Buoyant global market fosters new capacity: global production of phosphoric acid is forecast to increase by 14% overall during the next five years. The factors behind this encouraging outlook are reviewed here--but there is one caveat.(PHOSPHORIC ACID)

It has been another good year for phosphate fertilizer producers around the world. The improvements seen in 2004 continued apace last year, and the sustained upward trend in demand has been reflected in world market prices. DAP prices closed the year at around $260/t f.o.b. Tampa, slightly below their 2005 peak in October of $265/t, but nevertheless an impressive increase of 64% since the start of the recovery in phosphate markets three years ago: in January 2003, DAP prices averaged around $159/t f.o.b. Tampa. Prices of phosphoric acid have reflected these gains. In January 2003, the typical price was around $250/t [P.sub.2][O.sub.5] f.o.b. Morocco. At the end of December 2005, phosphoric acid prices had risen by 50% to an average $375/t [P.sub.2][O.sub.5] f.o.b. Morocco.

In 2004, according to IFA, global production of phosphoric acid rose by 5% to 32.6 million tonnes [P.sub.2][O.sub.5], while trade rose by 11% to 4.9 million tonnes [P.sub.2][O.sub.5]. The higher volume of trade in 2004 was driven by a sustained recovery in phosphate fertilizer production in India and Pakistan, and there was no loss of momentum in 2005. Provisional figures for the first nine months in 2005 suggest that world production of phosphoric acid totalled around 20.93 million tonnes [P.sub.2][O.sub.5], an increase of 3.5% on the January-September 2004 total of 20.21 million tonnes [P.sub.2][O.sub.5]. However, this was before Hurricane Rita struck the US Gulf Coast: it remains to be confirmed how much US production was lost during the fourth quarter of 2005. The phosphate plants located in Central Florida were not directly affected by Hurricane Rita: it was the disruption in the supplies of sulphur from Louisiana that compelled several operators to reschedule planned turnarounds at their phosphate fertilizer operations. IFA forecasts that any shortfall in US phosphoric acid production will be offset by higher production elsewhere, with a provisional 2005 total world output of 33.6 million tonnes [P.sub.2][O.sub.5], a 3.7% increase over 2004.

The present buoyant market has led to higher capacity utilisation, and almost every producer around the world has experienced higher production during 2004 and 2005. IFA's survey of phosphoric acid production showed that producers ran at an average 78% percent of capacity between 2000 and 2003. Capacity utilisation rose to an average 78% in 2004 and is expected to be slightly higher overall, at 80% in 2005. Most of this output is for conversion on or near the site to downstream fertilizers. Trade in merchant grade acid has been particularly strong in the past two years, and supply has been tight. The major exporters are Morocco, Jordan and Tunisia: all operated at rates exceeding 90% of capacity. However, production fell in South Africa and Senegal, and each country achieved operating rates of 70% and 80% of capacity respectively.

India remains the world's leading importer of phosphoric acid, accounting for half of world trade. India's estimated 2005 import total of 2.3 million tonnes [P.sub.2][O.sub.5] represented a fall of 6% on 2004 levels, but imports into Pakistan and Indonesia increased significantly.

Global phosphoric acid capacity in 2005 was estimated to total 43.6 million tonnes [P.sub.2][O.sub.5], …