Ammonia; a global assessment

The primary use of ammonia and its derivatives is for use as fertilizers.  Fertilizer demand growth is a function of:

• Population growth
• GDP growth
• Government policies on tariffs and subsidies
• Environmental implications of fertilizer use including biofuels

The dramatic historic and projected rise in global population is the main driver for fertilizer growth.  Unsurprisingly, different regions are expected to show vast variations in population growth: Asia Pacific and Africa are forecast to have a rapid increase in population size, while in Western Europe and North America’s population is expected to remain almost constant up to 2035.  Therefore, demand growth for food and hence fertilizers such as ammonia and urea are expected to be significantly higher in Asia Pacific than in the West over the outlook period.

Of course other factors such as size of arable land, erosion, climate and climate change, general farming and fertilizer application practices, regionally specific diets and deficiencies of selective nutrients in the soil have a considerable impact on fertilizer consumption.

Hence, despite a positive long-term correlation between population and GDP growth and fertilizer consumption, the distribution of cultivated land area might shift in the future.  While the economically developed region West Europe, consumes large volumes of fertilizers, the proportion of arable land and its population respectively are rather small compared to other regions.  On the other hand, several Central Asian, African, South American and South-East Asian countries have generally very favorable conditions for land cultivation while having relatively low GDPs.  Although some of the countries in these regions are already food exporters a higher demand for fertilizers to boost production can be expected over the forecast period.  Demand outlook for individual regions is therefore also a function of where food will be produced in the future and consequently how food trade flows are likely to develop.

Although ammonia is applied directly to the soil in a few countries such as the U.S. It is predominately used as an intermediate product in the nitrogenous fertilizer value chain.  Urea is mainly consumed as a direct application fertilizer but is also used in the production of UAN as well as some compound and bulk blend NPKs.

Ammonia is a key intermediate for fertilizers such as urea, ammonium nitrate, ammonium phosphate and NPK compounds as well as a variety of industrial applications such as synthetic resins (urea-based), synthetic fibres (acrylics and nylons), polyurethanes, explosives (ammonium nitrate-based) and refrigeration. 

For fertilizer applications, population growth is the principal driver for increased consumption.  However, additional factors have a notable impact, such as economic growth and government policies (e.g. fertilizer subsidies/tariffs and environmental regulations).  Increases in population size and GDP have resulted in increased protein (meat) uptake and higher consumption of fruit and vegetables in countries such as China and other rapidly developing nations.  Greater demand for meat results in higher grain consumption as feed, which in turn boosts fertilizer use in agricultural production.  The increased demand for vegetables and fruit is being met by using more fertilizer application per hectare, thus boosting production.  Global population is currently growing by about 75-80 million persons per year with the majority of this occurring in developing countries such as India, Brazil, Indonesia Malaysia and Africa.  Industrial end-uses of ammonia and its derivatives are typically linked to GDP growth.

In 2017, an estimated 190 million tons of ammonia was consumed and by 2035, the total consumption is forecast to reach over 260 million tons, growing at an average rate of close to two percent annually.  In 2017, approximately 55 percent of ammonia was used to make urea, and the majority of this urea is consumed as direct application fertilizer.  An additional 25 percent of ammonia production is consumed as other fertilizers, namely ammonium phosphates, ammonium nitrates, other N fertilizers and direct application fertilizer.  The remaining 20 percent is for industrial applications.  Among fertilizer applications, urea has been steadily increasing its share of total ammonia consumption from around 47 percent in 2000 to 57 percent in 2016.  

Author:

Priyanka Khemka, Consultant