl. Yara

Ammonia cost position Nitrate cost position


Index Index
110 110

100 100

90 90

80 80

70 70

60 60

50 50

Average cost Yaras European plants

Source: Fertilizer Europe European average (excl. Yara)

28
Ammonia

29
Global ammonia production

Million Total production Million 10 largest producers (2015)


tonnes tonnes
200 66.6

180

160

140

120

100 15.2 13.8


11.7
80 6.0 5.3 4.9 3.7 3.7 3.7
60

2005-2015 trend growth rate = 2.2%/year


Source: IFA

30
Most of global ammonia production is upgraded to urea and
other finished fertilizer

Million Ammonia trade - seaborne Million Ammonia use


tonnes tonnes
25
World trade 143

20

15

10
Yara trade 37
5

0
Fertilizer Industrial use

Urea Nitrates DAP/MAP NPK Other N


Source: Yara, IFA Source: Fertecon

31
Global ammonia trade

Million 10 largest exporters (2015) Million 10 largest importers (2015)


tonnes tonnes
5.4

4.5

3.6

2.3

1.2 1.2 1.1 1.0 1.0


0.8 0.9 0.9 0.8
0.7 0.7 0.7 0.6 0.6
0.4 0.5

Source: IFA

32
Main ammonia trade flows (2015)
Million tonnes

1.7
1.2 0.5 0.6
0.9
1.1
0.6 2.6
3.6
0.5
0.9 1.5

Source: IFA 2015 trade statistics ( covering 85% of total trade)

33


34
Global urea production

Million Total production Million 10 largest producers (2015)


tonnes tonnes
200
71.0
180

160

140

120
24.0
100

80 7.2 7.0 6.2 5.7 5.3 4.0 4.0 3.8


60

2005-2015 trend growth rate = 3.1% p.a.

Source: IFA
35
Global urea trade

10 largest exporters (2015) 10 largest importers (2015)


Million Million
tonnes tonnes
13.7 10.6

7.9

5.4 4.2
5.0
3.7 3.4
2.6 2.1 1.8
1.9 1.7
1.6 1.5 1.2 1.1 1.0
1.0 0.9

Source: IFA

36
Main urea trade flows (2015)
Million tonnes

0.8
2.2
1.0 1.1
4.3 1.8 1.2 7.0
9.3 2.6
2.2 0.6 2.4
0.5
0.9 0.6 1.5
3.0

Source: IFA 2015 trade statistics ( covering 87% of total trade)

37
Chinese domestic urea price and export tax set the global floor
price
USD/mt
Urea price China (inland proxy price)
600
Urea fob Black Sea
500

400

300

200

100

Source: China Fertilizer Market Week, International publications

38



39
Nitrate production

Million 10 largest producers (2015) Million 10 largest producers by company (2015)


tonnes tonnes
nitrogen(AN/ AN/CAN/CN
CAN) Exports 7.4

Domestic
consumption
1.6
4.5
0.2
3.2
0.1 2.7
2.3 2.2
1.9 1.8 1.8
2.2 2.3 1.6
1.8 0.2 0.1
0.9 1.0 0.7 0.0
0.6 0.4 0.3 0.4
0.2 0.3 0.1

Source: IFA, AN/CAN including nitrate part of UAN, as is


industrial grades Source: Yara estimates, company info
40
Nitrates are products with a nitrate content of 50 % or more

N fertilizer N content Nitrate (% of total N) Other nutrients

CAN (calcium ammonium nitrate) 27% 50% 4% MgO

AN (ammonium nitrate) 34% 50%

NPK various about 50% P&K

CN (calcium nitrate) 15.5% 93% 19% Ca

Urea 46% 0%

UAN (liquid urea ammonium nitrate) 28% 25%

ASN (ammonium sulfate nitrate) 26% 25% 13% S

AS (ammonium sulfate) 21% 0% 24% S

41
Nitrates vs. urea
Nitrate is the most important fertilizer in Europe

Urea (CON2H4) Ammonium (NH4+) Nitrate (NO3-)


Urea-N needs to be converted into Ammonium-N is fixed onto clay minerals in Nitrate-N is always dissolved in the soil
ammonium-N before it is plant the soil and therefore immobile. The plant water and is transported passively together
available. roots have to grow actively towards the with the water into the plant root. Thus,
nutrient. nitrate is rapidly effective.

42
Urea and UAN underperformance compared with ammonium
nitrate
Trial results for arable crops (cereals, UK)

Extra N required for same yield Protein content at identical N rate Yield at identical N rate
% % %
118
114 8.6
12.6

100 12.3 8.3 8.3


12.1

AN UAN Urea AN UAN Urea AN UAN Urea

To maintain the same yield, significantly Protein content was significantly lower on Yield was also significantly lower with urea
more nitrogen was needed from urea and fields fertilized with urea or UAN than with
UAN than from ammonium nitrate and UAN than with ammonium nitrate
ammonium nitrate

Source: DEFRA

43
Yield advantage of nitrates in tropical climate
Brazil, main season corn

Grain yield (t/ha)


Research shows that the benefits of nitrates
12.0
are even more pronounced in the tropics than
YaraBela Nitrates
in colder climates
Urea
10.0
YaraBela nitrate provides direct and efficient
uptake of nitrate-N 8.0

Consistently lower NH3 volatilization losses


6.0
Optimum N rate

Reduced acidification in the root zone,


supporting root growth and nutrient uptake 4.0

2.0
0 50 100 150 200 250 300
Fertilizer N rate (kg/ha)

Source: Fundation Bahia (2013)

44
Nitrates agronomic advantage has higher value for cash crops than
for commodity crops

Crop value with nitrates Increase in crop production value using


nitrates instead of urea
/ha 3,192 Index
1,016

1,553

100

Wheat/UK Oranges/Brazil Wheat/UK Oranges/Brazil


(160 kg N/ha) (180 kg N/ha)

45





0
0 0
0 0
0
46
Compound NPKs contain all nutrients in one particle
Compound NPKs NPK bulk blends
A mix of products with different
All nutrients in each and every particle spreading properties

Risk of segregation and uneven


Even spreading of all nutrients
spreading

lI 47
hiii
Bulk blend segregation during loading and unloading
Urea + DAP + MOP Compound NPK
15-15-15 15-15-15

Compound NPK
20 - 15 - 10 15 + 15 + 15
Compound NPK
13 - 17 - 15 15 + 15 + 15
Compound NPK
12 - 13 - 20 15 + 15 + 15
N P2O5 K2O analysis N P2O5 K2O analysis
in a pile of poor quality blend in a pile of compound NPK 15-15-15

Segregation due to differences in specific weight and granule size

48
Better spreading with compound NPKs

Spreading width

Spreading width of light particles


like Urea is less than those of
Urea heavier particles like DAP
DAP and MOP
MOP
Poor spreading patterns
cause striped fields
and significant yield losses

Compound
NPK

49
Compound NPKs give and excellent spatial distribution of
nutrients and as a result higher crop yields
Average yield of potato (n = 9 years)
Potato yield, tonne per ha
NPK
Compound NPKs NPK 41
16+16+16
39

more particles and


better distribution
NPK NPK

N
Bulk blend P
Urea-DAP-MOP
K
fewer particles,
longer distance to roots

Bulk blend NPK Compound NPK

Source: Yara field trials

50
Compound NPK capacities

Million 10 largest producers Million 10 largest producers by company (ex. China)


tonnes tonnes

47.1
5.3

3.3
2.7 2.7
1.9 1.8 1.8
6.2 2.6 2.6 2.5 2.5 2.2 1.5 1.5
6.8 1.1
4.2 3.7

Source: IFA 2013/2014 Source: Yara estimates, company info


51



0
0 0
0 0
0
52
Key value drivers

Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t)
525 516 545 466
477 496 499
379
387 423 407 337 316 329
357
341 318 244 261 268
308 289
245 264 240 214 240
236 223 195
249 272 198

06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16

Henry Hub (USD/MMBtu) Oil Brent blend spot (USD/bbl) NOK/USD exchange rate
8.9 104 105 104
97 96 8.1 8.4
7.0
6.7 73 80 6.4 5.6 6.3 6.0
5.9 5.6 5.7 5.9 6.3
65 62
4.7
4.0 4.4 4.1 3.7 51
43
2.8 2.6 2 .5

06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16

Source: The Market, Fertecon, CERA, W orld Bank, Norges Bank Average 2006 2016

53
Nitrogen fertilizer value drivers

Drivers Effect on

Chinese coal prices Supply-driven price for urea


Grain inventories/prices Urea demand
Revenue Urea supply
New urea capacity vs. closures
drivers
Global urea demand vs. supply Urea price (above floor)
Urea price Most other nitrogen fertilizer prices

Cash crop prices Value-added fertilizer premiums

Oil product prices and LNG capacity Gas cost in Europe


Cost expansion
drivers Manning and maintenance Fixed cost
Productivity and economies of scale Unit cost

54
Drivers of demand

55
Drivers of fertilizer consumption growth

Food demand drives fertilizer consumption


Population growth of about 80 million each year
Economic growth change diets
Higher meat consumption in developing countries
More protein-rich diets
More fruit and vegetables
Reduce hunger
Biofuels

Industrial consumption
Economic growth
Environmental limits (e.g. reduction of NOx emissions)

56
Key crops by producing by region

Maize-global production 975 mt Wheat-global production 733 mt

Other EU-27
Other 21%
25% United States 33%
Ukraine 36%
2% China
EU-27 18%
6% China US
Brazil Russia India
23% 8% 12%
8% 8%

Rice-global production 473 mt Soybeans-global production 321 mt


India
3% Other
China 11%
Other 3% USA
China
26% 31% 35 %
Argentina
18%
Vietnam
6%
India Brazil
Bangladesh Indonesia 22%
7% 31%
8%
Source: USDA, 2015/16 season
57
Growing meat consumption increases demand for cereals
China example

Direct cereal consumption, Mio.


Mill. tons
tonnes Meat consumption, Mill. tonnes
260 35
+4% p.a.

-2%
p.a.
200
0 0
1990 2005 1990 2005

Total cereal demand, Mill. tonnes


Mio. tons
The example of China illustrates that changing 370
diets towards higher meat consumption increases
overall demand for cereals +5% from
1990 to 2005
Higher meat consumption requires more feed grain
350
0
1990 2005
Source: McKinsey

58
Steady growth in grain consumption, while production growth is
more volatile due to weather variations
Grain consumption and production Days of consumption in stocks
Mill. tonnes Days
2,600 95
2,550
2,500 90
2,450 85
2,400
2,350 80
2,300
2,250 75
2,200 70
2,150
2,100 65
2,050
60
2,000
1,950 55
07 08 09 10 11 12 13 14 15 16E 17F 07 08 09 10 11 12 13 14 15 16E 17F

Consumption Production

Source: USDA December 2016

59
China drives recent years increases in global grain stocks

Grain stocks China versus the rest Days of consumption in stocks


Mill. tonnes Days
400 250

350
200
300

250 150
200

150 100

100
50
50

0 0
08 09 10 11 12 13 14 15 16E 17F 08 09 10 11 12 13 14 15 16E 17F

China Rest of world

Source: USDA December 2016

60
Profitability of investment in mineral fertilizers

Yield response (monetary value) to N fertilizer rate


Income
USD/ha Yield, tonne/ha The investment in nitrogen fertilizer is highly
3,000 10.0
profitable for growers
9.0
2,500 Fertilizer investment: 126 USD/ha
8.0

2,000 7.0 Net return: 973 USD/ha


6.0
1,500
Net return > 8 x investment
5.0
4.0
1,000
3.0
500 2.0
1.0
0 0.0
0 50 100 150 200 250 300
Fertilizer application, kg N/ha

Source: Winter wheat yield data: Long term trial, Broadbalk, Rothamsted (since 1856).

61
Breakdown of grain production costs
Example: 2016F average US corn production costs

Fertilizers as proportion of US corn


Seed production costs
15% 30%
Other
7%
25%

Fertilizer
20%
21%
Land
26% 15%
Chemicals
4% 10%
Labour
Power & Machinery 5% 5%
22%
0%
2001 2003 2005 2007 2009 2011 2013 2015 2017F

Source: USDA (Cost-of-production forecasts March 2016)


62
Large variations in yields across regions

Maize yields Wheat yields


Tonnes/Ha Tonnes/Ha
10.7 7.4

5.0
6.6 6.0
5.2 3.0 2.9
3.3 2.5

US Argentina China Brazil Mexico France China India US Russia


Tonnes/Ha Rice yields Tonnes/Ha Soybean yields
3.2
6.7 2.9 2.8
5.8 5.1
4.4 1.8
3.6
1.0

China Viet Nam Indonesia Bangladesh India US Brazil Argentina China India

Source: FAOSTAT 2014


63
Seasonality in fertilizer consumption
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Corn
USA
China
Europe
Brazil, first crop
Brazil, second crop

Wheat
China (winter wheat)
China (spring wheat)
India (Rabi)
USA (winter wheat)
USA (spring wheat)
Europe (winter wheat)
FSU (winter wheat)

Rice
China (single crop)
China (early double crop)
China.(late double crop)
India (Kharif)
India (Rabi)

Planting/seeding
Harvest

Source: USDA

64
N-fertilizer consumption from biofuels production
Million tonnes nitrogen

2.2

0.6
0.3 0.4

US - maize for ethanol Europe - rapeseed for biodiesel Brazil - sugarcane for ethanol Others

Source: IFA 2013/2014

65
Organic farming represents a marginal share of total cultivated
land
50 1.2%

The principles of crop nutrition are also valid for 45


organic farms 1.0%
40

Organic farms use manure and crop residues to 35


0.8%
deliver minerals to their crops 30

Organic farming is a niche market, mainly for 25 0.6%


consumers in the developed world 20
0.4%
15

10
0.2%
5

- 0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ha, millions Share of cultivated land


Source: Organic-world.net
66
Drivers of supply

67
Nitrogen value chain
Raw material Intermediate Finished Industrial
products products products

H, Ar, CO etc
Industrial gases
C02
Ammonia
Ammonia
Environmental
Urea products
Natural gas

Nitric acid
Industrial nitrogen
Nitric acid Nitrates chemicals
Calcium
Nitrate

68
Fertilizer production routes

Finished fertilizer products


Natural gas Ammonia
(coal, oil) Ammonia
Ammonia plant
Air CO2 Urea
Ammonia

Air Nitric acid plant


Ammonium Nitrate (AN)
Nitric acid Calcium Ammonium Nitrate (CAN)

Rock (P) Triple Super Phosphate (TSP)


H3PO4
Phosphoric acid plant
Single Super Phosphate (SSP)
Sulphur (S) Sulphuric acid plant
DAP / MAP

69
NPK production routes

Natural gas Ammonia plant


(coal, oil) Ammonia
Air

Air Nitric acid plant


Nitric acid
Nitrophosphate based NPK
Nitrophosphate plant + Calcium Nitrate (CN) 1
Phosphate
rock1 H3PO4 Phosphoric acid based NPK
Phosphoric acid plant 2
+ gypsum
Urea
AN/CAN Dry blend
Sulphur Sulphuric acid plant 3
MAP/DAP
SSP/TSP
MOP/SOP Steam granulated NPK
MOP/SOP
(also compound) 4
1. Igneous and calcined sedimentary

70
Nitrogen technology evolution

450
400 Birkeland-Eyde electric arc method
350
300

GJ/tN 250 Cyanamid method


200
150
Haber-Bosch synthesis n
Steam reforming natural gas
100
50 Theoretical minimum
0
1910 1915 1930 1950 1960 1975 2000

71
Projected nitrogen capacity additions outside China
Capacity additions, excl. China
(mill. tonnes urea1)
8.0
Nigeria 0.7

Iran 1.5

5.7
Indonesia 0.7 5.3
Malaysia 0.6 Algeria 1.2 Nigeria 1.3
Russia 0.2
Egypt 0.6
Saudi Arabia 0.5
Bangladesh 0.2
Romania -1.8
3.6 Russia 1.0 3.8
3.5 Vietnam -0.2
historical trend
~3 Mt = 10 year hist
Nigeria 0.7 Iran 1.9
USA 3.1
Nigeria 1.3 consumption growth
Iran 0.9
Russia 0.3

2.1 2.3 Iran 0.1


Russia 0.5
USA 1.3
Algeria 1.2 Iran 0.5
India 0.7
India 0.7
India 0.7 Turkmenistan 0 .6
Turkmenistan 0.6
Malaysia 0.6 Mexico 0.5
USA 0.6 Bolivia 0.5 India 0.7
Indonesia 0.5 Azerbaijan 0.4 Mexico 0.5
Azerbaijan 0.4
Bangladesh 0.3 Indonesia 0.3
Indonesia 0.3 Tajikistan 0.2
Bolivia 0.2
Kuwait -0.6
Uzbekistan 0.2
Uzbekistan 0.2 0.2
Tajikistan 0.2
Kuwait -0.6

2013 2014 2015 2016 2017 2018 2019 2020 2021


Source: CRU, December 2016. Numbers include both additions and closures of capacity.
1) Using 50% operating rate in new plants first year of production.

72
30% of announced nitrogen projects realized on time
Likely and probable ammonia projects in pipeline 2002-2008; Million tons

52

17
30 35

22 22 -
-70%

2 11

Projects in Added to Total projects Due after 08 Due within 08 Cancelled Delayed Realized
02 pipeline pipeline in pipeline
from 02-08 between 02-08
Note: Chinese projects are excluded from pipeline
Source: 2002, 2004, 2006, 2007, 2008 Fertecon Ammonia Outlook Reports

73
5 year typical construction time for nitrogen fertilizer projects*

46 years

Business
development Concept
Feasibility Prepare
selection Construction Operation
phase for execution
Gas phase
agreement

12-24 months 30-36 months


depending on complexity

6-12 months
- check cost assumptions by approaching market
- bidding for contracts and/or equipment

* Ammonia and urea plant example

74


75
Upgrading margins from ammonia to urea
USD/tonne
900

800

700

600

500

400

300

200

100

0
Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16

Urea fob Black Sea 0.6 * Ammonia fob Black sea + 15

Source: Average of international publications

76
Grain prices important for fertilizer demand
Corn USD/t Urea USD/t
350 700

300 600

250 500

200 400

150 300

100 200

50 100

0 0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Corn Urea fob Middle East

Source: World Bank, Fertilizer publications

77
The urea market has been supply-driven since 2004

USD/t
600

500 Urea price, fob Yuzhny

400

300

200

100

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Europe oil index Ukraine (Fertecon) US China

Source: Fertecon (Ukraine), Yara estimates

78
Nitrate premium is mainly a function of crop prices and
marketing
Wheat price, USD/t
CAN price, USD/t
450 400

400 350
350
300
300
250
250
200
200
150
150
100
100

50 50

0 0
05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16

Adjusted urea* Nitrate premium, USD/t Wheat price

* Urea fob Black sea adjusted for import costs into Europe and nitrogen content similar to CAN
79
Grain/oilseed prices yearly averages

USD/bu Wheat (HRW US Gulf) USD/t Rice (Thailand)


10 800
8 600
6
400
4
2 200

0 0
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16

USD/bu Corn (US Gulf) USD/bu Soybeans (cif Rotterdam)


8 20

6 15

4 10

2 5

0 0
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16
Source: World Bank, December 2016 Average prices 2006 - 2016

80
Cash crop prices yearly averages

USD/kg Cocoa USD/kg Coffee (arabica)


4 8

3 6

2 4

1 2

0 0
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16

USD/kg Cotton USD/kg Orange


4 2.0

3 1.5

2 1.0

1 0.5

0 0.0
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16
Source: World Bank, December 2016 Average prices 2006 - 2016

81
10-year fertilizer prices monthly averages

USD/t Ammonia fob Black Sea USD/t CAN cif Germany


1,000 500

800 400

600 300

400 200

200 100

0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

USD/t Urea prilled fob Black Sea/Urea granular fob Egypt USD/t DAP fob US Gulf/MOP granular fob Vancouver
800 1,200
1,000
600
800
400 600
400
200
200
0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Average of international publications Average prices 2006 - 2016

82



83
Yaras operating cash costs are mainly variable

NOK Operating cash cost 2015


Billions
Temporary plant closures can be carrie out
100 with limited stop/start costs
90
80 Example for ammonia/urea plants:
70 Typically half a week to stop and a week to start
60 Cost of stopping is 2 days energy consumption
Variable costs (87%) Cost of starting is 3 days energy consumption
50 79.1 - Dry raw materials
- Energy
40
- Freight
30 - 3rd party finished fertilizer
20
10
11.8 Other cash cost (13%)
0

84
Ammonia cash cost build-up example

36 MMBtu natural
Gas price: 4 USD/MMBtu
gas/tonne ammonia
x Gas consumption: 36 MMBtu/mt NH3
= Gas cost: 144 USD/mt NH3
+ Other prod. cost: 29 USD/mt NH Ammonia (NH3)
3
(82% N)
= Total cash cost 173 USD/mt NH3
Typical natural gas
consumption for ammonia
production

Source: Blue Johnson & Associates.


85
Urea cash cost build-up example

36 MMBtu natural
Ammonia price: 173 USD/mt NH3
gas/tonne ammonia
x Ammonia use: 0.58 NH3/mt urea

= Ammonia cost 100 USD/mt urea Ammonia (NH3)


(82% N)
+ Process gas cost* 21 USD/mt urea
0.58 mt ammonia per

CO2
+ Other prod. cost**: 25 USD/mt urea
tonne urea
= Total cash cost 146 USD/mt urea

Urea
(46% N)
* Process gas cost is linked to natural gas price
** Including load-out Source: Blue Johnson & Associates.

86
Theoretical consumption factors

Ammonia
(82% N)
P and K

Urea AN CAN NPK


(46% N) (33.5% N) (27% N) (15-15-15)*

Price comparisons should always be based on nutrient tons, not product tons

* There are many NPK formulas; 15-15-15 is one example

87
Main phosphate processing routes
2015 production and exports, million tons product

Phosphate rock Rock production: 201


(72% BPL*, 33% P2O5 ) Rock exports: 30
Sulphuric
acid**

Phosphoric acid Production: 44


(100% P2O5) Export: 4
Ammonia
( 82% N)

SSP DAP MAP TSP


(15-22% P2O5) (18% N, 46% P2O5) (11% N, 52% P2O5) (46% P2O5)
Production***: 26 Production: 36 Production: 23 Production: 5
Export: 2 Export: 17 Export: 9 Export: 3

* P2O5 content of phosphate rock varies. This is an example.


Source: IFA ** 1 ton of phosphoric acid requires 1 ton of sulphur.
***2013 figures
88





0
0 0
0 0
0
89
Nitrogen has many industrial applications

H2S abatement H S abatement Technical nitric


2
in oil fields in sewage acid Cleaning/
scrubbing AdBlue /heavy-duty vehicles
NITCAL Concentrated Aqueous Vessels
DIPCAL nitric acid ammonia
CN Acrylonitrile Stationary sources
ANFO Glue NOX
abatement Dry ice
Emulsions TAN Nitric NH3
acid
N2O abatement Urea Melamine Applic. LIC
CO2

Combined Industrial gases LIC wholesale


products Formates Nitrogen
Oxygen
Argon
Propane
Ammonia

90
Industrial use accounts for 21% of global nitrogen consumption

~30 million tonnes N ~9.5 million tonnes N as urea


Environment Environment
6% 10%

Other
11%

Explosives
18% Melamine
21%

Chemicals Glue
76% 58%

~21% of total nitrogen consumption ~12-13% of total urea consumption

Source: Yara estimates 2015, IFA, Fertecon, CRU

91
Global demand development of nitrogen chemicals for industrial
applications is strong
CAGR
Million tonnes nitrogen 3%

11.3
9.5
Urea Ammonia
8.5

23.4
18.8 20.5

2013 2015 2020E

Demand growth for Industrial applications


is estimated to ~3 % annually
Source: Yara estimates 2015, IFA, Fertecon, CRU
92
Reagents, technology and services to improve air quality

Nitrogen oxides (NOx) are a major air quality issue causing serious problems mostly in urban centers related to both the
environment and human health. Legislation around the world drives the business growth.

Air 1 AdBlue/DEF is a generic name for urea-based solution (32.5% liquid


urea) Air 1 is Yaras brand name for AdBlue that is used with the selective
catalytic reduction system (SCR) to reduce emissions of oxides of nitrogen
from the exhaust of diesel vehicles such as trucks, passenger cars and off-
road vehicles

NOxcare As a world leader in reagents like urea and ammonia in


combination with our experience in abatement systems like SNCR and SCR
technology Yara offers its clients one of the most comprehensive and effective
solutions to reduce NOx emissions in industrial power plants and utilities.

In the maritime segment Yara offers SCR and scrubber technologies to abate
NOx and SOx (sulphuric oxide) emissions.

93
Calcium Nitrate applications in wastewater treatment, concrete
manufacturing, oil fields and latex industries

Nutriox provides H2S prevention for Corrosion, Odor and Toxicity control
of municipal and industrial waste water systems

Nitcal is a multifunctional concrete admixture serving concrete admixtures


companies around the world

PetroCare prevents well souring and supports drilling in oilfields around


the world, for both the oil majors and the service companies that serve them

Dipcal is the premier dipping coagulant for the latex industry

Other important applications are in the ceramics, bio-gas and solar CSP
industries

94
Technical Nitrates for Civil Explosives

Various grades of Ammonium Nitrate and Calcium


Nitrate for use in the civil explosives and mining
industries

Largest customer segment are civil explosives


companies and open-pit coal and iron mining sectors

95
Animal Feed industry with several nutritional products based on
core chemicals
Feed Phosphates
Macro-minerals such as phosphorus and calcium are essential elements to sustain healthy
and productive animal growth

Feed Acidifiers
Antimicrobial effect and lowering pH, replace AGP (antibiotic growth promoter) and
effective against salmonella and moulds

Feed Urea
Source of NPN (non-protein nitrogen) used by rumen micro-organisms forming
proteins, replacing part of vegetable protein

Ammonia for fermentation


Amino acids like lysine, methionine, threonine are essential to add to lower total use of
protein

96
Sources of market information
Fertilizer market information
FMB www.fmb-group.co.uk
Fertecon www.fertecon.com
Fertilizer W eek www.cruonline.crugroup.com
Profercy www.profercy.com
The Market www.icispricing.com
Green Markets (USA) www.greenmarkets.pf.com
Beijing Orient Business (China) www.boabc.com
China Fertilizer Market W eek www.fertmarket.com

Fertilizer industry associations


International Fertilizer Industry Association (IFA) www.fertilizer.org
Fertilizers Europe (EFMA) www.efma.org

Food and grain market information


Food and Agriculture Organization of the UN www.fao.org
International Grain Council www.igc.org.uk
Chicago Board of Trade www.cbot.com
World Bank commodity prices www.worldbank.org
US Department of Agriculture (USDA) www.usda.gov

97
Knowledge grows