Regional Demand Outlooks -India Outlook

Transcription

1

2 Regional Demand Outlooks -India Outlook Rakesh Kapur Joint Managing Director, Indian Farmers Fertiliser Cooperative Ltd. and Chairman, Fertiliser Association of India Organization logo to appear here

3

4 E Million MT Urea - accounts for more than 50% of the fertilizer consumed. Urea Units in the country -30. No Investment for fresh capacity creation in Urea since Domestic Production of Urea growth 0.8% CAGR since Urea Consumption growth 3.5% CAGR since Urea Capacity Consumption Source : FAI

5 New Investment Policy (NIP) Effective from 04 th Sept 2008 till 31 st May 2015 Investment linked to Import Parity Prices of Urea with floor and ceiling prices based on gas price of US$ 4.88 per MMBTU. 85% of Import Parity Price (IPP) considered for reimbursement from Revamped production. Prompted Investment in fertilizer sector - Around US $ 700 Million invested on Revamp of capacities. Limited Capacity Addition of 2.8 Mill MT through Revamp/ Debottlenecking. Policy not very conducive for Capacity addition and Revamped Production due to doubling of Gas price. Companies curtailed additional Production beyond 100% Capacity last fiscal due to depressed level of Urea IPP & higher RLNG prices.

6 Policy effective from 02 nd January 2013 but tweaked with certain amendments on 07 th October Floor-Cap prices of Urea in line with the gas prices till US$ 14/MMBTU and Floor price thereafter. Implicit pass through of Gas price for Greenfield / Revival & Brownfield projects. Subsidy on domestic sale for a period of 08 years from production. Production to start within 05 years. Policy seeks Bank Guarantee of US$ 50 Mill from companies interested in setting up Project.

7 Policy aims to boost Indigenous Urea Production and reduce import dependency. Extra Urea production beyond 10% from existing Revamp capacity recognized under NIP Additional amount of US$10 per Tonne allowed in the Floor and Ceiling Price for producing Granulated Urea. GOI w.e.f 25 th May 2015 has made it mandatory to produce 100% Neem Coated Urea (NCU). Neem Coated Urea is a slow release fertilizer and its application reduces Urea consumption by 10-15% (Likely impact of reduced Imports). An additional 5% / 10% price loading on Maximum Retail Price (MRP) allowed for Neem Coated / Zincated Urea.

8 MILLION TONNE Urea Import currently in the range of 7-8 Million MT Demand Import Steady of 2.7% anticipated in Urea Demand. Import dependence may increase to 12 Million MT per annum in medium term if Urea Retail Price is not increased to arrest its over usage E E E E Source : WGR

9 Natural Gas - Highest Priority allocated to fertilizer sector so far. Domestic Natural Gas Price Guidelines notified on October 10, Weighted Average gas price in gas-surplus economies of US, Canada and Russia are the basis. Natural gas prices prevailing at US$ 4.66 per MMBTU valid till 31 st October Natural gas prices likely to reduce from 1 st November 2015 due to low Crude and LNG prices globally. RLNG price not regulated. Higher Cost of Imported LNG.

10 Distorted Gas Price signals were affecting investment choices in markets and access to Energy baskets. Multiple Gas prices. Variations for individual units - US$ per mmbtu. Gas Pooling Policy effective from 01 st June GAIL (India) Ltd. is the Pool Operator for the fertilizer sector. Policy alters the dynamics by levelling gas costs for all 25 existing gas-based units and New Planned Units. Policy aims to incentivise Urea production at healthy Energy efficiency.

11 Greenfield /Revival of Closed HFCL & FCIL Projects Delivered Gas Price US$ 6.5 per MMBTU Floor Price - US $ 305 per MMBTU Ceiling Price -US $ 335 per MMBTU Urea recognized at rate of 95% of IPP. Revamp Projects Delivered Gas Price US$ 7.5 per MMBTU Floor Price -US $ 245 per MMBTU Ceiling Price - US $ 255 per MMBTU Urea recognized at rate of 85% of IPP. Expansion of Brownfield Projects Delivered Gas Price US$ 6.5 per MMBTU Floor Price - US $ 285 per MMBTU Ceiling Price -US $ 310 per MMBTU Urea recognized at rate of 90% of IPP. Joint Venture Projects - Overseas Floor price equivalent Greenfield Projects at a gas cost of USD 6.5 per MMBTU.

12 Sick Urea Units of erstwhile PSUs namely, Fertilizer Corporation of India (FCIL) and Hindustan Fertiliser Corporation Limited (HFCL) were closed prior to GOI planning to revive FCIL/HFCL Units. FCIL (Talcher and Ramagundam) Units revival on Nomination Basis. FCI (Gorakhpur, Sindri & Korba) Units and HFCL (Durgapur, Haldia, Barauni) Units revival through Bidding route. FCI (Gorakhpur, Talcher, Ramagundam, Sindri) and HFC Barauni initially targeted. Gas transporters to lay pipeline by December Revival expected to increase Urea capacity by Million MT???.

13 India- Iran negotiations to set up a US$ 1 Billion Urea plant of 1.3 Million MT per annum capacity in the Gulf. RCF, GNVFC and GSPC- Nominated Consortium from India. IFFCO planning to set up a 1.3 Million MT per annum Urea plant in Quebec province of Canada.

14 Brownfield/ Greenfield Cap. Indo Gulf Jagdishpur, U.P RCF, Thal, Maharastra CFCL, Gadepan III, Rajasthan NFCL, Kakinada Matix Ferts.& Chems. Panagarh, West Bengal (CBM based) GNVFC, Bharuch GSFC, Vadodara FACT, Kochi Bharat Coal Chemicals Ltd, Odisha (Coal Gasification) Total (Million MT) Bank Guarantee not yet submitted by interested Parties. These capacities will not come up in next 03 years? Financial Viability and Bankability of New Investment proposals will be an important concern.

15 RLNG share to increase due to less domestic gas supply. RLNG Prices to take the Pool Gas price average upwards from US$10/MMBTU. Price Viability of New Urea Projects based on RLNG, if Long Term Urea Price US$ PMT??. NIP (New Projects) Natural Gas (US $/MMTBU) Natural Gas cost (US $/MT Urea) Other Costs (US $/MT Urea) Cost of Production (New Capacity) (US $/MT Urea) Existing Pool Price Pool Price New Projects

16 Current requirement of existing gas based units : 42 MMSCMD. RLNG constitutes 20-25% of Gas consumption by fertiliser sector. All fertilizer plants to switch over to natural gas by Natural Gas requirement is 2.4 MMSCMD for a 01 Million MT Urea production Unit. Gas requirement for fertilizer sector to increase to 87 MMSCMD by Additional Requirement Naphtha based units Greenfield/Bro wnfield Units Closed units Revamp units Total

17 Subsidy differential to increase on account of increase in Pool Price and low IPP. Higher the Floor Price for new Investments, higher the Subsidy amount. Adequate Subsidy Budget Allocations. Existing companies profitability already hit on account of Delayed Subsidy payments. Price Competitiveness after Eight year Period?? Whether Farm Gate price of Urea will remain constant at current level of Rs 5310 per Tonne for next couple of years???

18 Global Urea Capacity projected to increase to 252 Million MT by 2019 (44 Million MT 20% increase over 2014). Major Capacity addition of 9-11 Million MT in China (20 New Units) and USA (7 Million MT). Incremental Capacity to occur in countries with NG reserves. Global Supply to increase by 6.4% p.a. over Global Demand to increase by 5.3% over Demand Supply Potential Surplus to increase from 8.3 to 12.7 Million MT. Source : IFA

19 Middle East and China region have strategic advantage on account of low feedstock prices and Export Policies. China currency devaluation against US $. Weaker Yuan to imply export competitiveness and aid export performance. China s imposition of VAT on all fertilizers from 1 st Sept VAT impact may get neutralized by Currency Devaluation. China edging towards Zero Consumption growth in fertilizers. Incremental capacity to put pressure on International Urea Prices.

20

21 Rainfall was excess/normal in 18 States and Deficient in 18 out of 36 States. Average rainfall of mm against normal rainfall of mm (16% below the LPA). Approaching spell may bring down cumulative rainfall deficiency figures of the entire country.

22 Normal/Excess rainfall in June at all the broad homogenous regions helped boost initial phase of sowing. Govt. increased Minimum Support Prices for Kharif Crops by Rs per quintal to increase acreage. Crop Sown area increased by 2% (99.9 Mill ha) over previous year. Drop in Food grain output in : 251 Mill MT ( : 265 Million MT). Good Kharif crop output expected in 2015.

23 Nutrient Based Subsidy for P&K fertilizers at same level as of last fiscal year. Fertilizer Demand remained relatively strong with assured availability. Stable/lower International prices of fertilizers improved overall availability. India on course for another increase in fertiliser consumption this year. Capacity Utilization of Indigenous Urea manufacturers expected to improve on account of New Urea Policy.

24 CFR INDIA PRICE US $ PER MT Port inventories in China for export started building since July. IPP has gone down this fiscal. Average Urea Price has gone down by US$ 30 per MT since last fiscal. Ammonia prices witnessed a major drop of US$ 110 per MT since last fiscal. DAP/MOP prices more or less stable. Chinese and Saudi producers finding better netbacks than pursuing DAP sales in Latin America DAP Ammonia MOP 571 Prilled Urea Bulk Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Source : FMB/FW/Fertecon

25 Mill Tonne Mill Tonne Mill Tonne Mill Tonne Kharif Rabi UREA E Kharif Rabi MOP (Direct) E Source : FMS % Variation (Est.) UREA DAP MOP COMPLEX ( vs ) Kharif Rabi DAP E Kharif Rabi Complex E

26 E Consumption in Mill Tonne Rs per MT Urea MRP DAP MRP DAP Consumption Urea Consumption Source : FAI/FMS

27 DAP 4.9 Million MT Imports tied up (April till Sept 15). Adequate DAP Stocks at the end of Kharif Import requirement for Rabi Season??? Domestic demand for Phosphate fertilizers in China is over this season. Exporters targeting Indian market. High Volatility in US$-INR parity. INR- USD Exchange variation may put pressure on DAP Prices in case Farm Gate Prices are to be maintained for DAP/ NPKs.

28

29 MMSCMD Demand - Highly price elastic. Demand to outpace Domestic supply. Deficit to necessitate higher dependence on LNG. Demand deficit to reduce in owing to incremental capacities. Gas supply to fall short by 184 MMSCMD by LNG Terminal Capacity estimated to increase to 63 Mill MTPA (239 MMSCMD). Back to Back RLNG contracts and timely commissioning of LNG terminals - a critical factor Demand Domestic Supply Gap Source : India Infrastructure

30 MMSCMD Major Gas companies targeting production in the next 3-6 years. Incremental Gas Supply of 49 MMSCMD expected by ONGC Gas Blocks to add 30 MMSCMD. RIL s KG D-6 to yield additional 11 MMSCMD. CBM blocks to add 8 MMSCMD. Projected Incremental flow may be affected by technical complexity and pricing issues Gas Supply Incremental ONGC ONGC (Uran) OIL RIL GSPC Essar Oil RIL CBM GEECL CBM Source: MOPNG

31 India 4 th largest importer of LNG Globally. Existing Terminal Capacity Million MTPA Import from existing Terminals 64 MMSCMD. 20 Terminals Capacity to improve. Private/State companies setting up their Terminals. Expansion of existing Terminals to account for 30 Million MTPA by Greenfield Terminals on East/ West Coasts projected to add 33 Million MTPA Capacity. Total Supply from RLNG Terminals projected at 240 MMSCMD by MTPA Existing/ Expansion East Coast Existing West Coast Proposed/UC East Coast Proposed/UC West Coast Source: MOPNG

32 Normal/Excess Rainfall in June 2015 led to increased sowing. Kharif Output expected to be higher. Adequate DAP availability may meet the Rabi Season demand. GOI commitment to revive Closed Units and increase Domestic Urea production Capacity. Pooling of Gas provides platform for further reforms in Urea sector including Direct Transfer of Subsidy to Farmers. Global Surplus Capacity of Urea, Devaluation of Yuan, Zero Consumption Growth of fertilizers in China would keep Urea IPP under check.

33 Organization logo to appear here