Brazil & Australia: Fertilizer and Metals are hot button issues in 2022
Brazil
On February 7, 2022, Brazil’s largest state-owned company Petrobras agreed to sell its National Fertilizer Unit III (UFN III) plant to Russia’s Acron Group. The deal was approved by Brazil’s Agriculture Minister Tereza Cristina Dias. (It was recently announced that Dias would be stepping down from her role.)
A week later, President Jair Bolsarno issued decrees aimed at prospecting in the Amazon Rainforest on February 14, 2022. While there’s going to be pushback from a variety of actors about mining in the Amazon Rainforest (more on this later), the decrees fit into Bolsarno’s vision to improve Brazil’s national fertilizer industry .
Bolsarno’s vision is laid out in accordance with Brazil’s National Fertilizer Plan. It was reported by Argus Media that Brazil intends to cut down on fertilizer import dependency — from 85% of consumption to 60% of consumption from fertilizer imports by 2025. Brazil imports all three of the major fertlizer commodities: nitrogen (95.7% reliance on imports), phosphate (72% reliance on imports) and potash (96.4% reliance on imports).
The National Fertilizer Plan got a boost in support from Canada after the escalation of the Russia-Ukraine conflict. According to Director of Programs at the Ministry of Agriculture, Luis Rangel, “The national fertilizer plan is a long-term plan, a 30-year infrastructure transformation plan […] we intend to reduce the national dependence on imported fertilizers from 85% to around 50% or 55%.”
Therefore, following the crisis and conflict in Ukraine the consumption percentage from imports would be further cut down to 50%. Moreover, the strategic objectives for the plan were announced, with specific figures and targets for how Brazil intends to reach its goal of 50% import dependency for fertilizers. It was also announced that “promoting the creation of a South American fertilizer industry council within Mercosur” would provide the solution to Brazil’s natural gas dilemma. Access to natural gas is key to achieving Brazil’s fertilizer industry production ambitions.
This has led to Brazil’s “fertilizer diplomacy” initiative throughout the Middle East and North Africa.
Read more about Russia’s influence in the global fertilizer markets with this story about Brazil and Russia in the global fertilizer scenario: https://readmedium.com/how-russias-actions-raised-the-stakes-of-brazil-s-fertilizer-strategy-5fb2381a1a2f
Australia
The story begins with a scheme implementation deed (SID) agreed to in December 2021 when Australia’s IGO Ltd sought to acquire another Australian metals miner outfit, Western Areas Ltd, to boost its nickel and lithium portfolio. By adding some of the highest-grade nickel and lithium mines that Western Australia has to offer, IGO would be able to significantly take on the metal production base that is crucial to Electric Vehicles (EV) and Clean Energy Technologies.
Originally valued at A$1.096 billion, IGO would takeover Western Areas Ltd assets with a 100% interest in the mines in Western Australia. IGO appeared to be on its way to a massive acquisition that would put it at the top of Western Australia’s nickel production capacity. Until recently when the nickel trading mechanisms on the London Metals Exchange (LME) got out of control, causing China’s Tsingshan Holdings Group to hedge production against a surging nickel price that hit a whopping $100,000 a tonne.
Due to the events on LME the company was expecting only a “relatively short delay” for the takeover deal at first. It was then reported on April 5, 2022, that IGO would completely back out of the deal to acquire Western Areas — citing only an independent expert report as the rationale for foregoing the acquisition.
Why It Matters
Nowadays the economy is going through what many experts are calling a “commodity supercycle” which has been exacerbated by the Russia-Urkaine Conflict as well as China’s global economic and geopolitical dilemmas.
I argue that Fertilizer and Metals are particularly vulnerable under these macro-economic circumstances. Not to mention the various wars and geopolitical conundrums that have been widely ignored since the outbreak of the global Covid-19 pandemic. Many of these issues are not going to be resolved any time soon, and yet many of the most vulnerable areas are critical to global fertilizer supply and metals production.
Fortunately, there seems to be a renewed vision of leadership in the fertilizer and metals industries. I have written extensively about the Nutrien Ltd. CEO transiton and BHP Group’s CEO Mike Henry.
And no one understands these problems better than Elon Musk.
