Vital nutrients: Already a leading producer of fertilisers and phosphates, the Kingdom is now expanding production capacity

The Kingdom is one of the world’s largest producers and exporters of both urea and phosphate-based fertilisers, which it manufactures using abundant locally sourced raw materials such as natural gas, sulphur and phosphate deposits. Other advantages for fertiliser production in Saudi Arabia include the fact that it is geographically well placed to take advantage of strong and growing international demand for fertiliser, particularly from Asia and India.

Producers also benefit from low operational costs thanks to the availability of cheap gas and electricity. Production capacity is currently being expanded in both segments, with the phosphates industry in particular undergoing major development. A large phosphate mining and processing complex opened in the Kingdom in 2011, and local state-backed industrial companies are currently working together with a large international phosphates producer to develop another major complex in the near future.

MAJOR PLAYERS: The country’s two main finished fertiliser products are urea fertilisers and phosphate-based fertiliser diammonium phosphate (DAP). Saudi Basic Industries Corporation (SABIC) dominates urea and other non-phosphate-based fertiliser production via its equity stakes in three fertiliser firms and claims to be the world’s largest producer of granular urea. The Saudi phosphates and phosphate fertiliser industry by contrast is dominated by metals and minerals company Saudi Arabian Mining Company (Ma’aden) and its subsidiary Ma’aden Phosphate Company (MPC), which was established in 2011 – though SABIC holds a 30% share in MPC. The bulk of fertiliser production in the Kingdom is exported. By value, fertiliser exports totalled SR6.07bn ($1.6bn) in 2012, according to the Central Department of Statistics and Information (CDSI), more or less unchanged from 2011, compared to imports of SR389m ($103.7m). By volume, total fertiliser exports for the year stood at 3.78m tonnes. SABIC’s total fertiliser output in 2012 was 6.54m tonnes, according to data from the CDSI, up from 4.78m tonnes in 2008. Of the 2012 figure, the firm exported 3.91m tonnes.

The company’s largest fertiliser affiliate by production volume is the Saudi Arabian Fertiliser Company (SAFCO), in which the petrochemicals firm holds a stake of 42.99%; most of the remaining equity in the firm is listed on the Saudi Stock Exchange. SAFCO primarily produces ammonia and urea, of which it has a production capacity of approximately 2.4m tonnes per annum (tpa) and 2.7m tpa, respectively; the firm’s total combined production of the two commodities stood at 4.57m tonnes in 2013. SABIC’s urea production capacity is set to increase substantially in the near future as a result of a new 1.1m-tpa urea fertiliser plant currently under construction in Jubail. The plant will be SAFCO’s fifth factory (and hence is sometimes referred to as SAFCO V) and is due to begin operations by the end of 2014.

SAFCO registered sales of SR4.24bn ($1.1bn) in 2013, down from SR4.98bn ($1.3bn) in 2012. Net income was also down for the year by 18%, to SR3.16bn ($842.5m), though this nonetheless represented an extremely healthy profit margin, as a result of a drop in international fertiliser prices over the course of the year. These were down on average around 17% in 2013. The World Bank in January 2014 forecast that fertiliser prices, along with those of other major commodities, would continue to fall over the course of 2014. Some 45% of the firm’s output was sold to Asia in 2013, followed by 22% to the Pacific region, 17% to the US, and 14% to the Middle East and Africa.

SABIC also holds 50% stakes in Al Bayroni Al Jubail Fertiliser Company and Ibn Al Baytar National Chemical Fertiliser Company. SABIC also indirectly controls nearly half of the remaining equity in Al Baytar via its stake in SAFCO, which owns the other 50% of the firm. Both firms produce ammonia and urea, in addition to several other fertiliser-related products.

UREA & OTHER NON-PHOSPHATES: Urea fertilisers accounted for around 82% of the country’s fertiliser exports in 2012, at SR5bn ($1.3bn). According to the UN’s Food and Agriculture Organisation (FAO), national urea production stood at approximately 3.5m tonnes in 2011, making Saudi Arabia the seventh-largest producer in the world (as noted above, output is set to increase substantially when SAFOC V comes on-stream at the end of 2014). Almost all of this (3.14m tonnes) was exported, ranking the Kingdom as the fourth-largest exporter of urea worldwide (behind China, Qatar and Russia), a position it maintained in 2013, according to estimates from Potash Corporation. Asian countries represented the largest purchasers of Saudi urea exports in 2012, on imports of SR1.64bn ($437.2m), followed by Australia and Oceania on SR1.13bn ($301.3m), and North America on SR855m ($227.9m). Exports of ammonium nitrate, more than 80% of which went to Asia, were worth SR568m ($151.4m) in 2012. Ammonium sulphate fertiliser accounted for the bulk of fertiliser imports, on foreign purchases of SR303.8m ($81m) in 2012, around half of which came from the US.

PHOSPHATES EXPANSION: In addition to its status as one of the world’s major urea exporters, the Kingdom has also recently entered the ranks of the largest global producers of phosphate fertiliser. Saudi Arabia’s estimated reserves of phosphate rock stand at around 750bn tonnes, according to the US Geological Survey’s 2013 “Mineral Commodity Survey”, representing around 1% of global phosphate reserves and ranking Saudi Arabia in the top 10 countries by deposit size, and in recent years the Kingdom has been moving to substantially step up exploitation of this resource. In 2011 the country was the world’s ninth-largest producer and 11th-largest exporter of DAP fertiliser (the most widely used phosphate fertiliser globally), according to data from the FAO, on figures of 456,000 tonnes and 68,000 tonnes, respectively. However, in mid-2011 a major new phosphate fertiliser complex, MPC’s 3m-tpa granular Jalamid-Ras Al Khair Diammonium Phosphate Company, began production, significantly boosting national capacity. The complex transports phosphates from the Al Jalamid mine, which has annual production capacity of around 11.6m tpa, to a plant in Ras Al Khair via the country’s north-south railway. The launch of the complex will have moved the Kingdom to near the top of the international DAP capacity rankings. While FAO data is not available for 2012 or 2013, by itself the complex, if operating at full capacity, would have ranked the Kingdom as the world’s third-largest phosphate producer based on 2011 figures (actual DAP production by MPC in 2013 stood at 1.83m tonnes, up from 1.53m in 2012). As a result of the project’s commissioning, according to Potash Corporation, the country has also become the world’s second-largest exporter of the product (behind Morocco).

NEW PROCESSING POTENTIAL: Furthermore, Ma’aden, SABIC and American phosphate and potash producer Mosaic are currently developing a $7bn phosphate processing complex at Waad Al Shammal in the north of the Kingdom, near the city of Turaif, that will also produce, among other products, DAP, further cementing the Kingdom’s status as one of the largest producers of phosphate fertilisers. Ma’aden will be the majority shareholder in the project with a stake of 60%, while SABIC and Mosaic will take stakes of 15% and 25%, respectively.

The complex – known as Ma’aden II – is due to enter into production in the final quarter of 2016 and will see the establishment of a phosphate mine at Umm Wual and seven processing facilities, with a combined production capacity of 16m tpa of various phosphate products including around 3m tpa of DAP, monoammonium phosphate and NP/NPK fertilisers. The complex will include a 3m-tpa ore beneficiation plant, a 4.9m-tpa sulphuric acid plant and a 1.5m-tpa phosphoric acid plant. Other products will also include phosphate concentrate and dicalcium and monocalcium phosphate for use in the production of feed for animals. The project will also see the construction of phosphate fertiliser and ammonia plants at Ras Al Khair. Saudi Arabia Railway Company is working on extending the country’s rail network Waad Al Shammal, in order to connect the facility to Ras Al Khair port, allowing for easy international exports. In December 2013 Ma’aden secured $4.2bn worth of bank financing for the project, in addition to $3bn provided by government agencies.

ASIAN SUPPLIER: Mosaic’s involvement is representative of a trend of increasing investment in phosphate production in the Middle East, as well as in Africa and Asia, at the expense of production in the US. This is being driven in part by a desire on the part of producers to be able to easily export fertiliser to Asia and in particular to India. The latter is one of the world’s largest importers of fertilisers generally as well as of phosphate and DAP, accounting for nearly half of the global trade in the commodity. The FAO estimates that Asian phosphate consumption will increase by 32% between 2012 and 2016, by which time Asia will account for approximately 60% of global demand.