Fertilizer output in Brazil is set to rise over the next few years. New projects in Brazil are expected to cut Brazil's fertilizer imports from 70% of total consumption to 60% in 2018. However, increased agricultural demand over the next ten years is expected to erode those gains and by 2023, imports into Brazil may rebound to very near current import demand.
According to a report from the Sao Poulo industrial association Fiesp., phosphorous production will double to 4.1 MT by 2023, up from 2012's 2.25 MT. That would cut Brazil's P imports from 57% to just 22%. Vale SA and Petrobras are leading the charge to increase Brazillian fertilizer production, and the government has offered a range of tax incentives to spur investment in the sector.
Nitrogen imports are expected to change the least, and in 2012, Brazil imported 93% of the nitrogen used by growers. But national oil compnay, Petrobras has its hands in the mix and may be able to lend increased natural gas production the the effort.
The United States is also hot on the trail of domestic fertilizer and will add production capacity to the nitrogen segment -- many projects are already underway -- weaning the national appetite off of imports, and providing U.S. made nitrogen to U.S. growers. Natural gas pricing has set off a wave of foreign investment in nitrogen production in the U.S. but Brazil does not have the luxury of readily accessible gas from shale, or cheap natgas.
Part of the problem is the natural gas price is tied to crude oil in Brazil, not electricity. However, natural gas is making strides in Brazil, now accounting for 11% of the nation's energy portfolio. Natgas logistics -- including infrastructure and pipelines -- have increased 150% since 1999.
To increase natural gas production in Brazil, several conventional and unconventional gas blocks will be offered up at auction later this year. But officials are quick to point out that the natural gas revolution in the United States was fueled by technological advances, not geologic discovery.
Brazil is playing catch-up with fertilizer production, but advances made over the next few years will require accessible, affordable natural gas supplies, improved infrastructure and industry expertise. As infrastructure projects improve logistics, and companies like Vale and Petrobras put their collective heads together, natrual gas is the final piece of the puzzle and until inexpensive natgas supplies are secured, nitrogen production will lag and hold Brazil squarely in the importer's position.