Podcast: Covid-19 impact on the global NPK market

Author Julia Campbell

Join Julia Campbell, Editor - NPK, as she explores the impact of the coronavirus pandemic across the global NPK market.

All industries have seen some kind of impact from the global coronavirus pandemic and this podcast highlights how Covid-19 has affected the global NPK market from a supply and demand perspective. Have a question for Julia? Contact her at julia.campbell@argusmedia.com


Hi. My name's Julia Campbell, and I'm the editor of the global NPKs report at Argus Media. So, I'm gonna be talking today in this podcast about the impact that the global coronavirus pandemic has had on the NPKs market. It has been very much doom and gloom surrounding this coronavirus pandemic over the last few weeks and even months. But let's start off with a more positive note.

The fertilizer industry has been classed as an essential business in most countries because of its link with food production, which means that the fertilizer market, in theory, can continue its day to day business. But, there have been other measures related to this pandemic that's been implemented, and as a result, it means that the fertilizer business has seen quite a bit of an impact. So, specifically on NPKs, the main challenges faced by this market, and it's probably also applicable to the wider fertilizer business, is the impact from the numerous lockdowns enforced in numerous countries around the world. And these lockdowns have led to two key challenges, which are labor and logistics, and both these will slow day to day business at the bare minimum.

So, on the supply side of things, firstly, let's go to India. We've seen particularly over the last couple of weeks quite a big impact in this market, and it's quite a big import market for NPKs as well, as it takes in probably over... Well, last year was a record year, over 700,000 tons of various NPS, NPK fertilizers. So, on the supply side here, we've seen a lot of shutdowns of domestic NPK producers as a result of a 21-day lockdown imposed by the Indian government on 24th of March, in a bid to curb the spread of coronavirus in the country.

Following this announcement, it led to 10 producers in India to close their plants or reduce operating rates, although of this 10, there is one producer that is in turnaround anyway. And most of these plants continue to be down, but last week, we did see one producer, IFFCO, to have partially resumed production at its DAP NPKs facility in Kandla. But we don't have the exact details of what product it's going to be making or the operating rates. And based on this data, we do estimate that the shutdowns and reduced operating rates will probably take over 275,000 tons of product out of the market for April. And that's based on the capacity details of these plants.

And with the kharif season coming up, which is a key application season for India, we do expect NPS and NPK demand to continue to ramp up, and with the shutdowns at this crucial time, we do expect to perhaps see more demand for imports into India. So far, imports are ongoing, and there don't appear to be any major disruptions on that side of things. Most ports have declared a force majeure, and the Indian Shipping Ministry has also directed ports not to charge any penalties or fees on partners during the lockdown, to help keep things flowing. And so far, the ports used for discharging complex fertilizers appear to be operating as normal, although some report that activity is perhaps slower than usual, mainly because of a shortage of labor and bags.

There's also logistical issues with regards to the movement of product from ports to within the country itself. There's road freight delays across states. Road freight accounts for around 55% to 60% of total movement, while rail freight meets around 35% of demand. Some districts have sealed borders, and this has also led to the shortage of truck drivers, and labor to load and unload cargos. The Indian government has allowed workers to join fertilizer factories and ports to carry out loading and unloading, so that production and distribution remain unhindered. And there is an expectation that transit delays may shorten from the second half of April as everyone begins to adjust.

Aside from that, on the supply side, there have been several projects, NPK projects, that have been delayed as a result of the coronavirus, mainly because of the uncertainty surrounding the virus. Firstly, we have in Turkey Iskenderun Fertilizers. They've halted the start-up of its new 300,000 ton per year steam granulation NPK plant in Iskenderun, in response to the coronavirus outbreak. The company actually began test runs at the plant in March, and had intended to begin commercial production before April, but all activity has now been temporarily halted, and it's not expected to restart until at the very earliest, the end of April.

And in Kenya, we have MEA Fertilizers, a Fertiplant startup, which has the capacity of around 100,000 tons per year of NPKs in Nakuru. This has been delayed because of a lack of available Chinese engineers. You know, they had Chinese engineers working on this plant, and they returned to China for the Chinese New Year back in January, and obviously there was the coronavirus outbreak, and they haven't returned. And there's uncertainty as to when they could return. Test runs at this plant were scheduled to begin in March, April, but then this has obviously now been delayed, but MEA Fertilizer has confirmed that alternative personnel are being sought, and work on the plant is ongoing. So, the new date for the test runs is now targeted for June and July.

Moving on to the demand side of things. The largest impact has probably been the cancellation of a purchase tender in Kenya by the Kenya Tea Development Agency, for almost 90,000 tons of NPKs. Two weeks ago, KTDA initially announced that it had suspended the tender indefinitely. But then last week, it canceled the tender completely because of concerns surrounding the disruption caused by the coronavirus pandemic to the fertilizer supply chain. KTDA has a very clear fertilizer procurement, delivery, and distribution plan, which they've designed to offer optimal benefits to tea plants and farms. But there are concerns that if they secured the product under the tender for this year's application, that the NPKs would not arrive in time for the application season. So, they've just decided to cancel this tender. And I guess that once things perhaps are a little clearer, there is a chance that they could reissue the tender. But so far, they've just said that they won't buy this year.

Moving east on the demand side of things, let's move to China, where the virus originated. Things there now are slowly improving. It's approaching... Well, we're in the main application season now there, and demand has been ramping up. And so far, feedback suggests that demand is as normal, although some report that there are some concerns that there may not be enough domestic NPKs to meet this year's demand, because a lot of the plants were shut down for a couple of months as a result of the lockdown in China. But even in this case, the truth is that there is plenty of imported NPK stock, which may help to replace some of this loss tonnage, but most people probably would agree that there would be sufficient supply for this spring, regardless of whether it's domestic or imported product.

And for Southeast Asia, there are concerns that demand overall will be down this year because of a lack of cash flow among farmers. The coronavirus outbreak halted the China's... Sorry, halted China's agricultural imports from countries such as Vietnam and Myanmar, which may potentially hit farm incomes and reduce fertilizer demand in the export countries. This led to containers of fruit stuck at the border towns of Muse in Myanmar and Lào Cai in Vietnam. So, fruits such as melons from Myanmar and dragon fruit from Vietnam were among the agricultural products affected, and China is a significant export market for harvested fruit from both those countries. And the delays and reductions in exports will likely hit incomes and reduce cash flow, which could hurt domestic demand for certain NPKs. So, as an example, in Myanmar, melon, that requires NPK grades such as 15-15-15 or 16-16-16, and 15-10-20 and 19-9-19. So, there could be a reduction in demand for those grades. Domestic NPK demand has, in general though, has slowed in Vietnam and Myanmar since the fourth quarter of last year because of drought conditions and falling crop prices. It was expected that demand would increase after the Lunar New Year holidays, earlier this year, but the impact of the coronavirus outbreak on border trade in fruit means that domestic demand hasn't picked up just yet.

And over in Europe, most buying is done for spring, so there aren't any major issues there. The main concern though is probably logistics, with long border queues for deliveries and also manpower to help move product. But outside of this, for now, a lot of buyers have taken the decision to stand back and watch the impact unfold before making any firm commitments. Most players now are in a wait and see mode. And this has also been encouraged by currency devaluations against the US dollar in a number of countries. So, for now, we're just waiting and seeing on the sidelines and see how things develop before committing to any large, any major decisions. If anyone has any questions or comments on the content of this podcast, feel free to contact me. My email address is julia.campbell@argusmedia.com, and if you want to listen to more podcasts by Argus Media, please visit argusmedia.com/podcasts.