Vaivém: Concentration on deliveries should raise fertilizer freight prices

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The scenario of extreme difficulty in obtaining fertilizers, as expected at the beginning of this year, was not confirmed. Despite the high prices, there was no shortage of product.

The delivery of fertilizer to the farms in this final stretch of the year, however, can be a rush.

The statement is from Marcos Stelzer, CEO (executive president) of Galvani, a national company with an integrated production system. After the intense increase, mainly because of the invasion of Ukraine by Russia, prices are already starting to fall, and part of the farmers, expecting lower values, delayed purchases.

The difficulty in delivery will be accompanied by a higher cost of freight, due to this concentration of orders, according to the Executive. For 33 years in the business, he says that no year is the same, something always happens.

Domestic consumption of fertilizers has been increasing year after year, but national industries have lost strength in recent decades in relation to the supply of imported product. Twenty years ago, the country produced 60% of what it consumed. Today, there are 20%, says Stelzer.

This year, however, the national industry increased the supply of product in the domestic market. Data from Anda (National Association for the Diffusion of Fertilizers) show that national production rose to 3.8 million tons, 17.4% more than in the same period in 2021.

“We went through a nervous period, with high prices, but that are already starting to come back. There is a tension, however, that will continue due to the effects of the measures taken by the embargoes”, says the Galvani Executive.

Although prices will not return to previous levels, as long as this tension persists, producers will have a better exchange rate next year, according to him.

The rise in prices and the loss in the exchange ratio between commodities and fertilizers will cause a retraction in fertilizer deliveries to 42 million tons this year, down from 46 million in 2021. Next year, sales will return to 46 million , estimates Stelzer.

The Galvani executive says that Brazil has slowed down the production of fertilizers in recent years, but that there will be an expansion in the coming years. Galvani itself, which has integrated operations in western Bahia, will go from a production of 650 thousand tons of phosphates to 1.2 million in 2024, after investments of R$ 200 million.

The company owns the mine, the mineral concentration unit and the manufacturing unit, in addition to distribution.

Galvani will also place 350 thousand tons on the market in 2024, coming from another mine, in Irecê (BA).

“It is a constant challenge because we have to deal with seasonality, with inventories, in addition to understanding macroeconomics, dollar, commodity prices, geopolitics and logistics”, says Stelzer.

Galvani is also developing a project in Santa Quitéria (CE). When in operation, which is estimated to start in four years, the production of phosphate fertilizers should reach 1 million tons; that of dicalcium phosphate, 220 thousand tons. This is intended for animal feed supplementation.

With investments of R$ 2.3 billion in the project, the company expects to obtain a 25% share in the fertilizer market in the North and Northeast and a 50% share in the dicalcium phosphate market.

It is a region of growing demand, both for agriculture and livestock, according to the CEO. In addition to the Matopiba region (Maranhão, Tocantins, Piauí and Bahia), Galvani wants to supply products to Mato Grosso, with transport via barges.

The executive believes in advances in the Brazilian production of fertilizers. The National Fertilizer Plan sheds light on the problem, although there are more than 200 actions. “How to execute all this?”, asks the executive. In his assessment, at least three points would be basic.

First, there is no setback on the tax issue. There is a movement between some states for this to happen. Second, financing for integrated projects with incentivized debentures, as already exists for civil construction and agribusiness.

Third, faster licensing is needed. Today, no one predicts when the prior license will come out. “We don’t want to skip steps. There has to be a lot of rigor, but the body in charge has to be faster and commit to certain dates”, he says.

Szelter also believes that the sector is very exposed to unilateral decisions by other countries, which generates price volatility.

A form of price band would be interesting, which would be managed, when it exceeds the upper or lower level, by the sector’s own fund.

For the domestic market, Szelter says it is possible to unlock projects. It is a mistake to think that the country has no phosphate. In the foreign scenario, Morocco, Saudi Arabia and Canada should increase their product supply.

The big unknown is China, which has weight in the international market.

“Are you going to export or continue to restrict exports?”

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