Fertiliser production capacity in the GCC region will reach 38.9mn tonnes by the year-end, and is expected to increase to 47mn tonnes in 2025, a new report has shown.
According to the Gulf Petrochemicals and Chemicals Association (GPCA), the GCC fertiliser industry continues to grow, both as a major producer and exporter. 
Revenues have been growing at a compound annual growth rate (CAGR) of 5.7% between 2010 and 2017, standing in 2017 at $5.93bn, albeit down from a peak of $7.22bn in 2014. 
GCC fertiliser exports in 2017 were valued at $5.3bn, with volumes at a record level of 20.4mn tonnes, GPCA noted.
According to Rakesh Kapur, president, International Fertiliser Association (IFA) and joint MD of India’s IFFCO, the GCC region, with large reserves in the nitrogenous and phosphatic fertiliser segment, is mostly export-oriented with over 90% of mainstream fertilisers sold overseas. 
“Asia is the largest importer of GCC fertilisers followed by North and Latin America, respectively. However, over time, the prolonged period of low oil and gas prices has helped the fertiliser industry,” Kapur is quoted in the latest issue of ‘GPCA Insight’.
Countries such as the US and India are targeting self-reliance in nitrogenous fertilisers; together these account for almost half of the GCC region’s nitrogenous fertiliser exports. 
Also, oversupply of liquefied natural gas (LNG) is helping countries like India, Pakistan and Egypt to increase their domestic production capabilities, Kapur noted. 
As such, new market segments and geographies are required to be explored by the GCC producers to offset the likely demand from GCC countries. 
However, favourable policy initiatives, price affordability and improved infrastructure in the regions struggling for fertiliser availability will present good export opportunities to GCC producers. 
The share of agriculture in the GDP of the Middle East region is low due to limited availability of arable land and excessive water usage, Kapur pointed out.
New emerging indoor farming models such as greenhouse/polyhouse/vertical farming and micro-irrigation techniques are appealing concepts that may give enormous potential for the region to increase its share of agriculture in its GDP.
“Overall, we are witnessing maturity in the fertiliser market, especially in commodity fertilisers, but there are regional differences. In the mature markets, the challenges of soil degradation, climate change and water scarcity have shifted the focus on to fertilisers with improved nutrient use efficiency (NUE) and the speciality fertilisers segment,” Kapur said.
On protective trade policies and tariffs becoming a growing problem for the fertiliser industry, Kapur noted, “Fertiliser trade is global and has always been subject to some protectionist measures by various countries. 
One of the most important protectionist measures that can affect the Middle East as a fertiliser exporter is a potential increase in import tariffs in large import markets. 
The prevailing tariff and non-tariff barriers for urea in Sub-Saharan Africa results in Nigeria exporting 80% of total urea capacity to Brazil and Argentina, which otherwise is sufficient to satisfy most of the urea demand in Sub-Saharan Africa. 
Protectionist measures on agriculture trade items can potentially impact demand for fertilizers and international trade. The current retaliatory tariff of an additional 25% by China on $12bn worth of soybeans from the US, and reduced tariffs from 3% to zero from India, South Korea, Bangladesh, Laos and Sri Lanka, can impact fertiliser demand. 
Other countries are joining the retaliation and increasing the custom duties on products from the US. If governments resort to restrictive trade policies, especially in a tit-for-tat process, it could lead to an unmanageable escalation, Kapur said.
The recent EU/Japan trade agreement signed in July this year provides hope for endorsement of a global trading system that is under increasing threat from unilateralism and protectionism.
The deal which covers 600mn people and almost a third of the global economy is aimed at eliminating tariffs on nearly all goods and access of European food items to the Japanese market. 
“This will potentially influence both agriculture items as well as fertilisers trade,” Kapur said.