Interview to BN Americas about Fertilizers market in Brazil

1. In-depth interview
"It's not just an issue of raw material availability but also logistics"
Alessandra Lancellotti
Latin America research team leader for chemicals, materials and food
Frost & Sullivan
BNamericas spoke with Frost & Sullivan research team leader for Latin America's chemicals, materials and food division,
Alessandra Lancellotti, to learn more about Brazil's fertilizer industry.
BNamericas: Is there sufficient investment taking place in Brazil at present to expand fertilizer production capacity?
Lancellotti: Brazil imported around 57% of fertilizer volumes in 2009. For some types of fertilizers the country imports over 90%;
the country is very dependent on imports. Even last year, when demand for fertilizers decreased by almost 20% due to the global
economic crisis, Brazil had to import significant volumes.
However, efforts are being made to improve the situation, for example, the ministry of agriculture has mapped areas for raw
material exploration. Most exploration is taking place in the southeast and central areas of the country, in the states of Minas
Gerais, Goiás, Mato Grosso and some areas of São Paulo.
However, it's not just an issue of raw material availability but also logistics. Brazil needs to invest in infrastructure in the long term to
enable companies to deliver products throughout the country, because it's very expensive to transport products in Brazil.
But investments are being made to increase production. Recently [Brazilian petrochemical group] Unigel announced an investment
of 500mn reais [US$284mn] in a production unit for ammonium sulfate in the northeastern state of Bahia, which will double capacity
to 400,000t/y.
BNamericas: So the country must be running a substantial trade deficit in fertilizers?
Lancellotti: It depends on which fertilizers you're talking about. For example, Brazil imports more than 70% of nitrogen fertilizer
volumes, however, phosphate-based fertilizers are mostly produced locally. Last year Brazil produced around 2Mt of phosphate-
based fertilizers and imported about 1.7Mt.
BNamericas: And which is the most commonly used fertilizer in Brazil?
Lancellotti: Potassium-based fertilizers, which are the most suitable for the country's climatic conditions and soil type. And this is a
problem for the country, because about 90% of potassium-based fertilizers are imported into Brazil.
BNamericas: What is the government doing to facilitate self sufficiency in fertilizer production?
Lancellotti: [Federal energy company] Petrobras and [mining major] Vale are investing in the sector, but they will have to invest
substantial amounts to compete with [US agribusiness and food company] Bunge and [US-based fertilizer maker] Mosaic, which
are the main players in the industry. They are talking about investing in manufacturing ammonium and urea, which is likely to
double local production. The plant will be located in the state of Bahia. It forms part of the government's growth acceleration plan
[known as PAC].
The country also has a national plan for fertilizers which establishes strategies for the industry but Brazil is still a long way from
being self sufficient in fertilizer production.
Again, consideration and large investments need to be made in infrastructure to improve logistics, and improve the availability of
fertilizers throughout the country.
The government should also provide some incentives to medium-sized companies that have the capacity to produce blended
fertilizers because raw material and fertilizer production is concentrated in the hands of multinational companies, which have the
know-how, but blended fertilizers are easy to produce so companies should receive more investments and incentives from the

2. government to improve production and help the country become self sufficient.
BNamericas: What other challenges is the industry facing?
Lancellotti: There is also a trend in fertilizer production to increase efficiency and reduce toxicity to improve crop production, and
Brazil must improve in this area. It's important for the country to establish partnerships with other countries, for example, to create
technological alliances and invest in research agencies. Embrapap, an institution in Brazil dedicated to research in the field of
fertilizers, is lacking investment from the government.
BNamericas: What trends do you expect to emerge in the next five years?
Lancellotti: Increasing consumption of food products will be a strong driver of growth in the fertilizer market. This is why it is very
important to invest in becoming self sufficient. I don't think Brazil will be self sufficient in five years, but the country can improve the
situation.
About the company
Founded in 1961, Frost & Sullivan has 31 global offices with more than 1,700 industry consultants, market research analysts,
technology analysts and economists.
By Linus Hoggett