A rapidly growing global population and planned capacity expansions are the key drivers for sustained growth for the GCC's fertilizer producers, say industry experts. According to Charlotte Hebebrand, director general of the International Fertilizer Industry Association (IFA), a key driver for fertilizer demand is an expected global population surge. As global population is expected to reach 9.3 billion by 2050, food production will have to increase by 50 percent in the same period." She predicts that the solution to ensuring that people are fed is not only increasing arable land but also increasing the yield of current cultivated land.
"Today, food security is not only about the quantity of food but also quality. We don't want a 'hidden hunger' situation where billions of people are deficient in micronutrients. Fertilizers are able to provide both the quantity of food to feed billions of people, but also quality food that is nourishing."
Gulf fertilizer producers are aided by their strategic location between major export markets like East Asia and the United States. "The GCC is a powerhouse in global fertilizer trade," said Hebebrand. Last year, the region's fertilizer products accounted for 30 percent of global urea and 16 percent of ammonia supply.
"In fact, GCC fertilizer production is set to expand, reaching a capacity of 46.4 million tons by 2018," said Abdulwahab Al-Sadoun, secretary general of the GPCA .
"There are $10 billion worth of projects currently in the construction or planning stage in the GCC. Because of this, we expect the region's fertilizer industry will grow consistently in the next five years," said Sadoun.
The GPCA estimates that the GCC's fertilizer production capacity reached 31.4 million tons in 2012. According to the IFA, global fertilizer capacity reached 255.7 million tons in 2011, and is expected to grow by 1.8 percent per year in the next five years. Meanwhile, the GPCA estimates that GCC fertilizers will grow by 10 percent every year in the same period.
An abundant supply of natural gas and minerals has enabled fertilizer producers in the Arabian Gulf to play a major role in the supply of nitrogen-based and phosphate-based fertilizers like urea, ammonia and di-ammonium phosphate (DAP) to global markets, Sadoun added.
While analysts have warned of a slowdown in growth due to the availability of cheaper feedstock elsewhere due to the shale gas boom, Sadoun notes that the region's fertilizer products portfolio is already diversifying its mix to produce new grades.
"The GCC will capture a large share of the world's phosphates trade over the next 5 years," said Sadoun.
Around 3.7 million tons of phosphates are produced in the Gulf today, accounting for 9 percent of global phosphate capacity. By 2018, as many as 8.3 million tons of phosphate capacity is expected to come on stream, raising the Gulf's share of global phosphates to 24 percent.
"The Middle East fertilizers producers are already evolving in a way that will ensure their longevity and competitiveness," said Sadoun.