Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — NPK Fertilizers India 2016
31 slides from Mosaic Company (the)'s conference presentation, Mar 8, 2016
Slide 1: Competition for Indian Demand
1 Competition for Indian Demand NPK Fertilizers India 2016 Shangri-La’s Eros Hotel New Delhi March 9, 2016 Dr. Michael R. Rahm Vice President Market and Strategic Analysis
Slide 2: Safe Harbor
2 Safe Harbor This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Wa’ad Al Shamal Phosphate Company (also known as the Ma’aden joint venture) and other prop
Slide 3: Preliminaries
3 Preliminaries India in the context of the global markets Focus on phosphate and potash (P&K) Current situation and five-year outlook Observations and perspectives of an outsider
Slide 4: Agenda and Take-Aways
4 Agenda and Take-Aways Agricultural Situation and Outlook - No structural imbalance but just a string of above-trend harvests - Long term food story not in vogue but still intact - Constructive outlook underpins positive plant nutrient demand prospects - India: feeding a growing and more affluent
Slide 5: Agricultural Situation and Outlook
5 Agricultural Situation and Outlook
Slide 6: No structural imbalance
6 No structural imbalance Farmers can’t frack corn and the world cannot stop eating - Most agricultural commodity prices are holding up in a volatile environment - No disruptive technological developments (e.g. like hydraulic fracturing in energy markets) - No gross supply/demand imbalance (e.g. l
Slide 7: Just a string of above-trend harvests
7 Just a string of above-trend harvests Still a horse race between supply and demand - Stocks declined and prices increased when yields were less than trend (2010-12) - Stocks built and prices dropped when yields exceeded trend (2013-14) - World less China grain and oilseed inventories are project
Slide 8: Long term food story not in vogue but still intact
8 Long term food story not in vogue but still intact Wide range of potential outcomes in 2016/17 - Demand growth of ~2% and trend yield results in a small decline in inventories Record area and yields required to meet projected demand - Predictable increases in demand driven by population and in
Slide 9: Feeding a larger, more affluent, more urbanized, and older population
9 Feeding a larger, more affluent, more urbanized, and older population . . . 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 MillionsIndia Population Rural vs. Urban Source: World Bank Rural Urban 0 200 400 600 800 1,000 1,200 1,400 1
Slide 10: Closing yield gaps with better technology/practices
10 . . . by closing yield gaps with better technology/practices 0 1 2 3 4 5 6 70 75 80 85 90 95 00 05 10 15 MT Ha Source: USDA Wheat Yields India World China Pakistan Austraila 1 2 3 4 5 6 70 75 80 85 90 95 00 05 10 15 MT Ha Source: USDA Rice Yields India World China Vietn m Thailand 0.0 0.5 1.0 1.5
Slide 11: More balanced nutrient use required to achieve higher yields
11 More balanced nutrient use is one of the practices required to achieve higher yields in the long term 0 5,000 10,000 15,000 20,000 25,000 30,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 India NPK Retail Prices Urea MOP DAP INR MT Source: FAI, Mosaic 1.75 2.00 2.25 2.50 2.75 3.0
Slide 12: Phosphate Situation and Outlook
12 Phosphate Situation and Outlook
Slide 13: Demand growth expected to accelerate
13 Demand growth expected to accelerate Global phosphate shipments increased just 1.3% per year from 2010 to 2015. India was a drag on demand with shipments dropping 2.4 million tonnes from 2010 to 2015. Strong growth in China, other Asia, and Brazil more than offset the drop in India and resu
Slide 14: Subsidy changes crater phosphate shipments
14 0 5,000 10,000 15,000 20,000 25,000 30,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 India NPK Retail Prices Urea MOP DAP INR MT Source: FAI, Mosaic Subsidy changes crater phosphate shipments Indian shipments and imports collapsed following subsidy change and price spike in 20
Slide 15: 2016/17 subsidy expected to result in stable to lower retail prices
15 2016/17 subsidy expected to result in stable to lower retail prices and underpin strong demand prospects Retail DAP Price Scenarios (order of magnitude change) Scenario ==> (1) (2) (3) (4) (5) Exchange Rate (R/US$) 69 69 69 66 72 Subsidy Reduction (R/Tonne) 3,800 3,800 3,800 3,000 4,000 DAP Price
Slide 16: A balanced supply/demand outlook
16 A balanced supply/demand outlook 40% 50% 60% 70% 80% 90% 100% 0 10 20 30 40 50 60 10 11 12 13 14 15E 16F 17F 18F 19F 20F Th ou sa nd s Global Capacity, Production and Opr Rate Operational Capacity Production Oper Rate Mil Tonnes Phos Acid Opr Rate Source: CRU and Mosaic 40% 50% 60% 70% 80% 90% 10
Slide 17: Significant changes on the supply side of the ledger
17 Significant changes on the supply side of the ledger China has accounted for all of the net increase in global phosphate supplies so far this century and has transitioned from the largest importer to the largest exporter of finished phosphate products. China has stopped building phosphate pla
Slide 18: Trade flows expected to adjust to supply developments
18 Trade flows expected to adjust to supply developments China 8% USA 51% Jordan 9% FSU 23% Morocco 4% Other 5% India DAP Imports by Origin 2009/10 China 49% Saudi Arabia 31% USA 12% Jordan 8% India DAP Imports by Origin 2014/15 China 71% Saudi Arabia 17% USA 10% Jordan 2% India DAP Imports by Origi
Slide 19: Potash Situation and Outlook
19 Potash Situation and Outlook
Slide 20: Collapses of key potash currencies a main driver of lower prices
20 Collapses of key potash currencies a main driver of lower prices 200 250 300 350 400 450 500 13 14 15 16 $ Tonne Muriate of Potash Spot Prices Blend Grade c&f Brazil Std Grade c&f SE Asia Blend Grade fob NOLA China Contract First Mover Source: Argus FMB 3/19/15 1/1/13 1/20/14 40 50 60 70 80 90 10
Slide 21: Impacts of a collapse of key potash currencies
21 0 25 50 75 100 125 150 175 200 225 250 275 300 0 10 20 30 40 50 60 70 US$/Tonne Million Tonnes 2014-16 MOP Cost Curve fob Mine at Name Plate Capacity Source: CRU 2014 2016 2016 vs. 2014 MOP Cost Curve fob Mine at Nameplate Capacity Exporter: Lower dollar costs/higher local currency price Importer
Slide 22: Strong and steadier demand prospects
22 Strong and steadier demand prospects Global MOP shipments increased 2.5% per year from 2010 to 2015, but growth was erratic. India was a drag on demand with shipments dropping 2.2 million tonnes during this period. China accounted for most of the net growth with both imports and domestic pr
Slide 23: India potash shipments collapsed following strong gains
23 India potash shipments collapsed following strong gains during the previous decade Indian MOP shipments/imports dropped in half following the subsidy change and price spike in 2010/11. Retail MOP prices more than tripled from R5,000 per tonne in 2010 Q1 to R16,000 in 2015/16. Farmers respon
Slide 24: 2016/17 subsidy expected to result in lower retail prices
24 2016/17 subsidy expected to result in lower retail prices and bolster the demand outlook Retail MOP Price Scenarios (order of magnitude change) Scenario ==> (1) (2) (3) (4) (5) Exchange Rate (R/US$) 69 69 69 66 72 Subsidy Reduction (R/Tonne) 500 500 500 300 700 MOP Price c&f India ($/Tonne) 260 2
Slide 25: The global MOP market not grossly out of balance
25 The global MOP market not grossly out of balance 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 0 10 20 30 40 50 60 70 80 90 10 11 12 13 14 15E 16F 17F 18F 19F 20F Op RateMMT KCl Source: Company Reports, CRU and Mosaic Global Potash Capacity, Production and Operating Rate Capacity Production Op Rate 45
Slide 26: Significant MOP supply adjustments underway
26 Significant MOP supply adjustments underway Company Facility Supply Adjustment (1000 mt) Uralkali Solikamsk 2 2,400 Mine flooded in November 2014 Mosaic Carlsbad, NM 500 Closed MOP operations at the end of 2014 Hersey, MI 100 Ended MOP operations and sold as a salt-only facility in 2014 Colonsay,
Slide 27: Thank You!
27 Competition for Indian Demand NPK Fertilizers India 2016 Shangri-La’s Eros Hotel New Delhi March 9, 2016 Dr. Michael R. Rahm Vice President Market and Strategic Analysis Thank You!
Slide 28: Appendix
28 Appendix
Slide 29: 2016 Phosphate and Potash Shipment Forecasts
29 2016 Phosphate and Potash Shipment Forecasts 65-67 30 35 40 45 50 55 60 65 70 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E 16F Global Phosphate ShipmentsMMT Product DAP/MAP/NPS/TSP Source: CRU and Mosaic 58-60 25 30 35 40 45 50 55 60 65 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E16F Glob
Slide 30: 2016 Phosphate Shipment Forecasts by Region
30 2016 Phosphate Shipment Forecasts by Region Million Tonnes DAP/MAP/NPS*/TSP 2014R 2015E Nov Low 2016F Nov High 2016F Feb Low 2016F Feb High 2016F Comments China 21.4 19.6 20.8 21.2 20.6 20.9 Shipments of high analysis products declined last year due to moderate demand growth, delays in the winter
Slide 31: 2016 Potash Shipment Forecasts by Region
31 2016 Potash Shipment Forecasts by Region Muriate of Potash Million Tonnes (KCl) 2014 2015E Nov Low 2016F Nov High 2016F Feb Low 2016F Feb High 2016F Comments China 13.8 15.8 14.3 14.6 13.4 13.7 Implied shipments surged 2.0 mmt to 15.8 mmt in 2015 as a result of record net imports (9.2 mmt) and re