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RSS & PodcastsIndustry-specific framework conditions
Fertilizer and Plant Care business sector
• With a share of just under 11%, the Potash and Magnesium Products business segment is the fourth-largest producer in the world and the leading provider in Europe.
• COMPO is one of Europe’s leading providers of premium products in the field of potting soils, speciality fertilizers, plant care products and plant protection for home and garden. As to speciality fertilizers for professional horticultural and agricultural application areas, COMPO also occupies an important position in Europe.
• The fertiva business segment places K+S among the leading suppliers of nitrogen fertilizers in Europe.
Constantly growing demand for agricultural products has ensured that the ratio of stocks to demand for agricultural products continues to be at a very low level, in spite of record harvests. In light of this scarcity on the international agricultural markets, prices for agricultural products rose significantly during the first half of the year. There was therefore also a further tangible rise in global demand for fertilizers primarily during the first nine months, which resulted in far higher prices for nitrogen, phosphate and potash fertilizers due to the backdrop of supply bottlenecks and higher acquisition costs.
As a result of the financial crisis, there was significant profit taking on the raw material markets in the second half of the year, and thus also a sharp correction in the prices for almost all agricultural products. This development can only be explained fundamentally with difficulty, because the ratio of cereal stocks to demand, which is the decisive factor for pricing, continues to be at a very low level, although farmers achieved above-average crop yields due to ideal weather conditions in 2008.
Uncertainty regarding the future yield situation, associated with the sharp fall in cereal prices, resulted in a very low order volume for fertilizers from the agricultural sector in the fourth quarter. More restrictive lending to farmers to finance their input material in advance had a dampening effect on demand for fertilizers, above all in South America. Consequently, numerous producers of complex fertilizers have cut back their output sharply. Moreover, the trade sector built up its stocks considerably during the first nine months against the backdrop of rising fertilizer prices. Besides, demand from the agricultural sector in the northern hemisphere in the fourth quarter in any case declines for seasonal reasons.
After fertilizer prices had risen significantly by the autumn, suppliers of nitrogen and phosphate responded to the slowdown in demand in the fourth quarter with price cuts, in the light of falling acquisition costs and rising stocks. However, as a result of hoped-for further declines in prices, the hesitant reaction of the agricultural sector then grew even stronger, so that the increase in demand aimed for with the price cuts did not materialise. However, the potash producers responded to the slowdown in demand, which was observed primarily on the spot markets, with production cutbacks. For this reason, the prices for potash fertilizers remained stable in the fourth quarter.
With its Salt business sector, measured in terms of available capacity, K+S is the world’s second largest producer of salt. esco – european salt company, with a production capacity of about 9.7 million tonnes, is Europe’s largest supplier of salt. SPL is the largest salt producer in South America and through the North American distribution company ISCO, it occupies a strong market position in the north-eastern states of the United States. At the SPL Group, production capacity in 2008 amounted to about 7 million tonnes; with the expansion of SPL’s own port of Patillos, in Chile, the loading capacity doubled in comparison with the previous year and thus yielded considerable savings on demurrage charges.
Sales of de-icing salt in Western Europe were again characterised by a warm winter in the first quarter. In the early purchase business, high customer inventories therefore resulted in price pressure. The wintry weather conditions during the fourth quarter, however, again had a positive impact on the de-icing salt business. In the food grade and industrial salt segments, demand in Europe was stable, and sales of salt for chemical use were still high until the fourth quarter.
Also the North American de-icing salt market on the East Coast was adversely affected by mild weather conditions, especially in January. The tenders for the winter season 2008/2009 then, however, benefited from supply bottlenecks after two consecutive harsh winters in the Mid-West. The South American market for industrial salt and salt for chemical use grew again in line with local economic development.
Key events affecting the course of business
• During the first nine months, the international fertilizer market was characterised both by strong demand and short supply, as already described under the heading "Industry-specific framework conditions". As a consequence of this, for example, global prices for potassium chloride almost doubled, but prices for nitrogen and phosphate fertilizers also rose sharply during the year.
• Sales of de-icing salt largely depend on winter weather conditions during the first and fourth quarters. Therefore, the positive de-icing salt business in the fourth quarter, described in the market environment of the individual business segments, resulted in increased sales in the Salt business sector. However, after the more significant, weak first quarter, this was not enough to compensate for increases in all costs.
