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Yara Fertilizer Industry HandbookFebruary 2014


2/90

IR – Date: February 2014

1

List of contents

Fertilizer industry overview – What is fertilizer? p. 2

– The fertilizer industry p. 16

Fertilizer industry dynamics p. 26 – Ammonia p. 28

– Urea p. 33

Industry value drivers p. 39 – Drivers of demand p. 42

– Drivers of supply p. 60

– Price relations p. 67

– Production economics p. 74

Industrial applications p. 80


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What is fertilizer?


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3

Plants need nutrients to grow

Nutrient behavior

Nutrients have specific

and essential functions in plant

metabolisms

They cannot replace eachother, and lack of any one

nutrient limits crop growth

YIELD

P o t a s s i u m

P h o s p h o r u s

C a l c i u m

Soil conditions

& other growth

factors


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4

What is fertilizer?

Nitrogen is the main driver of yield


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5

Why mineral fertilizer ?

Mineral fertilizers are necessary to replace those nutrients that have been removed from the field

NOrganic

substance,humus

Crop residues are decomposed to minerals

Mineralisation

• Export of nutrientswith the harvest

• Growing demandfor food & feed

Supply of crop residues

and organic fertilizer

PK

S…

Mg

NPK


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6

61%

23%

16%

Nitrogen – the most important nutrient

Total 176 million

tons nutrients

Nutrient characteristicsPrimarybenefit Application Industry structure

Improve

crop quality

Increase crop

size

Most important

and commonly

lacking nutrient

Annual

application

not always

done

Annual

application

critical

Fewer suppliers,

production

discipline

Industry more

fragmented,

under

consolidation

More dynamic

prices, but stable

volume

Potassium

(K)

Phosphorus

(P)

Nitrogen

(N)

Source: IFA (season 2012/13 estimate, May 2013)


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IR– Date: February 2014

7

Profitability of investment in mineral fertilizers

The investment in nitrogen fertilizer

is highly profitable for growers

Fertilizer investment: 248 USD/ha

Net return: 1,711 USD/ha

Net return > 7 x investment

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

0

500

1,000

1,500

2,000

2,500

3,000

0 50 100 150 200 250 300

Yield, ton/ha

IncomeUSD/ha

Fertilizer application, kg N/ha

Source: Winter wheat yield data: Long term trial, Broadbalk, Rothamsted (since 1856).

Yield response (monetary value) to N fertilizer rate


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8

Seed15 %

Fertilizer24 %

Chemicals4 %

Labour4 %

Power & Machinery

24 %

Land22 %

Other7 %

Breakdown grain production costs

Source: USDA (Cost-of-production forecasts May 2013)

Example: 2013F average US corn production costs

2000 2002 2004 2006 2008 2010 2012 2014F

0%

5%

10%

15%

20%

25%

30%

Fertilizers as part of US cornproduction costs


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9

Nitrate is the most important fertilizer in Europe

Nitrate (NO3-)Ammonium (NH4

+)

Ammonium-N is fixed onto

clay minerals in the soil and

therefore immobile. The plant

roots have to grow actively

towards the nutrient.

Nitrate-N is always dissolved

in the soil water and is

transported passively together

with the water into the plant

root. Thus, nitrate is rapidly

effective.

Urea (CON2H4)

Urea-N needs to be

converted into ammonium-

N before it is plant

available.

Nitrates vs. urea


11/90


10

0

25

50

75

100

AN Urea UAN

Nitrate-based fertilizers are superior to urea both

agronomical and environmentally

The agronomic al eff ic iency of nit rates issuper ior to u rea

The carbon footpr in t is lo wer than for Urea

Source: DEFRA (2006), NT26 project report; Fertilizer Europe; 2EMEP/EEA air pollutant emission inventory guidebook (2007); Yara

Nitrogen recovery (% of AN)

Urea requires up to 20% higher N application toachieve same cereal crop yield and quality as AN

Lifecycle carbon footprint (kg CO2 eq/kg N)

0

4

8

12

AN Urea

Although urea is more CO2 efficient in production, CO2 emissions and ammonia volatilization on application

more than offset for this


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11

Trial results in arable crops

8.2

8.4

8.6

8.8

9.0

Urea UAN CAN CN

Grain yield (t/ha)

Winter wheat trials in UK from 1994-98

App l icat ion rate of 160 kg o f N/ha

Source: Levington Agriculture, UK (1999)


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12

100

1,016

0

200

400

600

800

1,000

1,200

Wheat/UK Oranges/Brazil

Index

Increase in crop pro duct ion valueusing nit rates instead of urea

Nitrates’ agronomic advantage has higher value

for cash crops than for commodity crops

(160 kg N/ha) (180 kg N/ha)

1,553

3,192

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Wheat/UK Oranges/Brazil

€/ha

Crop value with nit rates

13


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13

Fertilizer characteristics:

Organic compared to mineral fertilizer

Characteristics Organic fertilizer Mineral fertilizer

Nutrient

source

Crop residues and animal

manures

Nitrogen from the air and minerals

from the soil

Nutrient

concentration Low concentration High concentration

Nutrient

availability Variable Immediately available for the crop

Quality Often inconsistent Traceable and consistent

14


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14

Organic farming represents only a marginal

share of total cultivated land

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

-

5

10

15

20

25

30

35

40

2005 2006 2007 2008 2009 2010 2011Ha, billions Share of cultivated land

Source: Organic-world.net

33%

29%

18%

10%

7%

3%

Oceania

Europe

Latin America

Asia

North America

Africa

15


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15

Fertilizer production routes

Ammonia plant

Nitric acid plant

Nitrophosphate plant

NH3

CO2Urea

Phosphoric acid plant

Sulphuric acid plant

Natural gas

Air

Air

Rock

HNO3

Rock

Salts of K, Mg, S

Rock

Ammonium nitrate

Calcium nitrate

NPK fertilizers

H2PO4

H2SO4DAP / MAP

Rock

Triple Super Phosphate


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The fertilizer industry

17


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17

Consumption per nutrient

0

20

40

60

80

100

120

140

1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016F

Million tons nutrient

N 1.4% growth pa.

1.7% growth pa.P

K 2,8% growth pa.

Source: IFA, June 2013

18


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18

Nitrogen consumption in key regions

0

5

10

15

20

25

30

35

40

1999 2001 2003 2005 2007 2009 2011 2013F 2015F 2017F

Million tons nitrogen

China: 0.4% *

Europe: 1.6% *

North America: 0.0% *

Latin America: 3.6% *

Rest of Asia: 2.3% *

Source: IFA, June 2013 * CAGR 12-17

19


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19

Urea56 %

UAN5 %

AN/CAN8 %

NPK8 %

DAP/MAP7 %

Ammonia4 %

Other12 %

MOP/SOP

72 %

NPK26 %

Other2 %

DAP/MAP56 %

NPK20 %

SSP10 %

TSP6 %

Other9 %

Key global fertilizer products

108 million tons*

29 million tons 41 million tons

Nitrogen N

Potash K2O Phosphate P2O5

Source: IFA 2012 (nutrient totals) and 2011 (product split) * Does not include industrial nitrogen applications

20


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20

Nitrogen fertilizer demand – 5 key markets

Source: IFA 2011

China (33.8 mt)

India (17.4 mt)

West /central Europe (10.3 mt)

Brazil (3.6 mt)

USA (12.1 mt)

Urea78%

NPK3%

DAP/MAP18%

Other1 %

Urea67%

ABC17%

NPK5%

DAP/MAP

9%

Other

2%

Urea51%

Nitrates17%

NPK8%

DAP/MAP

11%

AS12%

Urea22%

Ammonia27 %

Nitrates2%

UAN

27%

NPK8%

DAP/MAP6%

Other8% Urea

18%

Nitrates43%

UAN11%

NPK16%

DAP/MAP2%

Other

9%

21


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21

Wheat16%

Rice14%

Maize16%

Other cereal5%

Oilseeds11%

Cotton4%

Sugar crops4%

Fruit & veg15%

Other12%

Nutrient application by crop

Source: IFA (2010/11)

N + P + K NITROGEN

Wheat18 %

Rice15 %

Maize17 %

Other cereal5 %

Oilseeds

7 %

Roots/Tubers3 %

Cotton4 %

Sugar crops4 %

Fruit & veg15 %

Other12 %

22


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22

Wheat24%

Rice30%

Oilseeds8%

Cotton9%

Fruits &

vegtables6%

Other24%

Nitrogen application by crop

Source: IFA 2010/11

Russia

India

EU-27

Brazil

USA

Wheat48%

Othercereals

14%

Sugarcrops8%

Maize7%

Oilseeds2%

Other21%

Maize49%

Wheat

13%Fruits &

vegtables2%

Othercereals

3%

Other33%

Wheat28%

Maize13%Other

cereals15%

Oilseeds10%

Fruits &vegtables

7%

Other27%

China

Fruits &vegtables

30%

Rice15%Maize

15%

Wheat14%

Oilseeds6%

Cotton3%

Wheat

16%

Maize

25%

Sugarcrops22%

Cotton4%

Fruits &vegtables

10%

Rice5%

Other30%

23


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23

Source: Thomson Worldscope

Fertilizer company comparison

0 2 4 6 8 10 12 14 16 18

CF

ICL

K+S

PCS

Mosaic*

Agrium

Yara

L4Q 2012

Revenues - USD billion

* 12 months ending May 2013

24


25/90


Yara – the leader in nitrogen fertilizers

* Incl. companies’ shares of JVs

Source: Yara & Fertecon Source: Fertilizer EuropeSource: Fertilizer Europe

0

1

2

3

4

5

6

78

9

Yara CF GDF Agrium PCS

0

1

2

3

4

5

67

8

Yara* Euroc. Acron ZAT Rossosh

0

1

2

3

4

5

6

7

Yara Euroc. GDF Acron Agrofert

Production capacity* (mill t)

Global no 1 in ammonia Global no 1 in nitrates Global no 1 in NPKcomplex fertilizer

Production capacity* (mill t) Production capacity* (mill t)

Excluding China

25


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Yara – the European cost leader

Ammonia cost pos i t ion Ni tra te cost pos i t ion

Production cost index: 100 = European FE average excl. Yara

Index Index

50

60

70

80

90

100

110

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

50

60

70

80

90

100

110

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

Average cost Yara’s European plants European average (excl. Yara)

Source: Fertilizer Europe


27/90

Fertilizer industry dynamics

27


28/90


Potential industry concerns

and associated mitigants

Weaknesses and risks Mitigating factors

Over-investment at the top

of the cycle

Rising construction costs and lead times, reduced state

ownership

Weak players/lack of focusSpin-offs from chemical/energy companies followed by

consolidation

High cost of natural gas in Europe Long-term trend of gas price convergence betweenregions, as pipeline and LNG investments increase liquidity

International trade restrictions WTO accession

Regulatory regimes Operational excellence

Terrorism, accidents, country, customer

and currency risk

Increased management awareness

of risk and better risk management


29/90

Ammonia

29


30/90


Ammonia production

60

80

100

120

140

160

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Million tonsTotal p roduct ion

Source: IFA

2002-2012 trend growth rate = 2.3%/year

0

10

20

30

40

50

60

C h i n a

R u s s i a

I n d i a

U S A

I n d o n e s i a

T r i n i d a d

U k r a i n e

C a n a d a

S a u d i A r a b i a

E g y p t

Million tons10 largest produ cers

30


31/90


Most of the ammonia produced is upgraded to

urea or other fertilizers

139

32

0

20

40

60

80

100

120

140

160

Fertilizer Industrial use

Million tons

Ammonia use

Urea Nitrates DAP/MAP

NPK Other N Direct application

TotalSource: Fertecon

0

5

10

15

20

25

02 03 04 05 06 07 08 09 10 11 12

Million tons

Ammon ia trade

Total world trade

Yara trade

Source: Yara, IFA

31


32/90


Global ammonia trade in 2012

Source: IFA

4.5

3.2

1.6

1.2 1.21.0

0.8 0.7 0.70.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

T r i n i d a d

R u s s i a


U k r a i n e

C a n a d a

I n d o n e s i a

A l g e r i a

E g y p t

Q a t a r

I r a n

Million tons

10 largest expo rters

6.2

1.8

1.2

0.8 0.8 0.7 0.7 0.60.4 0.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

U S A

I n d i a

K o r e a

M o r o c c o

F r a n c e

B e l g i u m

T a i w a n

T u r k e y

G e r m a n y

S p a i n

Million tons

10 largest impo rters

32


33/90


Main ammonia trade flows 2012

1.9

0.9 0.80.6

1.2

3.8

1.0

0.8

3.1

1.3

Million tonnes

0.4

Source: IFA


34/90

Urea

34


35/90


Urea production in 2012

Source: IFA

22.5

6.9 6.5 6.24.6 4.4 4.2 4.1 3.8

0

10

20

30

40

50

60

C h i n a

I n d i a

I n d o n e s i a

R u s s i a

U S A

Q a t a r

E g y p t

P a k i s t a n

I r a n

C a n a d a

Million tons10 largest produc ers

2002-2012 trend growth rate = 3.5% p.a.

60

80

100

120

140

160

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Million tonsTotal p roduct ion

35


36/90


Global urea trade in 2012

Source: IFA

6.9

4.8

4.23.6

3.1 3.12.9

2.2

1.4

1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

C h i n a

R u s s i a

Q a t a r

U k r a i n e

O m a n


I r a n

E g y p t

C a n a d a

I n d o n e s i a

Million tons

10 largest exporters

8.0

7.1

3.0

2.31.8

1.5 1.41.1

0.9 0.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

I n d i a

U S A

B r a z i l

T h a i l a n d

M e x i c o

A u s t r a l i a

T u r k e y

P a k i s t a n

I t a l y

F r a n c e

Million tons

10 largest impo rters

36


37/90


Main urea trade flows 2012

1.4

9.31.1

0.54.0

3.7 1.6 1.4

1.4

1.3

1.4

Source: IFA

Million tonnes

1.4

0.9

4.0

0.6

1.7

37


38/90


Short-term urea balance impacted by Chinese

export taxes

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Kilotons

Source: BOABC

2008

0 %

20 %

40 %

60 %

80 %

100 %

120 %

0

100

200

300

400

500

600

USD per ton Export tax

2011

2010

Acc umulated urea exports Urea pr ice and export tax

2012

2009

* Export tax during low tariff period depends on price level with40 yuan/t (~2%) representing the minimum tax level

2013

38


39/90

IR–

Date: February 2014

Chinese domestic urea price and export tax set

the export floor price

Source: China Fertilizer Market Week

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

RMB/t

Chinese domestic urea price


40/90

Industry value drivers

40


41/90

IR–

Date: February 2014

Key value drivers

7.16.7

6.4 6.45.9 5.6

6.3 6.05.6 5.7

5.9

0

2

4

6

8

03 04 05 06 07 08 09 10 11 12 13

NOK/USD exchange rate

185229 240 245

264

525

240

357

516545

477

0

100

200

300

400

500

600

03 04 05 06 07 08 09 10 11 12 13

Ammon ia fob Black Sea (USD/t)

139175

220 223

308

499

249289

423 407

341

0

100

200

300

400

500

600

03 04 05 06 07 08 09 10 11 12 13

Urea pri l led fob Black Sea (USD/t)

143164

187214

244

466

240261

379

337316

0

100

200

300

400

500

03 04 05 06 07 08 09 10 11 12 13

CAN cif Germany (USD/t)

5.55.9

8.9

6.7 7.0

8.9

4.0

4.4 4.1

2.83.7

0

1

2

3

4

5

6

7

8

9

10

03 04 05 06 07 08 09 10 11 12 13

Henry Hub (USD/MMBtu)

28

38

54

6573

97

62

80

104 105 104

0

20

40

60

80

100

120

03 04 05 06 07 08 09 10 11 12 13

Oil Brent blend s pot (USD/bbl)

Average prices 2003 - 2013Source: The Market, Fertecon, CERA, World Bank, Norges Bank

41


42/90

IR–

Date: February 2014

Supply-driven price for urea

Urea demand

Urea supply

Urea price (above floor)

Most other nitrogenfertilizer prices

Value-added margins

Nitrogen fertilizer value drivers

European / Ukrainian gasprices and Chinese coal prices

Grain inventories/prices

New urea capacity vs. closures

Global urea demand vs. supply

Urea price

Market segmentation

Drivers Effect on

Gas cost in Europe

Fixed cost

Unit cost

Oil product prices and LNG

development

Manning and maintenance

Productivity and economies

of scale

Revenue

drivers

Costdrivers


43/90

Drivers of demand

43


44/90

IR–

Date: February 2014

Drivers of nitrogen consumption growth

Fertilizer consumption

– Population growth

– Economic growth (improved diets)

– More meat consumption in developing

countries

– More protein-rich diets – More fruit and vegetables

– Reduce hunger

– Biofuels

Industrial consumption – Economic growth

– Environmental limits (e.g. reduction of NOx

emissions)

44


45/90

IR–

Date: February 2014

0

2

4

6

8

10

12

0

500

1,000

1,500

2,000

2,500

65 70 75 80 85 90 95 00 05 10 15E 20E 25E 30E 35E 40E 45E 50E

BillionsMillion tons

Population less developed regions Population more developed regions Grain consumption

Grain consumption growth stronger than

population growth

Source: US Department of Agriculture, United Nations

4% drop in production, lowstocks, demand rationingand spiking prices

3% drop in production3% drop in production, lowstocks, demand rationing andspiking prices

US drought resulting in 3.5%drop in production, low stocks,demand rationing and spiking

prices

45

Diet change the most important factor for growth


46/90

IR–

Date: February 2014

240

230

160

Diet change the most important factor for growth

in food consumption

2,200Grain eq. consumption 1998

Diet change

(same cal/cap and pop)

Increased calorie

consumption

(same pop and diet)

Population growth

(same cal/cap and diet)

2,830Grain eq. consumption 2008

126

14

13

9

162

Fertilizer consumption for food crop**

Million tons nutrients

Impact on food consumption 1998-2008

Million tons grain equivalent*

* Assumed 500 kcal/kg grain, 600 kcal/kg meat, meat/grain production factor of 3

** N, P and K demand. Average effective yield delivered to consumers of 2 ton cereal/ha; 120 kg fertilizer/ha

HistoricalCAGR of 2,5%

(1998-2008)

Source: McKinsey & Company

46

Higher meat consumption requires more feed


47/90


Higher meat consumption requires more feed

grain

0 20 40 60 80 100 120 140

Africa

Asia

Latin America

North America

EU

World

Kg/capita/year

Source: FAO

Significant potential for increasingmeat consumption in emerging countries

0 1 2 3 4 5 6 7 8 9

Beef

Pork

Poultry

Kilograms of grain to produce 1kg of meat

Feed grain multipliers for meatproduction

2X

4X

7X

47


48/90


0

2

4

6

8

10

0.0

0.1

0.2

0.3

0.4

0.5

1960 1970 1980 1990 2000 2010 2020E

P o p ul a t i on

( b i l l i on ) H

e c t a r

e s / p e r s o n

Hectares/person Population

Increasing population and reduced land

available for food production per capita

Source: IFA, Worldmarkets.com

Very limited potential to

increase farmable land

Improved living

standards increase

protein consumption perperson, requiring more

grain for animal feed

The only solution is to

increase agriculturalproductivity

48


49/90


Long-term grain price development underlines

productivity challenge

0

50

100

150

200

250

300

2002-2004=100FAO Food price index

Food Price Index Cereals Price Index

49


50/90


260

270

280

290

300

310

320

330

340

350

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Kg/capita

Production per capita has improved but remains

lower today than in the 80s

Source: USDA (cereal production) and UN (population)

Peak: average 1983-1986:326 kg/capita

Average 2002-2003289 kg/capita

Average 2009-2012319 kg/capita

50

R d 2013 dd l 1 d f


51/90


Source: USDA February 2014

Record 2013 crop add only 1 day of

consumption to global grain stocks

1,950

2,000

2,050

2,100

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

06 07 08 09 10 11 12 13E 14F

Million tons

Consumption Production

Grain consum pt ion and product ion Days of consum pt ion in stocks

55

60

65

70

75

80

85

06 07 08 09 10 11 12 13E 14F

Days

51


52/90


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1960 1970 1980 1990 2000 2010 2020E

Tons of cerealsper hectare

Source: FAO, Worldmarkets.com, Yara

1 tonne of grain requires ~25kg nitrogen

Mineral fertilizer

Organic fertilizers

Existing soil nutrients

Mineral fertilizer essential

to sustain future yield increases

Increased production of

mineral fertilizers

necessary to meet future

nutrient demand

Limited potential forrecycling organic

material

Nutrient reserves in the

soil do not increase

52


53/90


Key crops by producing

Source: USDA, 2012/13 season

UnitedStates32%

China24%Brazil

8%

EU-27

7%

Ukraine3%

Other26%

Maize-global produ ction 840 mt

EU-2720%

China18%

India14%

Russia6%

US10%

Other32%

Wheat-global productio n 651 mt

China

31%

India21%Indonesia

8%

Bangladesh7%

Vietnam6%

Other27%

Rice-global productio n 464 mt

USA35 %

Brazil30%

Argentina21%

China5%

India4%

Other10%

Soybeans-glob al prod uction 268 mt

53


54/90


Agricultural profile – key regions

Source: IFA (2011/2012 season), FAO (2011/12 season)

China

India

EU

Brazil

USA

160 mil l ha

Maize (34.0)

Soybean (29.9)

Wheat (18.5)

168 kg/ha

3 kg/ha

84 kg/ha

107 mil l ha

Wheat (26.1)

Barley (11.9)

Maize (8.9)

116 kg/ha

153 kg/ha112 mill ha

Maize (33.6)

Rice (30.3)

Wheat (24.3)

149 kg/ha

166 kg/ha

185 kg/ha

72 mil l ha

Soybean (24.0)

Maize (13.2)

Sugarcane (9.6)

5 kg/ha

54 kg/ha

65 kg/ha

157 mil l ha

Rice (44.0)

Wheat (29.0)

Millet(10.7)

113 kg/ha

137 kg/ha

Arable land, top 3 crops area harvested and nitrogen application.

* Total nitrogen applied (kg) divided by harvested area

54


55/90


Large variations in yields across regions

Source: FAOSTAT 2012

0

1

2

3

4

5

6

7

8

9

US Argentina China Brazil Mexico

Tons/Ha

Maize yields

0

1

2

3

4

5

6

7

8

France China India US Russia

Tons/HaWheat yields

0

1

2

3

4

5

6

7

8

China Viet Nam Indonesia India Bangladesh

Tons/HaRice yields

0

1

12

2

3

3

Argentina US Brazil China India

Tons/Ha

Soybean yields

55


56/90


Biofuels: high-level outlook

Source: PIRA, October 2013

0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2020E 2025E

MB/D

Global ethanol prod uct ion

FSU

Africa

Asia/Pacific

Latin America

EU-28

Canada

U.S.

56


57/90


N-fertilizer consumption from biofuels production

2.0

0.5

0.3

0.6

US - maize for ethanol

Europe - rapeseedfor biodiesel

Brazil - sugarcane for ethanol

Others

0.0

0.5

1.0

1.5

2.0

2.5

Million tons N

Source: IFA

57

The effect on fertilizer consumption of


58/90


The effect on fertilizer consumption of

genetically modified crops

Herbicidetolerance

(HT)100

Insectresistance

(IR)23

HT + IR41

Crop ped area by trait ,

Mi l l ion h ectares

Source: ISAAA

Soybean81

Maize40

Cotton19

Rapeseed9

Cropped area by crop ,

Mi l l ion h ectares

58


59/90


Fertilizer reduces carbon footprint from farming

Application

Nitrates better than urea

Precision farming (N-tester etc.)

Balanced fertilization (NPK)

Fertilizer - an efficient solar energy catalyst

Production marginal part of carbon footprint - efficient application more important Huge positive effects of fertilizer use by lower land use

Production

Yara’s production more energy-efficient thancompetitor average

Yara developed N2O catalyst

© Yara 2010

PRODUCTION TRANSPORTATION FARMING HARVEST CONSUMPTION CAPTURE

3.6 kgCO 2 eqv

0.1 kgCO 2

5.6 kgCO 2 eqv

75 kgCO 2

75 kgCO 2

59


60/90


Seasonality in fertilizer consumption

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May JunCornUSA

China

Europe

Brazil, first crop

Brazil, second crop

Wheat

China (winter wheat)

China (spring wheat)India (Rabi)

USA (winter wheat)

USA (spring wheat)

Europe (winter wheat)

FSU (winter wheat)

Rice

China (single crop)

China (early double crop)

China.(late double crop)India (Kharif)

India (Rabi)

Planting/seeding

Harvest

Source: USDA


61/90

Drivers of supply

61


62/90


itrogen value chain

Nitrates

Nitric acid

Urea

Ammonia

C02

H, Ar, CO etc

Industrial nitrogenchemicals

Environmental

products

Industrial gases

Ammonia

Industr ia lp roduc ts

Calcium

Nitrate

Natural gas

Nitric acid

Rawmaterial

Intermediateproduc ts

Finishedproduc ts

62


63/90


Nitrogen technology developments

0

50

100

150

200

250

300

350

400

450

1910 1915 1930 1950 1960 1975 2000

GJ/tN

Birkeland-Eyde electric arc method

Cyanamid method

Haber-Bosch synthesisSteam reforming natural gas

Theoretical minimum

63


64/90


100107

113118 120

0

20

40

60

80

100

120

140

Energy consumption in ammonia production

China’s coal-fired

ammonia plants use 70%

more energy and emit 2.5

times more CO2

Yara

Europe

Europe

ex Yara

RussiaRomania &

Bulgaria

US

Energy consumption

per ton ammonia

(relative index)

Source: Fertilizer Europe (2008)

64

Projected nitrogen capacity additions outside


65/90


Source: Fertecon urea update December 2013 (August update in brackets). Consumption data source is IFA.

Year Driving regionsUrea capacity growth relative

to nitrogen capacity

Excluding China Excluding China

2013Qatar 26%

UAE 20%1.2% (1.4%)

2014Iran 28%

Algeria 26%1.5% (1.8%)

2015 Algeria 23%

Iran 12%3.8% (3.5%)

2016 USA 38%Nigeria 12%

2.7% (3.2%)

2017USA 28%

Iraq 27%1.7% (1.5%)

Gross annual addition 2013-2017 ~2.2%

Assumed annual closures ~0.5%Net annual addition 2011-2015 ~1.8%

Trend consumption growth from 2002 2.1%

Projected nitrogen capacity additions outside

China in line with historical consumption growth

65

5 year typical construction time for nitrogen


66/90


Businessdevelopment

Gas

agreement

5 year typical construction time for nitrogen

fertilizer projects*

Feasibilityphase

Conceptselectionphase

Prepareforexecution

Construction Operation

4 –6 years

6-12 months- check cost assumptions by approaching market- bidding for contracts and/or equipment

12-24 monthsdepending on complexity

* Ammonia and urea plant example

30-36 months

66


67/90


Global urea capacity utilization

70%

75%

80%

85%

90%

95%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F2014F2015F2016F2017F

Urea capacity uti l izat ion

Excluding China

Source: Fertecon Aug 2013


68/90

Price relations

68


69/90


0

100

200

300

400

500

600

700

800

900

Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

USD/tonne

Urea fob Black Sea 0.6 * Ammonia fob Black sea + 15

Upgrading margins from ammonia to urea

Source: Average of international publications

69


70/90


0

100

200

300

400

500

600

700

0

50

100

150

200

250

300

350

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

USD/tUSD/mt

Corn Urea fob Middle East

Grain prices important for fertilizer demand

Source: World Bank, Fertilizer publications

70

Only shorter periods with supply-


71/90


Only shorter periods with supply

driven urea market

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E

Europe oil index Ukraine (Fertecon) US China

Urea price, fob Yuzhny

Source: Fertecon (Ukraine), Yara estimates

71

Nitrate premium is mainly a function of


72/90


Nitrate premium is mainly a function of

crop prices and proper marketing

0

50

100

150

200

250

300

350

400

0

50

100

150

200

250

300

350

400

450

02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

Wheat price, USD/tCAN price, USD/t

Adjusted urea* Nitrate premium, USD/t Wheat price

* Urea fob Black sea adjusted for import costs into Europe and nitrogen content similar to CAN

72


73/90


Grain/oilseed prices – yearly averages

0

2

4

6

8

10

2003 2005 2007 2009 2011 2013

USD/buWheat (HRW US Gulf)

0

100

200

300

400

500

600

700

2003 2005 2007 2009 2011 2013

USD/t Rice (Thailand)

0

1

23

4

5

6

7

8

2003 2005 2007 2009 2011 2013

USD/buCorn (US Gulf)

Source: World Bank, Dec 2013

0

5

10

15

20

2003 2005 2007 2009 2011 2013

USD/bu Soybeans (cif Rotterdam)

Average prices 2004-2013

73


74/90


10-year fertilizer prices – monthly averages

Source: Average of international publications

0

200

400

600

800

1,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USD/t

Amm onia fob Black Sea

0

100

200

300

400

500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USD/t

CAN cif Germany

0

200

400

600

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USD/tUrea pri l led fob Black Sea

Average prices 2004 - 2013

0

200

400

600

800

1,000

1,200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USD/tDAP fob US Gulf


75/90

Production economics

75


76/90


7.2

62.8

0

10

20

30

40

50

60

70

80

Yara’s operating cash costs are mainly variable

Temporary plant closures can be

made speedy and with limited

stop/start costs

Example for ammonia/urea plants:

– Takes half a week to stop and aweek to start

– Cost of stopping is 2 days energy

consumption

– Cost of starting is 3 days energy

consumption

Operating cash costs 2012

NOKBillions

Variable costs (90%)- Dry raw materials- Energy- Freight- 3rd party finished fertilizer

Other cash cost (10%)

76


77/90


Ammonia (NH3)

(82% N)

Ammonia cash cost build-up – example

Gas price: 8 USD/MMBtu

x Gas consumption: 36 MMBtu/mt NH3

= Gas cost: 288 USD/mt NH3

+ Other prod. cost: 26 USD/mt NH3

= Total cash cost 314 USD/mt NH3

Source: Blue Johnson & Associates.

Typical natural gas

consumption for

ammonia production

36 MMBtu naturalgas/tonne ammonia

77


78/90


Ammonia (NH3)

(82% N)

Urea(46% N)

Urea cash cost build-up – example

36 MMBtu naturalgas/tonne ammonia

Ammonia price: 314 USD/mt NH3

x Ammonia use: 0.58 NH3/mt urea

= Ammonia cost 182 USD/mt urea

+ Process gas cost* 41 USD/mt urea

+ Other prod. cost**: 22 USD/mt urea

= Total cash cost 245 USD/mt urea

Source: Blue Johnson & Associates.

0.58 mt ammoniaper tonne urea

C O2

** Including load-out

* Process gas cost is linked to natural gas price

78


79/90


* There are several NPK formulas. 15-15-15 is just an example

Theoretical consumption factors

Ammonia(82% N)

Urea(46% N)

AN(33.5% N)

CAN(27% N)

NPK(15-15-15)*

P and K

79

Main phosphate processing routes


80/90


* P2O5 content of phosphate rock varies. This is an example.

** 1 ton of phosphoric acid requires 1 ton of sulphur.

Main phosphate processing routes

Phosphoric acid(100% P2O5)

DAP(18% N, 46% P2O5)

MAP(11% N, 52% P2O5)

TSP(46% P2O5)

Phosphate rock(72% BPL*, 33% P2O5 )

Sulphur **

Ammonia( 82% N)

Rock production: 191

Rock exports: 31

Production: 42

Export: 4.4

Production: 33

Export: 16

Production: 21

Export: 5

Production: 6

Export: 3.8

2006 production and exports, million tons P2O5

Source: IFA


81/90

Industrial applications

81


82/90


Ammonia

Nitricacid

CN

Melamine

DIPCAL®

NITCAL®

H2S abatement

in sewage

Concentratednitric acid

Combinedproducts

Urea

Cleaning/scrubbing

Aqueousammonia

Glue

AdBlue ®/heavy-duty vehicles

Stationary sources

Industrial gases

N2O abatement

Emulsions

ANFO

TAN

NitrogenOxygen

Argon

Propane

Formates

Dry ice

Applic. LIC

LIC wholesale

NH3

Vessels (Yarwil)

CO2

H2S abatementin oil fields

NOXabatement

Acrylonitrile

Technical nitric

acid

Industrial nitrogen applications

82

Industrial use accounts for 19% of global


83/90


nitrogen consumption

~26 million tons N

19% of total N consumption

Environment5%

Melamine15%

Glue64%

Other16%

~8 million tons N as urea

10% of total urea consumption

Source: Yara estimates

Environment3 %

Explosives20%

Chemicals77%

83

Global demand development of nitrogen


84/90


Source: Fertecon

Million tons N

Estimated growth of Industrial applicationsis 10 million tons N (3.3 % annual growth )

0

5

10

15

20

25

30

35

40

2010 2015E 2020E

Urea

Nitric Acid

Ammonia, DeNOx

Ammonia, TAN

Ammonia, P-Chem

chemicals for industrial applications is strong

84Example

Urea and ammonia based solutions


85/90


Automotive, off and on road

Stationary

Maritime

Air1

NOxCare

Yarwil

AdBlue/DEF is a generic name for urea-based solution Air1 is Yara’s brand name for AdBlue/DEF

Nitrogen oxides emissions lead to groundozone layer and acid rain

Urea or ammonia combined with an SCRcatalyst, eliminates up to 90% NOx emissions

Legislation requires emission limits frommobile sources (transport fleets on land and

at sea) and from industrial sources (powerplants, cement factories, waste incinerators,refineries…)

to improve air quality

85

Example


86/90


Technical Nitrates for Civil Explosives

Various grades of Ammonium Nitrate and Calcium Nitrate for use in the civil

explosives and mining industries

86

Example:


87/90


p

CO2 has numerous industrial applications

Food additive:

High-quality CO2

for beverage carbonisation

Food care:

CO2 for greenhouses, chilling

and freezing, processing and

transport

Animal care:

Controlled atmosphere for

livestock stunning

Manufacturing:

Welding and cutting

gases

Industries Served :

Breweries

Dairies

Bakeries

Meat and Poultry processing

Fish Farming and processing

Greenhouses

Airline catering

Refrigerated transport

Blasting :

Multipurpose cleaning

87

C l i it t f H S b t t


88/90


Calcium nitrate for H2S abatment

• Hydrogen Sulphide (H2S) is a

highly toxic, odorous, andcorrosive gas formed in

wastewater systems. It

represents a significant health

risk potentially causing loss of

smell, eye irritation, rhinitis and

respiratory difficulties amongst

other symptoms

• Yara’s calcium nitrate application

is a natural biological system that

removes and prevents the

formation of H2S in sewage

systems and waste water

treatment plants

Industries Served :

Municipalities

Wastewater treatment

plants

Dairies

Pulp and paper industry Slaughter houses

Breweries

Oil fields

88


89/90


Sources of market information

Fertilizer market information – FMB www.fmb-group.co.uk

– Fertecon www.fertecon.com – Fertilizer Week www.cruonline.crugroup.com

– Profercy www.profercy.com

– The Market www.icispricing.com

– Green Markets (USA) www.greenmarkets.pf.com

– Beijing Orient Business (China) www.boabc.com

– China Fertilizer Market Week www.fertmarket.com

Fertilizer industry associations – International Fertilizer Industry Association (IFA) www.fertilizer.org

– Fertilizers Europe (EFMA) www.efma.org

Food and grain market information – Food and Agriculture Organization of the UN www.fao.org

– International Grain Council www.igc.org.uk – Chicago Board of Trade www.cbot.com

– World Bank commodity prices www.worldbank.org

– US Department of Agriculture (USDA) www.usda.gov

http://www.fertilizer.org/http://www.fertilizer.org/


90/90

www.yara.com

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