/Fertilisers%20AR_V12%5B1%5D by Fertilizers Europe

Food, fertilizers & NATURaL RESOURCES

Meeting Europeâ&#x20AC;&#x2122;s

food needs... increasing agricultural productivity through better use of natural resources

2010 overview

This publication outlines the major issues facing European agriculture and the nitrogen fertilizer industry in 2011 and the progress made by Fertilizers Europe in 2010 to promote the interests of Europe's fertilizer manufacturers. Fertilizers Europe represents the majority of nitrogen fertilizer manufacturers in Europe and is the industry's official dedicated source of information on fertilizers. It communicates with a wide variety of legislators, stakeholders and members of the general public who seek information on fertilizer technology and the variety of topics relating to todayâ&#x20AC;&#x2122;s agricultural, environmental and economic challenges. The website www.fertilizerseurope.com provides the latest information on a range of subjects of immediate relevance to all those interested in fertilizers and their contribution to global food security.

www.fertilizerseurope.com

Contents

The global food challenge

The challenge for Europe

Finding the right balance

Meeting the growing food demand

European agriculture today

Modern fertilizer production

Better use of natural resources

Fertilizer forecast 2010-2020

Implementing the messages

Association members & Board

Agriculture & Environment

Technology, Environment & Safety

Trade & Economic Policy

Information Services

Communicating the issues

Fertilizers Europe staff

Key

facts  Nitrogen fertilizers are needed to feed the world  Agricultural land must be used in the most productive way, protecting wildlife and natural resources and minimising climate change  Europe has the most modern agriculture and the most efficient fertilizer production  New agricultural policy should ensure the sustainability of the agricultural sector  Climate change regulations should consider emissions over the ‘life-cycle’ of fertilizers to avoid carbon leakage

2010 Overview

There will be 3 billion more mouths to feed by 2050. This means cumulatively feeding an additional population the size of Germany's every year for the next 40 years.

The global food

challenge

Availability of food is of fundamental human importance. The challenge is to achieve the necessary level of food production with minimum environmental impact." Renso Zwiers

President, Fertilizers Europe Vice President for West & Central Europe, IFA

The global food challenge |

The challenge for europe Finding the right balance | Meeting the growing food demand | European agriculture today | Modern fertilizer production Better use of natural resources | Fertilizer Forecast

he issues facing the nitrogen fertilizer industry in Europe need to be seen within the global perspective for agriculture. To meet growing food needs, agriculture around the world must increase its output by some 70% above the levels of production today. Devoting more land to agriculture is not a realistic option. The availability of suitable land is diminishing and further encroachment on forests and other natural habitats for new land not only destroys biodiversity but also releases significant amounts of carbon into the atmosphere. Increasing agricultural productivity through better farming practice, the best plant science and modern fertilization techniques is clearly part of the solution. Yet according to FAO reports, agricultural productivity is slowing down in many parts of the world, including Europe, and in some cases hardly keeping pace with population growth.

increasingly o uncertain marketso

the

Furthermore, although world agricultural markets are beginning to resume more normal growth after the economic turmoil of 2008/2009, they have not yet got back to where they were. Increasing price volatility due to climate change, natural disasters and political and economic upheaval continues to cast uncertainty over the entire food production chain. Agriculture cannot adequately respond to global needs if farm economics, farmers' buying power and their capability to invest are not improving. After last year's major contraction (6.7%) in global fertilizer consumption, the 2009/2010 season's 158 million tons of nutrients represented a modest 1% growth, but was still way below the 2007/2008 peak.

The need for o sustainable growth…o Agriculture's contribution to reducing hunger involves not only producing food where it is most needed but also creating employment, generating income and supporting rural communities. Europe is no exception. EU policy, such as the Common Agricultural Policy, must not only encourage European farmers to produce more quality products, so they can contribute to global food needs, but also allow them to do this on a profitable and a sustainable basis. Europe's fertilizer industry has a lot to give its partners in food and energy production but the sector faces several important challenges of its own.



Europe has an obligation to make use of its fertile agricultural conditions to support the global food effort.

…and a better functioning o gas marketo Natural gas is an essential raw material for fertilizer production as well as providing the energy to drive the production process. It typically makes up 60-80% of the cost of production. A drive for increased food security therefore also depends on a competitive and reliable supply of natural gas. This in turn means more infrastructure linked to more sources and more routes. The vision is for a fully integrated and transparent gas market and we therefore strongly support the European Heads of State when they call for a speedy implementation of the Third Gas Directive. Although we operate in a global world, we often seem to be burdened by costs and obligations in Europe that do not exist in other countries. This currently appears to be the case with the proposed implementation of the EU's ETS III carbon trading scheme. Neglecting the economic interests of Europe's fertilizer industry will not help European food security.

New Director General o Finally, our longstanding Director General, Esa Härmälä, has moved on from Fertilizers Europe to an important government post in his native Finland. We thank him for his wise counsel and achievements during his time with the Association and warmly welcome his successor, Jacob Hansen, who has joined us from the Danish Agriculture & Food Council in Brussels.

2010 Overview

Europe has some of the most efficient farmers in the world. it must be encouraged to expand its own food self-sufficiency and increase its global contribution.

The challenge

for Europe W

e are entering an important era for European agriculture, with many issues high on the EU agenda. Meeting the world’s growing need for food, facing up to environmental challenges, adjusting to market volatility with its adverse economic impact on farmers, and recognising the growing importance of agricultural production in supplying both energy and raw materials other than food are all key issues that will have to be dealt with politically.

Things are not standing still. We must embrace sustainable intensification of agriculture if we are to live up the many challenges facing farming and food production in Europe.



Reform of the Common o Agricultural Policy o In Fertilizers Europe we are ready to take part in the discussion of the EU’s future agricultural policy. We argue in favour of a balance between a more productive and competitive agriculture and an improvement in its environmental performance. The first positive outcome of more productive agriculture will be income stability for Europe's farmers and therefore less need for market support. Besides increased food production, it will also meet the greater demand for renewable energy resources, reducing European dependency on imported energy and pointing towards a more bio-based economy. Improved environmental protection is important for agriculture's acceptance by Europe's citizens. Climate change and biodiversity are two areas that will benefit most from the greater productivity of land already under cultivation. But a sustained effort is also needed to improve water and air quality. More integrated total farm management systems will enable Europe's farmers to meet the challenge of sustainable production.

ETS III involves real costso While acknowledging the European Commission's efforts to reduce the full burden of ETS III (the EU Emission Trading Scheme 2013-2020) via benchmarks, it should be recognized that the scheme represents a real cost for the fertilizer industry. The vast majority of European fertilizer plants will have to buy emissions allowances, representing an extra annual cost to the industry of more than €200 million, and it will have to invest in new technology. Without innovative technological assistance and management of the carbon market, this could lead to the relocation of fertilizer production outside Europe and increase carbon leakage.

In Fertilizers Europe, we will be following this issue closely to make sure that the interests of our members, in a sector very much exposed to carbon leakage, are taken into account.

2020" predicts an overall growth in N consumption of 1.3% over the ten-year period using the 2007/2008 season as the base year.

Fertilizers Europe activities o Overview of thee 2009/2010 seasono European fertilizer consumption over the 2009/2010 season was some 14.7 million tons of nutrients. This is a significant recovery (+8.3%) on the drop of the previous year, but still dramatically down (-18.7%) on the 2007/2008 peak. At 10.1 million tons, consumption of N fertilizers grew by 3.8%. But at 2.2 and 2.4 millions tons respectively (+22% and +17% on the previous year), consumption of both P and K fertilizers recovered part of the consumption level of 2007/2008. Forecast for the coming season confirms the recovery, but with a slower trend (+2.9%). Our "Forecast on food, farming and fertilizer use in the European Union 2010-

There were a number of membership and staff changes in 2010. Regrettably Agropolychim and Neochim from Bulgaria left the association but we welcomed ZAK S.A. from Poland. On the staff front, apart from myself, Dr. Antoine Hoxha joined us as Director, Technology, Environment and Safety, replacing Hans Van Balken, to whom we wish a happy retirement. We also suffered the sad loss of Felipe Lemus who passed away. Our deepest thoughts remain with his family. Our website (www.fertilizerseurope.com) provides further information for all those interested in fertilizers and their contribution to human nutrition.

CAP reform provides the opportunity for Europe to reshape its agriculture to improve its overall efficiency as well as address environmental concerns." Jacob Hansen

Director General, Fertilizers Europe annual report 2010

No part of the production chain can meet Europe's food, energy and environment goals alone. Many of the issues are closely interlinked.

Resource use

Energy efficiency

Price

balance

bjective analysis of the overall impact of nitrogen fertilizers on the environment requires an integrated evaluation of the nitrogen life-cycle and the individual issues involved in the food and energy production chain.

Fertilizers Europe also voluntarily submits data to the European Commission's LCA database which offers information on energy consumption and greenhouse gas emissions for all the main industrial sectors.

Natural gas Mineral ore

Security of supply

Finding the right

The fertilizer industry applies life-cycle assessment (LCA) principles when developing techniques to optimise the use of reactive nitrogen â&#x20AC;&#x201C; nitrogen in a form that can be used by plants. It collaborates closely with the scientific and agricultural communities to develop techniques and practices which minimise its loss, while providing the means to meet the challenge of feeding a growing world population.

Raw materials

Fertilizer type/quality

Shipping cost Safety

Fertilizer production

Best available technology (BAT) Energy efficiency

Security of supply

GHG reduction

The global food challenge | The challenge for europe Meeting the growing food demand | European agriculture today | Modern fertilizer production Better use of natural resources | Fertilizer Forecast

Finding the right balance |

Fertilizers & the environment Food consumption

Energy efficiency GHG reduction Human nutrition

Waste Price

Waste

GHG reduction

Food/feed production

Bio-energy

Fertilizers & food

Nutritional value Energy balance

Crop yield Nitrogen use efficiency

Crop type

Good agricultural practice (GAP)

Cropping Fertilizer application

Land use optimisation

CO2 sequestration

Good agricultural practice (GAP)

GHG reduction

2010 Overview

By maximising crop yield and quality, nitrogen fertilizers avoid the environmental cost of devoting more land to agriculture.

Meeting the growing

food demand

Almost half of the world is fed today thanks to the use of nitrogen fertilizers. Without access to a sufficient supply of the food protein they require, many would not survive." Tor Holba

Deputy President, Fertilizers Europe

The global food challenge | The challenge for europe Finding the right balance | Meeting the growing food demand European agriculture today | Modern fertilizer production Better use of natural resources | Fertilizer Forecast

t is widely recognised that agricultural productivity needs to increase dramatically around the world to meet global food needs. Ninety percent of the growth in crop production is expected to come from higher yields and increased cropping intensity. But, after the "green revolution" of the 1960s and 1970s, the rate of agricultural growth has generally slowed down in the past few years. In developing countries, growth in yields of wheat, rice and maize have all declined since 1980. The FAO predicts that global agricultural productivity will grow at just 1.5% a year until 2030 and fall back to 0.9% a year from 2030 to 2050. In Western Europe, growth in agricultural production per capita is almost stagnant.

Arable area & population growth World population

Arable area

(billion)

(ha per person) 0.30

8.5

0.26

7.5

0.22

6.5

0.18

5.5

diminishing land baseo To compound the problem, the world's productive land base is diminishing due to increasing urbanisation, soil erosion and nutrient exhaustion. Water availability is also declining, particularly in the light of recent trends in climate change, with an increasing number of countries or regions reaching alarming levels of water scarcity. By 2030, The FAO calculates that there will be less than 0.22 hectares of arable land per person, compared to approximately 0.28 hectares in 1998. At the same time, the continued expansion of farmland to meet food and, increasingly, energy needs in many parts of the developing world has had a major environmental impact. As well as destroying ecologically valuable natural habitats and their biodiversity, deforestation and depletion of the organic matter in the soil has released huge quantities of greenhouse gases from the carbon bound in the trees and the forest bed.

1998

2030

■ Arable area

■ World population



Extensive agriculture leads to higher environmental emissions.

Global GHG emissions

Production of mineral N fertilizer*

0.8%

N2O from mineral N fertilizer use in agriculture*

1.3%

N2O from organic N sources in agriculture

3.8%

greenhouse gas emissionso Of the 25.5% of global GHG emissions currently attributed to agriculture, 12% are due to changes in land use. With more natural habitats lost to agriculture, this percentage would rise considerably. Furthermore, deforestation often has an immediate impact on the natural water cycle, resulting in a greater likelihood of flooding or drought – an ever more common occurrence in many regions of the world. Nitrogen fertilizers play a vital role in keeping GHG emissions down. Without them, it is calculated that global agriculture would require an additional 1,100 millions hectares of virgin land.

Other GHGs from agriculture mainly CH4

Energy Industry Waste, etc.

8.4%

74%

Change in agricultural land use Based on IPCC (2007), Bellarby et al (2008), *Fertilizers Europe calculation

12%

2010 Overview

With average CO2 emissions of 1.5 tons per hectare to transform the land, this translates into 1,600 million more tons of CO2 or equivalent GHGs released into the atmosphere. Farming is highly dependant on climatic conditions and extreme weather and the increasing variability of seasonality not only effect crop yields, they can also bring new plant and animal diseases.

Increasing agriculturalo productivityo To meet greater food targets, agricultural policy must encourage farmers to increase the productivity of the land they currently cultivate, while maintaining its environmental integrity. This can only be achieved by the adoption of a sustainable farming practice that uses the best science, the best farm inputs, and crop species that are adapted to local conditions and more resistant to disease and pests.

ď&#x192;&#x2019;

The agricultural industry itself is the most threatened by climate change.

Providing the essential nutrients N is an essential component of plant proteins. P forms part of the nucleic acids and lipids and is key to energy transfer. K has an important role in plant metabolism, photosynthesis, activation of enzymes and other functions. When the plant is harvested, these nutrients are harvested with it, so the soil's potential productivity decreases. Nitrogen fertilizers typically provide about half of the plant's required nutrients, with the rest coming from organic matter, crop residues and other natural sources in the top layer of the soil. The underlying principle of an effective fertilization programme is, therefore, to precisely match the nutrient inputs with the requirements of a particular plant over its growing cycle in order to maximise nutrient use efficiency, ensuring better recycling of organic waste and avoiding losses to the environment.

The job of fertilizers is to ensure that the soil contains an appropriate supply of the major plant nutrients nitrogen (N), phosphorus (P) and potassium (K) and other secondary elements in a form that can be readily assimilated by the plant, which can then grow to its full potential.

CO2

nutrients

emissions

N2O

mineral fertilizers

harvest

N soil mineralisation

European agriculture

today

Farmers in Europe now produce more crops with less fertilizer than they did 20 years ago and their nitrogen-use efficiency is second to none." Arunas Laurinaitis

Chairman, Agriculture & Environment Committee annual report 2010

An efficient European fertilizer industry will ensure that Europe is self-sufficient in food and that it ALSO continueS to BE a major contributOR to global FOOD NEEDS.

Aâ&#x20AC;&#x160;

s part of the developed world, Europe has the moral obligation to play its part in contributing to the increasing food demand from other regions. It has both the climate and the available farmland to be self-sufficient in food production, yet it is currently a net food importer. In addition, volatile prices of farm inputs as well as farm outputs mean that many European farmers are today struggling to be profitable. Adoption of an agricultural policy that encourages farmers to attain maximum sustainable productivity on their land will strengthen the European agricultural sector and ensure that it can feed its own people as well as contribute to the global food effort.

Best agricultural practice o The sustainability of agriculture across Europe is closely linked to the promotion of good agricultural practice (GAP) by agricultural research bodies, European legislators and the providers of agricultural inputs. The European fertilizer industry has developed advanced farm management strategies to optimise

Nitrogen fertilizers are currently applied to 135.1 million hectares of farmland in Europe. Agricultural land use in Europe (EU-27) Idle land 6%

Wheat 14%

ď&#x192;&#x2019;

Coarse grains 18% Potato 1%

Grassland non-fertilized 21%

Sugar beet 1%

Grassland fertilized 17%

Other crops 3% Perm. Crops (fruit, vineyard, forest) 6%

Fodder crops 7%

Oilseeds 6%

crop yields, as well as to promote environmental and financial sustainability. Precision techniques cover fertilizer application requirements for particular crops, soil types and individual fields, as well as specific weather conditions. Reflective light measurement and GPS soil mapping are increasingly being used to define exact nutrient demand. Other basic agricultural techniques such as crop rotation and minimum tillage are aimed at maintaining the nutritional quality of the soil. Education of the farming community in the timing and dosing of nitrogen fertilizers is becoming increasingly widespread. As a result, the yields achieved with appropriate products are high and their impact on soil, water or air quality are better managed. Potential growth in crop yields is such that Europe's existing farmland is basically sufficient to meet its future food needs. Uncultivated or previously set-aside land is free for production of bio-energy crops or for reforestation to provide natural wildlife habitats and recreational areas that also act as CO2 sequestration sinks.

Emissions from o agriculture o Since fertilizer industry agronomists have developed new ‘tailor-made’ nitrogen fertilizers that limit environmental emissions, the main focus of future mitigation techniques is on GHG emissions resulting from farming practice.

Life cycle impact

Agriculture currently accounts for 9.2% of total European (EU-27) emissions. Those from changes in land use are not large. The most relevant GHGs are methane (CH4) from cattle and nitrous oxide (N2O) from soil applied nitrogen.

Comparative emissions - urea vs. CAN Production & soil application

Production

Natural N2O emissions from the soil represents some 50% of the total. Most agricultural activity – nitrogen input from manure, nitrogen fertilizers, or the cultivation of legumes which fix nitrogen from the air – increases these. They are a by-product of the microbiological processes that convert ammonium into nitrate (nitrification) and nitrate into nitrogen gas (dinitrification). Both processes are controlled by environmental conditions and independent of the origin of the nitrogen.

kg CO2 eq/kg N

12 10 8 6 4 2 0

3 2 1 0

Urea

CAN*

Urea

CAN*

*CAN production includes N2O abatement catalyst

As these emissions are partly the consequence of natural processes, the best way to reduce them is by increasing the soil's nitrogen use efficiency. Promotion of good fertilizer management has increased nitrogen use efficiency by 45% since 1985 and the industry remains committed to further improvement.

Different types of fertilizer have different environmental impacts, as can be seen from comparison of urea and CAN (calcium ammonium nitrate) fertilizers.

European (EU-27) emissions

Production of mineral N fertilizer*

1.0%

Energy Industry Waste, etc.

90%

N2O from mineral N fertilizer use in agriculture*

1.2%

N2O from organic N sources in agriculture

3.9%

Other GHGs from agriculture mainly CH4

4.1%

Most of the increase in world consumption of nitrogen over the past 30 years has been in the form of urea, whose higher N concentration can reduce distribution, storage and handling costs. In developing countries, it represents 67% of total nitrogen consumption, compared to only 30% in Western Europe. But broader analysis shows that the dominance of urea is more often due to economics than agronomics. Although its production has a lower environmental footprint than CAN, when soil emissions from its application are included, the picture looks very different.

Based on UNFCCC (2008) *Fertilizers Europe calculation

2010 Overview

Bio-energy

The development of bio-energy is a key element in the EU's low carbon strategy. The target of 20% renewable energy by 2020 with a 10% share for biofuels is driving the process. Nitrogen fertilizers play a key role in meeting the bio-energy targets. Bio-energy crops are currently grown on 4 million hectares of idle or previously set-aside land in Europe. By increasing crop yield and the intrinsic energy content

Energy balance of different fuels

Tonne of oil equivalent (toe)

1.2 1.0 0.8 0.6 0.4 0.2 0

Petrol

Bioethanol

Gasoil

Biodiesel

n Usable energy n Fossil energy used in production

of these crops, they optimise land use and maximise energy return. The "food versus fuel" debate continues but, so far, bio-energy crops in Europe have had no real impact on the overall amount of land needed for food production.

substantial o contribution o Biomass now makes a major contribution to European energy generation through thermal facilities and combined heat and power plants. On the transport front, where Europe's GHG emissions are expected to grow substantially up to 2020, an increasing number of vehicles are now powered by biodiesel or electricity from renewable energy sources. First generation biofuels are forecast to continue to dominate the market over the next decade, with the amount of cereal grains used for bio-ethanol production increasing three-fold up to 2025. A reduction in exports is expected to cover a significant proportion of this grain, with sugar beet providing the other main feedstock. On the other hand, slower expansion of the oil seed area for bio-diesel is foreseen.

Source: PWC 2002

land use o

Half the amount of fossil energy is needed to produce bioethanol compared to petrol and a third as much to produce biodiesel compared to gasoil.

ď&#x192;&#x2019;

Indirect land use changes as a result of the expansion of biofuel production could result in major increases in GHG emissions. The EC will present an impact assessment on this in July 2011, which may lead to the inclusion of these emissions in the biofuels sustainability criteria. This may result in a drastically limited production of first generation biofuels in the EU. Forest thinning and second generation feedstocks will probably become more significant but are unlikely to effect cropping areas and fertilizer use. Specific biomass crops grown for energy, like miscanthus and willow, might have to compete with arable crops for land but, with the use of set-aside and an improvement in grain prices, these crops may not be as attractive as originally supposed.

The global food challenge | The challenge for europe Finding the right balance | Meeting the growing food demand |

European agriculture today | Modern fertilizer production Better use of natural resources | Fertilizer Forecast

Modern fertilizer

production

Milestones for emissions reductions from 2030 to 2050 must be based on a sector by sector approach and consider the technical and economic feasibility of such reductions." Tore Jenssen

Supporting Vice President, Technology Environment & Safety Committee

annual report 2010

Europe is the most efficient worldwide producer of fertilizers, Based on the EU's current 20% reduction target, the fertilizer industry is contributing to reductions in emissions which far exceed those of any other industry sector.

ompound nitrogen fertilizers such as AN (ammonium nitrate) have traditionally been favoured by European farmers as they are the best suited to Europe's topography and climatic conditions. Europe is the worldâ&#x20AC;&#x2122;s most efficient manufacturer of these, produced by reacting ammonia with nitric acid. The industry has some of the most modern ammonia and nitric acid plants which use leading-edge technology.

Steam reforming natural gas ammonia facilities have an energy efficiency close to the technological limit and very low CO2 emissions (1.8 tons CO2/ton NH3). A significant number of the industry's nitric acid plants use modern N2O abatement technology which significantly reduces N2O emissions.

Energy efficiency of ammonia plants

GJ/t ammonia

Haber-Bosch process

80 Steam reforming natural gas

60 40 20

Technological limit = 27 GJ/t NH3

0 1930 1950 1960 1975 2000 2010

GJ/t ammonia

With 20% reduction Technological limit

With 30% reduction

22 EU-27 average (2006-2007)

In order to reach 2013 ETS III targets, the European fertilizer industry is therefore required to make a combined reduction in GHG emissions of some 50% (19.2% ammonia + 80% nitric acid), compared to the EU's overall target of a 20% reduction by this date. Furthermore, the European Commission has recently launched â&#x20AC;&#x153;A roadmap for moving to a low carbon economy in 2050â&#x20AC;?. This now calls for Europe to reduce its emissions by 80% by 2050 (and 83-87% for Industry) in relation to 1990 totals. To get there, emissions will need to be 40% below 1990 levels by 2030 and 60% below by 2040. For such milestones for 2030 and beyond to be realistic, they need to be based on a sector by sector approach. The previous efforts of the sector and its technological limits must also be taken into account. Based on the EU's current 20% reduction target, the fertilizer industry is contributing to reductions in emissions which far exceed those of any other industry sector.

34 30

EMISSION TRADING SCHEMEo In Europe's drive towards a low carbon economy, more industries will have to pay for their carbon emissions from 2013 onwards under ETS III. With "free emission rights" related to benchmarks based on the average performance of the industry's best 10% ammonia and nitric acid plants, 95% of compound fertilizer manufacturers in Europe will face significant carbon charges. The ETS III benchmarks call on the sector to reduce its CO2 emissions in existing ammonia plants by 19.2%. Considering that the majority of the industry is already operating close to technological limits, this target will be difficult to meet. For nitric acid plants, new technology is available which offers varying possibilities to reduce the level of N2O emissions depending on the design of individual plants. Under ETS III, an 80% reduction in N2O emissions will be required.

120 100

Fertilizers Europe regularly collects energy efficiency and emissions data from its members from which it calculates industry benchmarks. These benchmarks have been the basis of the industry's discussions with the European Commission on its ETS III Emission Trading Scheme proposals.

Egypt

USA

Saudi Ukraine Russia Arabia

The EU's offer, in the context of the international negotiations on a framework for climate action, to increase its energy use and emission reduction targets

The global food challenge | The challenge for europe Finding the right balance | Meeting the growing food demand |

European agriculture today | Modern fertilizer production Better use of natural resources | Fertilizer Forecast

to 30% for 2020, if the conditions are right, remains on the table. If a sectoral approach is not then deployed, as the illustrations on pages 18 & 19 show, to reach a 30% reduction in energy use for ammonia is beyond the technological possibilities for the industry. Equally, a comparable reduction in nitric acid emissions would be impossible to achieve.

CARBON LEAKAGEo In the near term, ETS III will put the European industry at a severe trading disadvantage to its global competitors and incur a significant risk of carbon leakage. Of all the industry sectors evaluated by the European Commission, the fertilizer industry was identified as the most exposed to carbon leakage. From 2013 onwards, European fertilizer manufacturers will have to pay considerable carbon charges, while neighbouring competitors, primarily in Russia, Ukraine and the Middle East, will not. Unable to pass on these costs in a global market, plants could face closure in several European countries, with a loss of jobs and local income. According to European Commission sources, Russia has nearly 2 million tonnes of spare nitrogen fertilizer export capacity. If this level of European production relocates there, an additional 2.9 million tonnes of CO2 would be emitted globally each year. Without a robust international Climate Change treaty, in addition to existing EU instruments, measures such as financial assistance for new innovative technologies and rebalancing mechanisms need to be deployed. Only then will the industry in Europe remain competitive and avoid the risk of carbon leakage.

Roadmap 2050 Required reductions in GHG emissions by sector (%) 100

100

Current policy

0 1990 2000 2010 2020 2030 2040 2050

n Power sector n Residential & Tertiary n Industry n Non CO2 Agriculture n Non CO2 Other Sectors

European agriculture may well become increasingly dependent, therefore, on the production and pricing policy of fertilizers from regions outside Europe. Its ability to contribute to global food security could be endangered.

kg N2O/t HNO3

The effect on agricultureo

n Transport

Reduction in N2O emissions from nitric acid production

4 For European farmers, the biggest impact of ETS III will be on the availability of nitrogen compound fertilizers. The combined additional carbon costs as a result of the two ETS III benchmarks will be significant compared to the production cost of the fertilizers.

European average emissions

20% reduction target

30% reduction target without sectoral approach

3 2 1 0

80% reduction 120% reduction

-1 EU-27 nitric acid plants

2010 Overview

The european Fertilizer Industry relies on natural gas. But gas prices in Europe are among the highest in the world. Market deregulation with greater transparency, interconnectivity and storage will benefit all European consumers.

Better use of natural

resources

Natural gas is a fundamental raw material for fertilizer production. It combines with nitrogen from the air to form ammonia, the building block of nitrogen fertilizers." Renata Auchimik

Supporting Vice President Trade & Economic Policy Committee

Tâ&#x20AC;&#x160;

he nitrogen fertilizer industry is the EU's biggest single industrial user of natural gas. It is a primary raw material for fertilizer production and represents 50-70% of its total production costs. The industry depends on a freely available supply at a competitive price. But the European gas market is dominated by a small number of key suppliers including Russia, Algeria and Egypt. Prices have increased by over 230% in the past 10 years, making Europe one of the highest gas priced regions in the world. Another problem is that gas contracts are sometimes still linked to the price of oil, an anomaly that needs to be addressed by the market. Dual pricing by exporting countries with fertilizer production, principally Russia and the Ukraine, poses a particular threat to the European industry. Subsidised prices, which favour domestic producers in these countries, represent unfair trade and continue to justify EU trade defence measures. One of the industry's challenges is to restore a constructive dialogue with these suppliers on compliance with the principles of a â&#x20AC;&#x153;free market economyâ&#x20AC;? and encourage the WTO to develop its legal framework to correct unfair pricing of energy and natural resources. In the medium term, there are a number of practical measures that can improve the security of the gas supply in Europe, as well as lower gas costs.

GAS Market deregulations Unbundling, improved access to pipelines, better cross border trade and supply infrastructure will produce positive results. Breaking down national borders with congestion management schemes and promoting simpler access to pipelines and storage can stimulate greater competition in the European gas market. Implementation of the EU's Third Gas Directive started in March. The separation of generation facilities from gas transmission and supply and the creation of pan-European standards will help to promote market efficiency. Other aspects of the Directive will support the further development low-carbon technologies, the opening up of gas storage to market players and the creation of transparent tariffs for transmission and storage networks. New distribution companies, stronger independent national regulators, and the creation of ACER, the European agency to control market conditions, will encourage a more competitive gas market and benefit both the European fertilizer industry and European agriculture.

Sources of gas available to Europe

New GAS s INFRASTRUCTUREs There is an obvious need for new gas pipelines from major producers and a greater diversity of gas sources. The industry supports expansion of the Trans European Gas Network and the development of a stronger LNG (liquified natural gas) infrastructure. As the USA requires less LNG because of its increasing use of domestic shale gas, Europe has a great opportunity to benefit from the investments in LNG infrastructure in the Middle East and the waves of supply coming on stream in that area. In addition, the European Commission's Security of Gas Supply proposals, including the need for national and European preventive and emergency planning, will help. The fertilizer industry also suffers at times from the volatile nature of the spot market or from the indexation of gas contracts fixed to oil. Freedom of choice through better cross-border integration and interconnectivity is the most practical solution to these problems.

Production area

Main gas pipeline

Planned gas pipeline

Existing LNG terminal

Planned LNG terminal

2010 Overview

CAP post 2013 and the 2008 climate and energy package are significant drivers for fertilizer consumption over the next ten years.

Fertilizer forecast

2010 - 2020

Reliable statistics are essential in assisting our agricultural experts in producing a detailed picture of farming and fertilizer use in Europe." Francis Raatz

Chairman Information Services Committee

As a starting point, the forecasting group carefully considers the agricultural trends identified by international organisations, such as the FAO, OECD agricultural department, US Department of Agriculture (USDA), Food and Agricultural Policy Research Institute from Iowa State University (FAPRI), as well as DG Agriculture and Rural Development with whom Fertilizers Europe maintains a close and productive collaboration.

ECONOMIC CONSIDERATIONSn Recent tensions in the energy and food sectors, with their related impact on food and fertilizer prices, as well as some consequences of the economic crisis are key contributors to the drop in fertilizer consumption over last two growing seasons. These exceptional circumstances are the main influences on the current forecast, with major considerations being the recovery's pace and strength. The situation has induced some significant changes from the previously expected EU-27 cropping pattern. These include stabilisation of the cereal area, with a small decrease of 0.8% (following the 1% decrease expected last year), and a limited increase (10.4%) in the oilseed area continuing the downward trend forecast last year. Similarly, the decrease in the EU-27 sugar beet acreage is now stabilising, with a 2% decrease foreseen over the period. The most significant increase is foreseen for maize, with an 8.5% expansion in the sown area and 16% growth in production as a direct consequence of the development of biofuels.

to reach 10.8, 2.7 and 3.2 million tonnes respectively, applied to 134.6 million hectares of farmland. Considering the economic situation, the expected changes relative to the reference period (from 2007/2008 to 2009/2010) appear at first glance, as last year, to be surprising. The relative increase in nitrogen consumption is foreseen at 4.0%, and reaches 14.1% for phosphate and 18.6% for potash. These significant increases reflect the pace of the recovery but more detailed analysis needs to be done for a better evaluation of its strength. When using 2007 as the base year, however, the expected changes become +1.3% for N, -11.7% for P2O5 and -8.9% for K2O.

ď&#x192;&#x2019;

CAP and the development of the 2008 bio-energy strategy will have a significant effect on fertilizer consumption over the next 10 years.

Fertilizer consumption in Europe (EU-27) by nutrient: nitrogen (N), phosphate (P2O5), potash (K2O) Nutrient

(million tonnes)

Forecast (2010 base year)

16 14 12

+4.0%

10 8 6 4

+14.1%

20 17

20 12

20 07

20 02

19 97

19 92

19 87

19 82

Fertilizer consumptionn On average over the last three growing seasons, fertilizers containing 10.4 million tonnes of nitrogen (N), 2.4 million tonnes of phosphate (P2O5) and 2.7 million tonnes of potash (K2O) have been applied in the EU-27 countries to 135.1 million hectares of farmland each season. By 2019/20, the forecasters expect these figures

+18.6%

0 20 22

Fâ&#x20AC;&#x160;

ertilizers Europe experts have carried out a thorough analysis of data in order to provide a detailed outlook regarding the evolution of farming and fertilizer use in Europe (EU-27) over the next ten years. While the main findings are set out below, Fertilizers Europe also issues a yearly publication, "Forecast of Food, Farming and Fertilizer Use in the European Union", which provides further detail and highlights some major issues and figures.

P2O5 K2O

2010 Overview

Forecast changes in farming food crops in Europe (EU-27) 2010-2020

Ten year forecastsn The ten year nitrogen forecast for the EU-27 is approximately the same as prior to the recent economic disruption. The EU-15 forecast is below recent historical minima, while the EU-12 volume is forecast to rise to 120% of the average over the past five years.

Wheat Barley

The overall EU-27 phosphate volume forecast is slightly lower than recent pre-disruption volumes. However the EU-15 forecast tonnage is significantly lower while that of the EU-12, at 136% of the last five year average, is showing major growth. The ten year forecast predicts that the average phosphate application rate per hectare on all agricultural land in the EU-12 countries will be greater than that for the EU-15.

Rye, oats, rice Grain maize Potato Sugar beet Oilseed rape -15 -10 -5

0 5 10 15

Yield (%)

Ten year forecast tonnage compared to the average over the past 5 years (%)

Cropping area (%)

Forecast changes in fertilizer use by crop in Europe (EU-27) 2010-2020

Potash

The forecast situation for potash is similar to that for phosphate, but with the EU-15 showing potential recovery of usage to 95% of the 5-year average. Nevertheless the tonnage is still lower than the predisruption level in the EU-15, whereas in the EU-12 the recovery is strong at 135% of the historic average, with the average potash application rate again overtaking that of the EU-15.

Coarse grains Sugar beet Oilseed & pulses Fodder crops Potato Grassland (fertilized) -5%

N P2O5

Phosphate

EU-15 97 89 95 EU-12 120 136 135 EU-27 103 103 107

Wheat

-10%

Nitrogen

10%

15%

K2O

20%

25%

30%

35%

The continuing low levels of usage of phosphate and potash in the EU-15 causes concern, with nitrogen use efficiency being potentially threatened if crop nutrition is not correctly balanced. Analysis of the nutrient balances â&#x20AC;&#x201C; inputs minus off-takes â&#x20AC;&#x201C; for phosphate and potash on major arable crops in the EU-15 suggests a continuing negative trend.

Implementing the messages | Association members & board Agriculture & environment | Technology, environment & safety Trade & economic policy | Information services Communicating the issues | Fertilizers Europe staff

Implementing

the messages Our work is to find the most effective way of promoting the interest of our members with legislators, stakeholders and the general public." Jacob Hansen Director General

Members of the Board with staff, Board meeting, Brussels, March 2011 2010 Overview

Fertilizers Europe represents the majority of nitrogen fertilizer manufacturers in Europe and is the industry's official dedicated source of information on fertilizers.

Fertilizers Europe structure General Assembly Board

Agriculture & Environment Committee

Technology, Environment & Safety Committee

Trade & Economic Policy Committee

Information Services Committee

Secretariat

Members Corporate AB Achema, Lithuania Anwil SA, Poland Azomures, Romania BASF AG SE, Germany Borealis Agrolinz Melamine GmbH, Austria SC Donau Chem srl, Romania Fertiberia SA, Spain & Portugal GPN, France GrowHow UK Ltd, United Kingdom Lovochemie AS, Czech Republic Nitrogénmüvek Zrt, Hungary OCI Nitrogen, The Netherlands Yara International ASA, Belgium Zaklady Azotowe Pulawy SA, Poland ZAK SA, Poland

Associations AIC Agricultural Industries Confederation, United Kingdom ANFFE Asociación Nacional de Fabricantes de Fertilizantes, Spain ASSOFERTILIZZANTI Associazione Nazionale Fertilizzanti, Italy BELFERTIL Belgium IVA Industrieverband Agrar e.V., Germany PIPC Polish Chamber of Chemical Industry, Poland UNIFA Union des Industries de la Fertilisation, France VKP Vereniging van Kunstmest Producenten, The Netherlands

The board OCI Nitrogen

Renso Zwiersk Presidentk

Yara International

Jean-Paul Beensk Supporting Vice President to thek Information Services Committeek

Achema

Arunas Laurinaitisk Chairman of the Agriculturek and Environment Committeek

GPN

Francis Raatzk Chairman of the Informationk Services Committeek

Yara International

Tor Holbak Deputy President k

Fertiberia

Javier GoĂąi del Cachok Vice President, Chairman of thek Branding Functionk

BASF

Robert MĂ¤rklk Chairman of the Technology,k Environment & Safety Committeek

GrowHow

Paul Thompsonk Vice President, Chairman of the Tradek and Economic Policy Committee

Zaklady Azotowe Pulawyk

Renata Auchimikk Supporting Vice President to the Tradek and Economic Policy Committeek

Yara International

Tore Jenssenk Supporting Vice President to the Technologyk Environment and Safety Committeek

UNIFA

Gilles Poidevink Supporting Vice President to thek Agriculture and Environment Committeek

Fertilizers Europe

Jacob Hansenk Director Generalk

2010 Overview

Climate change and biodiversity were the EU's main environmental focus for agricultural policy and product regulation in 2010. Modifications to CAP after 2013 was the other main driver.

Agriculture & Environment

limate change continued to be an important driver of EU policy in 2010 and is now integrated into most actions directed at the agricultural sector. But biodiversity, where the EU has failed to meet its targets for many years, and discussions on the CAP after 2013 came to the forefront during the year. The A&E Committee has continued to closely follow these developments as well as the other issues below and promote the industry point-of-view.

Commono Agricultural Policyo Discussion increased on the future shape of CAP after 2013, with the Committee actively contributing to the far reaching debate. Its position paper "The Cap after 2013", released in June, put forward its arguments for 'sustainable intensity' in agricultural production.

CAP post 2013 will set the food, energy and environmental goals for agriculture for the next 10 years." Christian Pallière Director, Agriculture & Environment

Agricultural productivity needs to increase in Europe and although agriculture has an effect on the environment, the Committee has highlighted its role in mitigating certain environmental impacts. For instance, fertilizer use can help EU agriculture to achieve its overall GHG emission reduction target by contributing to fixing carbon in the soil and by overcoming the need for significant changes in land

use. The main outcomes of the possible impact of the revised CAP on crop production and fertilizer consumption have been included in the publication “Fertilizers Europe Forecast for Food, Farming and Fertilizer Use in the EU 2010/2020”.

Food chaino In one of the most important projects initiated in 2009 in the area of sustainable use of natural resources, Fertilizers Europe has continued its active contribution to the “Food Sustainable Consumption and Production Round Table”, a food chain industries' initiative co-chaired by the European Commission, which aims to ensure that food production and consumption closely meet consumer needs and are also environmentally sustainable.

Biodiversityo 2010 was the European Year of Biodiversity and Fertilizers Europe's "Biodiversity and Agriculture" position paper, released in December, details its perspective on the subject. Although all types of biodiversity are important at every level – region, village, farm and field – the priority of Fertilizers Europe relates to the protection and stimulation of agricultural biodiversity.

Implementing the messages | Association members & board Technology, environment & safety Trade & economic policy | Information services Communicating the issues | Fertilizers Europe staff

Agriculture & environment |

The Committee has contributed to the development and promotion of integrated farming practices which directly benefit biodiversity. These include agricultural tools and infrastructure which do not jeopardise agricultural production, such as multi-cropping systems or crop rotation, and good fertilization practices including precision application techniques (right source, right time, right place, right rate) and choice of the appropriate fertilizer according to locality and soil characteristics.

Climate Changeo As part of the continued focus on climate change, 2010 has seen significant evolution in the areas of water protection and air pollution. These remain important issues, both as EU priorities and as main concerns for Fertilizers Europe. The A&E Committee has now successfully completed the ambitious programme it set out in April 2008. Water: For the Water Framework Directive, 2009 was the deadline for Member States to report their targets and action plan. The potential impact of these national measures have now been considered in our fertilizer forecast.

Sustainabilityo Life-cycle assessment (LCA) principles are increasingly being applied to address the environmental impact of manufactured products and the A&E Committee has made a significant contribution to a number of projects. Fertilizers Europe is now entering the validation phase of the data set supplied to the EU LCA platform's ELCD system, a project first initiated in 2005. The final draft report of the ENA (European Nitrogen Assessment) EU-funded project, where Fertilizers Europe has significantly contributed to three chapters, has now been completed and, in addition to our work on the Gothenburg protocol, we have started our contribution to a detailed study on â&#x20AC;&#x153;nitrogen and foodâ&#x20AC;? within the UN Task Force on reactive nitrogen.

CAP 2013 1. Why does CAP need to change?

The 2009 'health check' further implemented the single farm payment and the link with environmental protection, as well as updating some market measures such as the abandonment of set-aside. But despite the revisions being in the right direction, the policy has proved to be insufficient within the new global context. The EU's vulnerability to recent volatility in agricultural markets, with its related adverse economic impact on farmers, and the importance of new agricultural production (biomass, bioenergy) therefore triggered the need for the further restructuring.

2. What's Fertilizers Europe's vision?

One of the CAP priorities should be to enhance the productivity of EU agriculture, while at the same time improving its environmental standards. The first positive outcome of this enhanced productivity will be to increase Europe's competitiveness, providing income stability for farmers and limiting the need for market support. It will also ensure EU food self-reliance, while improving Europe's contribution to the global food supply. Finally, it will serve the increasing demand for renewable energy resources, such as bioenergy and biomass, contributing to a decrease in EU dependency on imported energy.

3. But what about the environment?

Improving environmental protection is essential for EU agriculture's acceptance by EU citizens. The development and support of sustainable productive farming systems, such as minimum tillage, integrated farming, etc. as well as advanced fertilizer selection and application techniques, can make a significant contribution. Such whole farm management systems appropriately address the new economic, environmental, social and animal welfare demands. 'Sustainable intensification' is our catchphrase.

Air: Revision of the Gothenburg protocol has been the main issue in 2010. Fertilizers Europe has contributed to the UN Task Force's work process on reactive nitrogen with progress especially on the introduction of quantified targets and criteria as mandated by the UN ECE.

Fertilizers Europe's Technical Committee deals with all aspects of the production, transport and storage of fertilizers.

Technology, Environment & Safety

Tâ&#x20AC;&#x160;

he main goal of the Technical Committee's actions is to ensure that new legislation takes into consideration factors that could affect the competitiveness of the fertilizer industry. The committee also serves as a platform where technical information and good practice are shared and formalised in guidance documents.

ETS IIIâ&#x20AC;Ś and beyondo ETS has been the prime focus of Fertilizers Europe Technical and other committees' communications during 2010. The Committee has been heavily involved in discussions with the European Commission (DG Clima, DG Enterprise) on setting appropriate benchmarks for the free allocation of emission rights as part of the ETS III Emission Trading Scheme (2013-2020).

Raising the awareness of fertilizers as a sector particularly exposed to the risk of carbon leakage has been one of our main challenges." Antoine Hoxha Director, Technology, Environment and Safety

The EU has now set extremely ambitious targets from 2013 onwards. Objectives such as a total decarbonisation of the economy by 2050 implies a reduction of CO2 emissions as high as 80-95%. The Technical Committee is closely following these developments as they will have a huge impact on the future of the industry.

Benchmark studieso Fertilizer Europe regularly performs a number of benchmark studies covering, safety, environment and energy. The data collected have been key references in discussions with the European Commission and other institutions about new legislation. They are also useful to member companies in benchmarking their own performance. Emissions: Fertilizers Europe has benchmarked the main emissions from its production plants, such as N2O, CO2, NOx etc., since 1996. Data from the Emissions survey have played a crucial role in Fertilizers Europe's discussions with the Commission on ETS III. Safety performance: The Lost Time Injury Rate (LTIR) is a good performance indicator for safety. Fertilizers Europe Technical Committee has asked member companies to draw safety improvement plans and set ambitious LTIR objectives for 2011.

Product stewardshipo Fertilizers Europe's Product Stewardship programme has been the umbrella for its environment, safety and security activities since 2003. The next industry Product Stewardship audit was conducted in the first quarter of 2011 and in preparation the Committee

organised a training session for Product Stewards in November 2010. The committee is collaborating with the International Fertilizer Association (IFA) to spread the concept of Product Stewardship outside Europe, while maintaining the recognition of the very high level achieved by our member companies. It is also in the process of updating the dedicated Product Stewardship section of the website.

Safetyo Safety Seminar: the annual Safety Seminar is a platform for members to discuss freely safety and related issues in order to exchange experience and learn. The 2011 Safety Seminar was held in Norway in May and focused on safety in storage, among other issues. The seminar culminated in a visit to Yara's Porsgrunn site in Norway. Incident Database: Fertilizers Europe updates its database of some 800 incidents that have taken place since 1920 on an annual basis. The database and the safety recommendations provided in the accident reports serve as a learning tool for members.

Securityo Fertilizers Europe continues to actively participate in the European Commission's DG Home Affairs Working Group â&#x20AC;&#x201C; Precursors in order to discuss ways to reduce the risk of terrorist misuse of fertilizers as explosives. In 2010, the Commission put forward a new legislative proposal restricting the supply of nitric acid and ammonium nitrate based products to the general public. In parallel, all the stakeholders in the fertilizer

supply chain and the Commission are evaluating the feasibility of a voluntary agreement to prohibit sales or put in place other measures to reduce this risk.

Environmento New Approach Directive: in conjunction with the A&E Committee, we are cooperating with the Commission in evaluating the need for new environmental legislation for fertilizers and the possible options. Fertilizers Europe favours fully harmonized legislation that would cover organic fertilizers, organo-mineral fertilizers and soil improvers, where the same safety and security requirements could be applied. The association published a position paper in September 2010 to express these views in more detail.

2011 issues 1. Product stewardship A total revamp of the Fertilizers Europe product stewardship website will be undertaken to ensure that the industries' responsible position regarding safety and the environment is given the widest possible promotion.

2. Emissions targets The European Commission is considering increasing its emissions targets to 30% or higher by 2020 and to 40% by 2030 in order to meet its objective to become a low carbon economy by 2050. These global targets need to be broken down into sectorspecific models so that the specific nature of fertilizer production is taken into account.

Fertilizer reference o & registrationo BATREF: the Best Available Techniques Reference Documents developed by the European Commission are used to guide national authorities in agreeing permits for fertilizer production plants. The existing BATREF Document â&#x20AC;&#x153;Ammonia, Acids and Fertilizersâ&#x20AC;? will be revised in 2012 and several Technical Committee taskforces are proactively preparing for this. REACH: the FARM consortium, which was initiated by Fertilizers Europe, has followed the registration of fertilizer substances under REACH. As of December 2010 this consortium has submitted the dossiers to the European Chemical Agency.

2010 Overview

Without continuous progress on Trade & Economic Policy issues, the EU industry cannot sustain the regular 12-15% return on capital necessary to secure its long term future – economically and environmentally.

Trade & Economic Policy

n the commercial front, 2010 provided a welcome market recovery after the economic crash of 2008/2009 but there remained deep structural problems in the gas, carbon and fertilizer scenarios. While North West Europe enjoyed highly competitive spot gas rates, much of the EU gas markets remained stuck in high oil indexed gas price contracts. In addition, the EU continued to pushed ahead with its ETS III programme – thus unilaterally and uniquely preparing to place carbon charges on the EU fertilizer industry by January 2013.

competitivenesso

We continue to work for a level playing field for fertilizers inside as well as outside the EU, where the issues of gas, carbon emissions and commercial fair trade are critical.” Sean Mackle Director, Trade & Economic Policy

The EU not only followed up on the establishment in law of its Third Energy Package but also on an equally impressive implementation programme. Having established the 3rd Gas Directive, the Security of Gas Supply Regulation and ACER (Agency for the Co-operation of Energy Regulators), the Commission, national regulators and all interested parties engaged in the development of 10 Year Plans, a Gas Target Model for a panEuropean market, and specific improvement projects – most notably on

congestion management, gas quality and gas balancing. In March 2011, the European Heads of State declared that the EU Energy Package must be completed by all Member States by 2014. This is ambitious but it is the political declaration Fertilizers Europe and its colleagues at CEFIC and IFEIC have long called for. Now the emphasise will be on the Member State governments and regulators to really push on fast. Interestingly, DG Energy and DG Competition regularly make it clear that they are both ready to take on any infringements or transgressions.

EU trade policyo The two Russian company actions at the General Court in Luxemburg were special features. The key complaint of the two separate actions is that the EU is wrong to apply “Waidhaus, Germany” gas market prices to their operations in Russia when calculating dumping margins. The EU institutions have consistently applied this “gas adjustment”, accepting the Fertilizers Europe and other industries' argument that Russian government statutes artificially set the gas price to industry in Russia at levels below cost – and even below operational costs.

With the Barosso II Commission getting into full working mode, there was a plethora of consultations. Fertilizers Europe gave special attention to the general trade policy review, the review on the Generalised System of Preferences (tariff concessions for third countries – mainly in the developing world but also relevant for the Former Soviet Union), and the Ukraine Partnership and Co-Operation agreement.

Internationalo trade policyo The Doha Round experienced another revival with the chemicals zero-rating package (which

includes fertilizers) becoming a central part of the Non Agricultural Market Access (NAMA) negotations. But as the Doha Round started to hit troubles again on reductions in tariffs by advanced developing countries and the BRIC nations, most notably Brazil, China and India, the Commission moved its Global Europe programme forward with its first new Free Trade Area agreement with South Korea. Accelerations in negotiations were also obvious in the case of Ukraine, India and Canada – and all three could be set for a conclusion by Treaty by end 2011 or 2012.

Arguably the 'stand out' international trade policy development for the EU and world fertilizer industry is the WTO accession of Russia. Urged on by President Obama, President Barosso resolved all outstanding problems with Russian leaders in Brussels in November 2010 and Russia is set to join the WTO by December 2011. Fertilizer Europe continues to insist that the EU-Russia gas deal done in May 2004 – known as 'the cost plus profit plus investment gas deal' – must become a full legal commitment undertaken by Russia in its WTO Accession Treaty.

Mixed outlook for 2011 Price volatility The trade and economic outlook for 2011 promises to be mixed. Market recovery cannot hide the fact that volatility in the prices of commodities – oil, gas, agricultural products – presents continued economic uncertainty. Very high oil prices puts tough pressure on margins for the fertilizer industry and its customers, the farming community.

Climate change With no sign of an international climate change treaty or a EU compensation/ equalisation scheme to 'level' the carbon charges that will be paid by the European industry, the energy-climate change scenario looks problematic.

Fair trade Over the next 18 months the fertilizer industry will also be defending, in 'sunset' reviews, the anti-dumping duties currently applied on UAN solutions from Algeria, Belarus, Ukraine and Russia and on AN from the Ukraine and Russia. These duties have been crucial to the maintenance of fair trade in the EU market. Their continuation will undoubtedly be crucial to the state and welfare of the EU fertilizer industry.

2010 Overview

The role of the Information Services Committee is primarily to provide members with essential EU-27 market statistics so they can benchmark themselves against the European market in terms of market share, production, production capacities and costs.

Information Services

esides providing market statistics to members, the Information Services Committee also provides support to other Fertilizers Europe committees in terms of statistics and resources to support their work (e.g. in advocacy, trade defence, etc.).

product consumption forecasts and worked with TESC on benchmarking exercises. In addition, it has provided regular support for the activities of TEPC, especially with statistics for trade defence cases.

INDUSTRY STATISTICS o overview o The ISC now focuses mainly on EU-27 statistics and its activities have been strengthened with a network of dedicated representatives from member companies. The Quality Group, which includes experienced representatives from member companies, has been formed to strengthen the quality of the statistical reports. The committee has also improved its cooperation with the International Fertilizer Industry Association. The committee's work continues to support that of the other Fertilizers Europe committees. It has completed the Fertilizer Europe's annual fertilizer consumption forecast for the A&E Committee (reported in the previous section) in publishing short-term

Our aim in 2011 is to facilitate Fertilizers Europe members access to our statistics through a modernised and updated database." Michał Wendołowski Information Services Manager

Industry statistics have been distributed to members throughout the year to support their forecasting and benchmarking activities. Regular publications included the statistical handbook, figures relating to capacities, production, exports and imports, production costs, and product deliveries. In addition, actions have been taken to improve the functioning of the database and the distribution of ISC statistics to members. An updated list of publications and statistics available to members was published at the beginning on 2011 and the confidentiality rules for members formalised. A new survey – the Industry Profile – provides data on Fertilizers Europe's members’ turnover, employment and investment which helps the industry to benchmark itself and supply key information for advocacy purposes.

Fertilizers Europe also produced its yearly survey of membersâ&#x20AC;&#x2122; production costs for the main fertilizer products. The survey identifies trends within the industry as a whole, as well as serving as a benchmarking tool. Provisional EU-27 import figures for all fertilizers containing N from countries outside the EU show that these totalled 2,204,000 tons N in 2009/2010 compared to 2,605,000 tons in 2008/2009, 401,000 tons more than the previous year. These accounted for 18% of consumption (including products used for technical purposes) compared to 22% in 2008/2009.

EU-27 nitrogen fertilizers statistics (in â&#x20AC;&#x2DC;000 tons N)

2008/2009

2009/2010

% change

ACF deliveries in 2010

7,004 7,502 +7

Imports to EU

2,605 2,204 -15

Exports from EU

1,487 1,066 -28

Consumption EU-27

11,860 12,194 +3

Capacity

16,100 15,700 -2

Production

11,300 11,800 +4

Objectives for 2011 1. Timely delivery of statistics. 2. Facilitating member access through a modernized database. 3. Integration of new members.

2010 Overview

Communications is at the heart of Fertilizers Europe's advocacy, branding and facilitation activities. we publish a variety of publications aimed at the industry, institutions and the general public.

Communicating the issues

Fâ&#x20AC;&#x160;

ertilizers Europe's advocacy, branding and facilitation functions operate across its committee structure to achieve internal synergy and to make the most efficient use of common information and ideas when addressing broad-based issues. They are steered by Fertilizers Europe communications activities through a range of printed and electronic publications, as well as via the Fertilizers Europe website and its social media platforms.

continuous contacto Advocacy involves daily contact between Fertilizers Europe representatives and the European institutions, which has become increasingly central as the EU prepares guidelines and legislation of direct consequence to the fertilizer industry. A large part of this activity is conducted in close cooperation with other EU players including trade associations, the press and NGOâ&#x20AC;&#x2122;s, to name but a few.

We need to firmly anchor our brand in the minds of key stakeholders. Reactions to our activities indicate that we are on the right track." Mark Cryans Head of Communications

Branding gives the association increased visibility within agricultural circles and helps promote productive agriculture as a response to the global food challenge. The rebranding of Fertilizers Europe in 2010 has elevated the status of the association in all relevant circles. Efforts still need to

continue, both to perfect the focus of the definition of the brand and firmly anchor it in the minds of key stakeholders, but we are on the right track. The advocacy remit has generated specific publications to educate and influence various target audiences and upgraded the content of the Fertilizers Europe website to contain items of topical interest on fertilizer use and farming.

increased cooperationo There has been increased cooperation between existing Fertilizers Europe members and the integration of new members. We are in the process of maximising the benefits of membership through tasks undertaken on behalf of members to encourage them to participate actively in the work of the association. It is envisaged that new platforms will be established to ensure that the information flow is customised and packaged to suit individual memberâ&#x20AC;&#x2122;s needs and to facilitate the functioning of internal and external meetings. Fertilizers Europe has presented at many European and International fora and conferences throughout the year on a range of issues in keeping with the core values of the association. Fertilizers Europe will host an International communications seminar in the last quarter of 2011.

Recent publications

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2010 Overview

fertilizer Europe activities are managed by a small dedicated team of professionals at its secretariat in brussels.

Fertilizers Europe staff

Jacob Hansen

Christian Pallière

Director General

Director, Agriculture & Environment

Ermis Panagiotopoulos Agricultural Economist

Jurga Lenktaityte

Sean Mackle

Patricia Everaert

Technical & Trade Analyst

Director, Trade & Economic Policy

Senior Secretary

Michał Wendołowski

Mark Cryans

Melina Moleskis

Gabor Marton

Marjolaine Jaquet

Antoine Hoxha

Information Services Manager

Head of Communications

Trade & Market Analyst

Manager Administration & HR

Director, Technology Environment & Safety

Avenue E. van Nieuwenhuyse 4/6 B-1160, Brussels, Belgium Tel: +32 2 675 3550 Fax: +32 2 675 3961 mark@fertilizerseurope.com

www.fertilizerseurope.com twitter.com/FertilizersEuro www.youtube.com/fertilizerseurope