It is well-known that the coronavirus pandemic has affected every business and industry in the world. So is the case with the Fertilizer Manufacturing industry. Through the content present here you will be able to learn the specific ways in which the coronavirus outbreak impacted the mentioned industry. In addition, as there are several major companies or players dominating the market of the Fertilizer Manufacturing industry, this article will analyze the specific actions as well as strategies practiced by each of them. What is more, this article will also present the analysis of the Fertilizer Manufacturing industry by summarizing the overall industry overview, its supply chain, its key external drivers, key trends, as well as its products and services segmentation and SWOT analysis. All of the data embodied within this article will be based on the industry report conducted by IBISWorld. That being said, by the end of this article you will be able to gain a perspective outlook on the overall present state of the Fertilizer Manufacturing industry, as well as make potential predictions about its future developments.
As stated in the IBISWorld industry report, while the economy slowly begins its restoration from the coronavirus pandemic, prices of crops as well as that of natural gas are likely to increase, which will also draw the overall industry revenue up. In addition, the demand for fertilizers is anticipated to decrease, as golf courses, nurseries, as well as other relative businesses are shut down.
Because of the coronavirus pandemic, demand for materials is likely to grow, since trade has also been temporarily stopped. Overall purchase costs are also predicted to grow, as a result of the increase in the price of raw materials as well.
As it can already be understood from its title, this industry in particular mainly manufactures fertilizer products that consist of different combinations of the three key nutrients significant for plant growth: nitrogen, phosphorous, and potassium. The manufactured products are dealt through wholesale arrangements with wither third parties or by the manufacturer.
That being said, the main activities of the Fertilizer Manufacturing industry include manufacturing ammonia, ammonium nitrate, ammonium, sulfate, as well as ammonium phosphates. In addition, it also includes manufacturing natural-organic as well as animal-waste and sewage-origin fertilizers. Other activities include manufacturing nitric acid as well as phosphoric acid, nitrogenous fertilizer materials, urea, phosphatic fertilizer materials, as well as potting soil, plant goods and compost. Lastly, the industry also mixes and combines purchased fertilizer materials.
The most significant products developed within this industry mainly include phosphate, nitrogenous, as well as mixed fertilizers. In addition, major players of the Fertilizer Manufacturing industry include CF industries, Mosaic, and Nutrien.
Fertilizer Manufacturing Industry Supply Chain Breakdown
According to the IBISWorld report, the key external drivers within the Fertilizer Manufacturing industry include the agricultural price index, the demand from crop production, oil and natural gas price index, price of fertilizers, as well as the trade-weighted index.
In addition, the first-line suppliers of the industry include organic chemical manufacturing, petrochemical manufacturing, chemical product manufacturing, inorganic chemical manufacturing, and lastly, industrial machinery and equipment wholesaling.
The second-line suppliers of the Fertilizer Manufacturing industry include oil drilling and gas extraction, mineral and phosphate mining, power tools and other general purpose machinery manufacturing.
That being said, the first-line buyers of the industry are farm supplies wholesaling, tool and hardware wholesaling, piece goods, notions and other apparel wholesaling. Additionally, the second-line buyers of Fertilizer Manufacturing include agriculture, forestry, fishing, as well as hunting, warehouse clubs and supercenters, home improvement stores, lawn and outdoor equipment stores, nursery and garden stores, as well as land development.
The percentages of the key external drivers for the Fertilizer Manufacturing Industry are distributed in a way that the highest percentage accounts to oil as well as the natural price index, resulting in 2.9%, while the demand from crop production achieves a negative percentage of -0.9%. The specific percentages of all key external drivers for the Fertilizer Manufacturing industry are depicted below.
When it comes to industry structure, the Fertilizer Manufacturing industry’s positive impact reflects in the industry’s high and increasing barriers to entry. Its mixed impact represents the industry’s mature life cycle, medium capital intensity, a medium as well as a steady regulation and policy, a medium and an increasing industry globalization, a medium revenue volatility, concentration, as well as a medium technology change. On the other hand, the Fertilizer Industry’s negative impact includes a low and steady industry assurance as well as a high and increasing competition.
The noted key trends of the Fertilizer Manufacturing industry include the fact that price movements in agricultural commodities have represented an essential factor for industry demand. In addition, merger as well as acquisition activity has grown because of the reduced fertilizer prices as well as a slowing demand. Stated in the IBISWorld report is the trend that prices of crops as well as natural gas are anticipated to decline, and most probably result in hurting the overall industry revenue. What is more, the prices of both corn as well as soybean are likely to increase in the following period, which will benefit the industry’s demand. In turn, rising demand will also represent the main driver of increased fertilizer prices. Lastly, the price of fertilizer, including potash, is predicted to increase for the following period, additionally advancing revenue.
The products and services included within the Fertilizer Manufacturing industry are, as already mentioned, phosphate fertilizers, nitrogenous fertilizers, as well as mixed fertilizers. As it turns out, the highest product percentage belongs to nitrogenous fertilizers.
Viewing as well as analyzing the SWOT analysis of the Fertilizer Manufacturing industry will in fact aid through the construction of potential future scenarios for the overall development of the industry.
The Fertilizer Manufacturing industry strengths include its high as well as increasing barriers to entry, medium imports, high profit vs. sector average, a low customer class concentration, as well as a high revenue per employee.
Contrastingly, the industry’s weaknesses include its low and steady level of assistance, high competition, high product/service concentration, as well as high capital requirements.
Still, among the possible opportunities existing for the Fertilizer Manufacturing industry is its already established consistent high revenue growth over the years, that allows future predictions to assume the same occurring trend. In addition, the trade weighted index also represents a potential opportunity for the overall Fertilizer Manufacturing industry.
Conversely, except its strengths, weaknesses, as well as opportunities, the Fertilizer Manufacturing industry may also face some potential threats. Some of those include a possible low revenue growth, low outlier growth, low performance drivers, as well as the agricultural price index.
Research-backed Industry Summary
As stated in the IBISWorld industry report, the key find of the overall industry research is that preferable energy costs will most probably bring benefits to increased industry participation.
The product achieved and developed within this industry, fertilizer, represent an either natural or manufactured material that consists of a 5% nitrogen, phosphorous, or potassium. It finds its application in crops that produce food, feed, fiber, as well as energy. Because fertilizer is a commodity, the world market establishes its prices, and consequently, the industry faces a high level of revenue volatility.
There has been a noted occurrence of the effect of price drops for both fertilizers as well as crops, as they harmed various industry operators back in 2015, resulting in a substantial revenue decrease.
From then on, prices have kept consistently declining and therefore caused an overall industry revenue decline in the five years leading up to 2021. Nevertheless, the price of fertilizers is predicted to increase in the following period, which could prove to be a benefit for businesses as they attempt to restore revenue losses faced in 2015, 2016, as well as 2017.
In addition, industry profit, which is calculated by including earnings before interest and taxes, is likely to represent a significant percentage of the overall industry revenue in the present period. Because of the coronavirus outbreak, international trade has temporarily been disrupted, which has caused an overall value decline of both exports and imports. As stated within the IBISWorld industry report, the US Department of Agriculture shows that the United States represents one of the top five global fertilizer producers for all key fertilizer nutrients. Right after China, the United States takes the second place when considering which nation represents the largest global producer, as well as consumer, of fertilizer.
Moreover, over the five years leading up to 2026, the overall industry revenue is anticipated to increase. In addition, the price of fertilizer, potash in particular, is likely to increase for the already specified period, leading to an increase in industry revenue. What is more, demand from crop production is expected to grow over the next five years, resulting in a growing industry demand. Since the value of exports is predicted to increase for the same timeframe, there is an added benefit to the overall industry revenue growth. Similarly, the value of imports is expected to increase for the same period. Manufacturers are predicted to go after additional growth opportunities through engaging into either building or expanding their establishments. Lastly, preferable energy costs over the last five years have supported the formulation of new nitrogen fertilizer plants across the United States.
Market Share Concentration & Key Success Drivers
As stated before, the overall market concentration for the Fertilizer Manufacturing industry is medium. In fact, market share concentration calculates the extent to which major players take over the industry. More specifically, the market concentration for the Fertilizer Manufacturing industry is moderate, as the industry consists of three major players that account for almost half of the total percentage of the industry revenue in the year 2021. However, regardless of the established position of the three major players, there also exists a great amount of small players. To add, market share concentration has decreased in 2020 because of the outbreak of coronavirus. It is worth mentioning that the largest merger as well as acquisition happened in 2018, when two of the Fertilizer Manufacturing industry major players, Agrium Inc. and Potash Corporation of Saskatchewan Inc. (Potash Corp.) finished their merger. Their negotiation only additionally reduced competition in the Fertilizer Manufacturing industry as a whole.
When it comes to the Fertilizer Manufacturing industry key success factors, the most important ones are considered to be the guaranteed supply of key inputs, access to the latest available as well as most efficient technology and techniques, availability of resources, and lastly, economies of scale.
A guaranteed supply of key inputs, including natural gas, can allow the Fertilizer Manufacturing industry a year-round production as well as an increased competitive advantage for businesses that do not have an achieved such guarantee.
Next, the access to the latest available and most efficient technology as well techniques can in fact aid the Fertilizer Manufacturing industry towards achieving lower manufacturing costs, as well as allow them to produce higher quality products for the market, while still growing the competition among other producers within the same industry.
Availability of resources such as phosphate, ammonium, sulfur, and natural gas entails a better profit margin, since it lowers transportation costs and therefore ensures a higher security in supply.
Lastly, the need to generate economies of scale has been evoked through the occurrence of an increasing price competition from local as well as imported products.
Fertilizer Manufacturing Industry Competition
When it comes to competition, the Fertilizer Manufacturing Industry is highly competitive, and the primary factor for competition is price.
Elements that influence price include raw material prices, the degree of integration, the scale of production as well as the cost of the transportation infrastructure used. Still, variables like specialized fertilizer products as well as an effective supply network may represent essential foundations for competition, too.
The manufacturer’s ability to offer purpose-specific fertilizers as well as fertilizer blends, as well as those for specialty crops, represents a significant foundation of product competition. In order to satisfy the specific needs of farmers, manufacturers may blend fertilizers in order to offer the proper nitrogen as well as phosphate levels required. In addition, farmers are also gaining more knowledge as well as becoming more informed and are therefore understanding the essential role of fertilizers in nurturing the needed nutrient balance in their land in order to maximize productivity of crops as well as pastures.
Considered as one of the industry’s major players, Nutrien Ltd. Applies its innovative technologies division in order to satisfy the particular demand from farmers by creating as well as developing advanced efficiency fertilizers that enhance the nutrient availability of crops.
In addition, product quality as well as supply security may also represent other factors that can be seen as competition, as it is the case with the existence of established customer relationships. Moreover, transportation costs can be a major cost, which is why producers aim to drag them down by setting up establishments near end markets. In fact, a large amount of major manufacturers provide widespread distribution networks in order to make sure that farmers will get the most accessible service possible. In turn, good relationship between downstream retailers may lead to achieving competitive advantage.
What is more, many products manufactured within the Fertilizer Manufacturing industry are also accessible and are offered by many European and Asian sources, which represents a potential threat to the industry, since they have highly competitive establishments. Within the last couple of years, imports have become a growing source of competition. Additionally, US producers have also faced Russian producers dumping excess capacity. Based on the factors mentioned, it can be concluded that import competition can in fact lead to downward pricing pressured on domestic prices.
Starting with the analysis of the overall Fertilizer Manufacturing industry definition as well as its broad overview, through its supply chain, market share concentration, and key success factors, down to its competition, this article presents an in-depth analysis of the overall industry, based on the found information in the report conducted by IBISWorld. Through understanding the specific industry trends, the SWOT analysis, as well as the overall development of the Fertilizer Manufacturing industry, this article also prompts the making of potential future predictions for the industry. By analyzing the Fertilizer Manufacturing industry as well as through thinking about its potential performance in the future, this article also allows us to understand the effect of the analyzed industry on our everyday life.
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