Brazil aims to cut fertilizer imports by quarter

Farming powerhouse Brazil is launching a national fertilizer plan to reduce its dependency on imports by more than a quarter to nearly 60pc of national consumption by 2050.

The plan, which would reduce imports from their current 85pc of consumption, will be officially released after the signing of a presidential decree. In March 2021, Brazil, a leading producer of soybeans, corn, cotton and coffee, undertook the crafting of a national fertilizer strategy to consider ways of boosting fertilizer output to make the country less dependent on imports.

Discussions led to a 195-page technical document that was made available to Argus and will be the basis for the governmental decree.

Among the plan's goals, Brazil intends to increase nitrogen installed capacity gradually up to 2.8mn metric tonnes (t) by 2050. To reach that volume, the plan includes attracting at least two more nitrogen producers in Brazil through 2030 and another four through 2050. As for private investments, the government seeks to attract at least $10bn to increase nitrogen production — and output of raw materials — by 2030 and the same amount each decade by 2050.

In 2020, Brazil produced 224,000t of nitrogen fertilizers, according to the document, an amount that could meet 4.3pc of the country´s demand in the same year. Operating at full installed capacity, local production could meet 17.6pc of consumption. The document highlights that demand for nitrogen fertilizer may double by 2050.

Brazil currently has three operational nitrogen units. Leased from Petrobras, Unigel's Camacari unit, in Bahia state, has an installed capacity of 475,000t/yr of ammonia and another 475,000t/yr of urea. Unigel's Laranjeiras unit, in Sergipe state, has an installed capacity of 650,000t/yr of urea, 450,000t/yr of ammonia and 320,000t/yr of ammonium sulphate. Yara has an installed capacity of 211,000t/yr of ammonia and another 416,000t/yr of ammonium nitrate.

Investment costs in producing plants as well as operating and raw material costs are determinants for competitiveness of Brazilian fertilizer. Natural gas is the main source of energy for producing nitrogen fertilizer in Brazil and prices for the raw material are a major factor in enabling local production of ammonia and urea.

Brazil is still in the early stages of a natural gas market opening, and the development of this market is essential for the local fertilizer industry. New players in the natural gas segment are expected to add competitiveness and liquidity to new contracts. Brazil also intends to enable bilateral agreements with its neighbors, Bolivia and Argentina, by 2025 to access natural gas from these countries.

While with nitrogen the goal is based on ways to boost Brazilian access to the raw material, regarding phosphates and potash, Brazil is focused on mapping out mining possibilities. One of the goals is to increase phosphate rock exploration by 3pc each year through 2030 and by 2pc each year until 2050. Gradually, Brazil intends to enhance its phosphate rock production to reach 27mn t/yr. The plan also envisions the addition of other two phosphate fertilizer and raw materials producers in new mining areas by 2030, totaling seven producers and increasing that number to 10 by 2040.

On potash, Brazil aims to raise national production gradually through 2050 to 6mn t of installed capacity. To reach that volume, the goal is to double to 10 the amount of potash and raw materials producers by 2030, adding another 10 producers by 2040. Brazil has only one potash producing unit, in Sergipe state, owned by Mosaic Fertilizantes and whose production reached around 9.5mn t in 2020. The main potash deposits with exploration potential mapped so far are located in Sergipe and Amazonas states and account for around 3pc of global deposits.

Steps to reach goals

To increase production and installed capacity, Brazil's government aims to encourage international investments by enabling financial incentives and reducing redtape.

Supported by the ministry of foreign affairs, Brazil intends to discuss at the Organization for Economic Co-operation and Development (OECD) ways of attracting international and national investors to the fertilizer market. The discussions will be valuable in encouraging bilateral agreements with leading global producing markets, such as Belarus, Canada, China, Morocco and Russia, among others.

A Brazilian government source told Argus the government has already taken a series of moves envisaged by the plan. Last week, agriculture minister TerezaCristina Correa da Costa paid a visit to Iran, where delegates of Brazilian and Iranian companies signed an agreement to barter 400,000t of Iranian urea for the same volume of Brazilian soybeans and corn.

All projects to develop and increase fertilizer production require long-term planning and investments in infrastructure. To encourage that, the plan includes a proposal to craft a law by 2025 to add special incentive norms for the development of fertilizer industry infrastructure.

By 2030, the government wants to enable at least five auctions of mining areas for phosphate fertilizers and another five auctions for areas of potassium fertilizers.

By Renata Cardarelli and Flavia Bohone