/Overview2011

Partnership

for growth Sustainable agriculture in Europe

2011 OVERview

Fertilizers Europe represents the majority of nitrogen fertilizer producers in Europe and is recognized as the dedicated industry source of information on mineral fertilizers. The association communicates with a wide variety of institutions, legislators, stakeholders and members of the public who seek information on fertilizer technology and topics relating to today’s agricultural, environmental and economic challenges. The Fertilizers Europe website provides information on subjects of relevance to all those interested in fertilizers' contribution to global food security.

www.fertilizerseurope.com

Contents The fertilizer/food production chain................................ 4 Sustainable agriculture in Europe................................... 6 Feeding life................................................................ 10 More from less........................................................... 13 Partnership for growth................................................. 16 Fertilizer trends.......................................................... 19 Fertilizers Europe 2011.............................................. 22 Fertilizers Europe Board.............................................. 23 Communications......................................................... 24 Committee activities: • Agriculture.............................................................. 26 • Technical................................................................ 28 • Trade & Economic.................................................... 30 • Statistics................................................................. 32 Fertilizers Europe members......................................... 34 Fertilizers Europe staff................................................ 35

2

Key

facts

 Mineral fertilizers are essential in increasing agricultural production to meet growing global food needs  I ncreasing the productivity of the existing agricultural area will safeguard virgin land and biodiversity, as well as minimise climate change  E urope has the world's most efficient agriculture and its most modern fertilizer production  E uropean agricultural policy should ensure the long-term sustainability of its agricultural sector and its increased contribution to global food needs  C limate change regulation needs to be based on the entire fertilizer life-cycle to make the best use of natural resources and avoid carbon leakage

2011 Overview

3

The fertilizer/food

production chain Environ­ mental Impact

Safety

Fertilizer development

Product efficiency

Price Natural resource use

Raw materials Energy Natural gas Mineral ore

GHG reduction

Security of supply

Cost

Fertilizer &

Crop type

Product stewardship

Logistics

Product quality

Cost

Nutrient use efficiency

Security of supply Energy efficiency

Fertilizer production

Best Available Technology (BAT) GHG reduction

N

Transport & storage

Energy efficiency

GHG reduction

itrogen fertilizers are an integral part of the food and energy production chain. Analysis of their impact requires objective evaluation of all the issues related to food and biomaterials production and consideration of the complete nitrogen life-cycle. The fertilizer industry applies life-cycle assessment (LCA) principles in the development of techniques to optimise the use of reactive nitrogen – nitrogen in a form that can be used by plants. It collaborates closely with the scientific

4

Land use Good Agricultural Practice (GAP)

Bio-energy production

Cropping/ harvest

4 R's: Right rate Right time Right source Right place

Crop quality

Natural resource use

Energy Balance

Crop yield

Crop yield

selection use Crop quality

Nutrient stewardship

Waste reduction

GHG reduction

Food/feed processing & distribution

Energy efficiency

Diet

Waste

Price

Waste reduction

Food/feed consumption

Disposal Recycling

Food production factors Environmental considerations

and agricultural communities to introduce practices which maximize nitrogen-use efficiency and provide the means to meet the challenge of feeding a growing world population. As part of this process, Fertilizers Europe voluntarily submits data on the industry's energy consumption and greenhouse gas emissions to the European Commission's LCA database.

2011 Overview

5

Sustainable

agriculture in Europe

6

Francis Raatz

 

Jacob Hansen

Comment francis raatz, President of Fertilizers Europe, and Director General, Jacob Hansen, discuss the 2011 performance of the European Fertilizer industry and the main issues facing nitrogen fertilizers and farmers in Europe.

FRANCIS raatz I am happy to say that, in my first year as President, the European

fertilizer market has continued to recover from the disappointing 2009 season.

Overall European fertilizer consumption in 2010/2011 was up 9% on 2009/2010 at some 16.2 million tons (in tons of nutrients), however still 11% below the 2007/2008 peak. Demand for nitrogen-based products grew by 7% to 11 million tons (of nitrogen). Fertilizers Europe's members generally posted good results, "Demand for nitrogen fertilizers grew by which has largely helped them to fund approximately €800 million worth 7% in 2010/2011 and Fertilizers Europe's of plant investments needed to lessen the impact of the ETS III emissions members generally posted good results." requirements coming into force next year. Measures, I would like to point out, that will not be applicable to our competitors outside Europe.



JACOB hansen Yes, 2011 saw strong fertilizer demand across Europe but we still need to be cautious. The industry is traditionally cyclical and it is not yet clear whether the growth of the last two years will be sustainable "The industry outlook looks over the longer term. European producers have positive but we still need yet to feel the full impact of ETS III and they face to be cautious." continuing challenges in the gas market. But I am an optimist on behalf of our members, even if a Energy efficiency of ammonia plants (regional average) cautious optimist.

42

FRANCIS raatz As far as ETS III is concerned, Europe already has some

of the world's most efficient fertilizer plants. Moreover, European producers have made a major effort to further upgrade their plants to limit the long term impact of ETS III on their businesses. Yet, with the ink not even dry on the legislation, there are worrying signs that further reductions in emissions are being considered. Before there has been a full review of the actual impact of the current legislation, this would be very irresponsible.

Any move towards further reductions would be extremely painful for the industry without some form of redress. >>

GJ/t ammonia

38

34

30

26

22 Europe (EU-27)

Egypt

USA

Saudi Arabia

Ukraine

Russia

2011 Overview

7

 Comment

Inconsistency in the gas price around the world also continues to play a key part in the profitability of the industry. The aftermath of the Fukushima disaster has increased average gas prices in Europe. The price of gas in the US market, which is largely based on shale gas, is currently around 30-40% of that in Europe.

Furthermore, some major fertilizer producers based in Russia, North Africa and the Middle-East still benefit from dual gas pricing. Since gas is the main raw material for fertilizer production in Europe and fertilizer prices are set globally, this has a significant impact on the profitability of the European "The gas price in the USA is currently around industry. We support any measure to further increase the flexibility 30-40% of that in Europe and some major fertilizer of the European gas market in order to create a more level producers still benefit from dual gas pricing." playing field for European producers.

JACOB hansen The industry's relation with the farming community and other stakeholders is also very important to us. We are increasing our efforts to explain to them how fertilizers play a positive role in increasing Europe's agricultural productivity and reducing its reliance on imports. Our members actively promote best practice in the use of their products to ensure that they are applied efficiently and safely. Our Fertilizers Europe conference "Increasing agricultural productivity through better use of natural resources" in October brought together agricultural experts, academics, decision-makers and representatives from all parts of the food production chain to discuss the issues facing Europe's agricultural "Our members actively promote best sector. We are also working to create better communication links with practice on the farm to ensure their the general public to explain the vital role fertilizers play in feeding products are used efficiently and safely." the planet (see the new website: www.RootsForGrowth.com).

 90%

Energy, industry, waste, etc.

Based on UNFCCC (2008) *Fertilizers Europe calculation

8

European (EU-27)

environmental emissions

1.0% 1.2% 3.9% 4.1%

n Production of mineral N fertilizer* n N2O from mineral N fertilizer use in agriculture* n N2O from organic N sources in agriculture n Other GHGs from agriculture, mainly CH4

FRANCIS raatz The promotion of best practice leads me to another important industry initiative: our Product Stewardship program. The program shows that our members take their commitment to society very seriously. Its compulsory, independent audit ensures that we are producing to the highest standard and that we respect stringent health, safety and environmental standards in both our production and distribution. The program operates at the highest managerial level and has enabled the European industry to take the global lead in this increasingly important area. The compulsory European ‘Product Stewardship’ certificate is recognized as the premier standard in the international arena and our members

"The Fertilizers Europe Product Stewardship program has enabled the European fertilizer industry to take the global lead."

are automatically accredited with the highest status within the International Fertilizer Industry Association (IFA) stewardship program. We recently presented certificates to several of our members to mark their successful compliance with the audit in 2011. As part of the life-cycle approach, we are now working on calculating the carbon footprint of our products so that if European farmers come under pressure to further reduce their environmental impact, they will know exactly where they stand as far as their choice of nitrogen fertilizer is concerned.

JACOB hansen Another key activity this year has been taking part in the preparation

of the new European fertilizer regulation, where a proposal is due next year. The regulation marks an important step in defining the quality of all fertilizers so farmers can make more informed choices. And with the increase in waste recycling, it is even more important to know the exact content and nutrient efficiency of a particular product.

FRANCIS raatz I would also like to say a brief word on the new CAP proposals,

currently being discussed. At first glance, the idea to set aside 7% of existing farmland as "ecological-focus-areas" does not seem compatible with the long-term challenge faced by Europe, and the world, "The CAP "ecological-focus-areas" do not seem to increase food production. Although we strongly support to be compatible with the long-term challenge sustainable agriculture and ecologically responsible land use, Europe faces in increasing food production." this measure appears to be ill advised.

JACOB hansen I would like to end by thanking our past President, Renso Zwiers, for his

solid work as President of our association over the past 4 years. I would also like to thank the Board members elected in June 2011. They have given me invaluable guidance and counsel on issues and on the running of the association. Finally, I congratulate my team for their outstanding performance and continued efforts for the benefit of the industry. Our website (www.fertilizerseurope.com) provides further information for those interested in the European fertilizer industry's continuing contribution to the agricultural production chain. n

2011 Overview

9

Feeding life

 Farmers have to eat  Plants have to eat  People have to eat

10

Farmers

have to eat Farming is a tough business. Mineral fertilizers help make farming financially viable. No wonder 95% of European farmers use mineral fertilizers to boost their financial independence.

In addition to providing us with essential food, feed and energy crops, agriculture has to be economically viable to be sustainable over the long term. Europe's farmers need to make a sufficient return on what they produce to reward their efforts and enable them to invest in their operations.

Fertilizers are often one of a farmer's major costs, so their efficiency plays a vital role in ensuring a productive and profitable agricultural sector. On average, every euro invested in mineral fertilizers provides the farmer with a five-fold return.

Plants

have to eat CO2

nutrients emissions

N2O

mineral fertilizers

harvest

N

P

K

Plants don't grow magically. They need a healthy diet of sunlight, oxygen, carbon dioxide, water and nutrients. Fertilizers give plants a hand by providing the right mix of the major nutrients nitrogen, phosphorus and potassium and important secondary elements.

Crops need sunlight, air, water and essential nutrients to grow. These are absorbed by the individual plant, either directly through its leaves or from the surrounding soil through its roots. When the crop is harvested, the nutrients the plant has absorbed are harvested with it. Unless these nutrients are replenished, the soil will lose its productive capacity. Natural processes that break down organic matter and crop residues provide about half the soil's requirement, but the balance needs to be provided by fertilizers.

Mineral fertilizers enable farmers to offer crops a predicable supply of the three primary nutrients nitrogen, phosphorus and potassium (N, P, K) as well as the secondary elements calcium, magnesium and sulphur, and other micro-nutrients. The fertilizer provides these in a form that can be readily assimilated by the plant.

Effective fertilization closely matches the nutrients available in the soil to the different requirements of a crop over its growing cycle. This balanced nutrition enables the crop to optimise its use of the nutrients and ensures strong, healthy and productive crop growth.

soil mineralisation

2011 Overview

11

Feeding life

People

have to eat

In the past 50 years, the world's population has doubled. However the amount of available farmland is limited. Fertilizers have helped make the best use of the farmland we have by providing crops with additional nutrients. Today, 48% of the global population are fed thanks to them.

12

It is widely accepted that global food production needs to increase significantly to keep pace with projected food needs. And, with increasing environmental pressure on bringing more land into agricultural production, the only way this growth can realistically be met is through improved agricultural productivity.

European agricultural policy should encourage its farmers to increase their productivity while maintaining the environmental integrity of the land they farm. This "sustainable intensification" of farming requires more widespread adoption of best farm practice based on new crop science, targeted crop nutrition and modern cropping techniques.

As part of the developed world, and benefiting from exceptional natural conditions, Europe has the moral obligation to do all it can to help meet global food needs. It has the climate and the farmland to be more than self-sufficient in food production, yet it is a net food importer. An area outside Europe the size of Germany is currently devoted to supplying European markets, land that could support local food needs.

Over the past 40 years, mineral fertilizers have significantly increased crop yields around the world.

Without them, it is calculated that agriculture today would require an additional 1,100 million hectares of virgin land. Efficient use of modern fertilizer technology can both ensure that a growing world population has enough to eat and that the environmental impact of farming on our planet is limited.

More

from less  Fertilizers & land  Fertilizers & energy  Fertilizers & climate change

2011 Overview

13

More from less

Fertilizers

& land After the "green revolution" of the 1960s and 1970s, the rate of agricultural growth around the world has slowed.

Growth in the yields of wheat, rice and maize have all declined in developing countries since 1980 and today growth in agricultural productivity in western Europe is almost static.

Higher crop yields mean that To compound the the land currently farmed in problem, the world's Europe is sufficient to meet its agricultural land base anticipated food and energy is shrinking due to needs. increasing urbanisation, soil erosion and nutrient exhaustion. A large number of regions are also affected by alarming levels of water scarcity.

The sustainability of European agriculture is closely linked to good agricultural practice (GAP). Agricultural experts, legislators and providers of agricultural inputs all have a role to play in promoting it. For its part, the European fertilizer industry has developed advanced farm management strategies to optimise crop yields and reduce environmental impact.

Nitogen-use efficiency Compound nitrogen fertilizers such as AN (ammonium nitrate) have traditionally been favoured by farmers in Europe as being the best suited to its soil and climate.

More crops are now produced with less fertilizer than 20 years ago and European farmers' nitrogen-use efficiency leads the world.

ďƒ N

itrogen consumption

(%)

(1990 = 100%) 120

Crop production

110 100 90

N Fertilizer consumption

80 70 60

1990 1995 2000 2005 2010

ďƒ N

itrogen use efficiency

(%)

70 65 60 55 50 45 40 1990 1995 2000 2005 2010

Source: FAO, Fertilizers Europe

Fertilizers are increasingly tailor-made to meet specific crop requirements and precision application techniques cater for different locations and soil types, as well as weather conditions. Modern technology like GPS-based soil and biomass mapping can now be used to define exact nutrient demand. Other agricultural techniques such as crop rotation and minimum tillage also help maintain the soil's nutritional quality.

Education of the farming community in the timing and dosing of nitrogen fertilizers is increasingly widespread.

As a result, the yields achieved with the appropriate product are high and their impact on soil, water or air quality are far better managed.

14

Fertilizers

& energy

Europe is the world’s most efficient manufacturer of compound nitrogen fertilizers. The energy efficiency of ammonia production in Europe is close to the technological limit and an increasing number of its nitric acid plants incorporate advanced emission abatement technology.

Although producing fertilizers is energy intensive, they greatly increase the positive energy balance of agriculture.

Fertilizers help plants store more energy.

Energy that will be used to feed people and animals or used as biofuel.

It takes a significant amount of energy to produce mineral fertilizers, however they offer a positive energy balance.

By increasing the yield and the intrinsic energy content of a crop, fertilizers enable them to produce six times more energy than that used to make, distribute and apply the fertilizer. This energy supports human and animal nutrition or the increasing demand for fuel from renewable sources.

Fertilizers

& climate change Fertilizers make land use more efficient, helping to reduce environmental emissions from farming.

Farming is highly dependant on climatic conditions. Extreme weather and the increasing variability of seasonality not only affect crop yields and quality, they can also bring new plant and animal diseases.

The expansion of farmland in many parts of the developing world has had a major impact on the environment. Of the 25.5% of global GHG emissions currently attributed to agriculture, 12% are due to changes in land use. Europe's long tradition of agriculture means that its direct changes in land use are not large. The most relevant emissions resulting from agriculture are nitrous oxide (N2O), from organic sources of nitrogen and fertilizer use, and methane (CH4), primarily from livestock production.

ďƒ C

arbon footprint of different nitrogen fertilizers

14

Kg CO2-eqv./Kg N

12 10 8 6 4 2 0

CAN CO2 from production CO2 from application

Source: Bentrup, F (2010)

AN

UAN N2O from production N2O from application

Urea CO2 from transport

Different types of nitrogen fertilizer have different environmental impacts, as can be seen from the comparison of the carbon footprint of different nitrogen fertilizers opposite. Although urea's higher N content can reduce its distribution, storage and application costs, when the emissions from the soil resulting from its use are included, the position changes.

With the availability of new fertilizers that limit environmental emissions, the main focus of future greenhouse gas mitigation is on promoting good agricultural practice, which has increased nitrogen use efficiency by 45% since 1985.

2011 Overview

15

Partnership

for growth

 Fertilizers + farmers  Fertilizers + the sun  Fertilizers + nature

16

Fertilizers

+ farmers Nitrogen fertilizers are a key ingredient for a sustainable farming sector for the decades to come. They are applied to more than 135 hectares of farmland in in Europe.

Europe's farmers rely on high quality fertilizers to sustain their operations. European fertilizer producers actively encourage efficient fertilizer use among farmers to control costs.

Fertilizers

+ the sun The power of the sun combines with the nutrients fertilizers provide to enable plants to store more energy. This increases the nutritional value of food and feed products, as well as the efficiency of bio-energy crops.

Fertilizers provide the right mix of nutrients to turn our crops into small biological power plants. The boost provided by fertilizers enables plants to grow more foliage and use the power of the sun to capture more CO2 and store more energy.

Furthermore, in Europe the price of gas, the main raw material for nitrogen fertilizers, is currently one of the highest in the world with the market dominated by a small number of key suppliers. In some countries outside the EU-27 dual pricing policies also favour local fertilizer producers, often with less strict emission standards, giving them an unfair competitive advantage.

It also does not help the competitiveness of the European fertilizer industry that from 2013 it will face significant carbon charges under the EU's Emission Trading Scheme (ETS III) while operating in a global and very competitive marketplace. Without a strong European fertilizer industry, our farmers will be increasingly dependent on the production and pricing policies of countries outside Europe's control.

The development of Europe's bio-energy sector is an important feature in its low carbon strategy. Bio-energy crops are today grown on approximately 4 million hectares, mostly on previously idle or set-aside land. First generation biofuels (cereals, oil seeds, etc.) are expected to continue to dominate the market over the next decade, with the grain used for bio-ethanol production anticipated to increase three times up to 2025.

However, indirect land-use changes resulting from the expansion of biofuel production can create large increases in greenhouse gas emissions. The inclusion of these in the EC's biofuels sustainability criteria may limit biofuel growth in the short term.

ďƒ E

nergy produced on 1 hectare of wheat

GJ/tN 140 Solar energy captured in extra biomass produced due to fertilizer use

120 100 80

Solar energy in biomass produced without fertilizer use

60 40

Energy input due to on-field activities, etc.

20

Energy input due to N fertilizer production, transport & spreading

0 -20

Without N fertilizer

With N fertilizer 170 kg N/ha

Source: Data from KĂźsters and Lammel (1999)

2011 Overview

17

Partnership for growth

Fertilizers

+ nature

As well as releasing quantities of greenhouse gas, increasing land for agriculture by clearing untouched areas and deforestation destroys ecologically valuable natural habitats and biodiversity. It also often has a negative impact on the natural water cycle, resulting in a greater likelihood of flooding or drought.

Arable land is scarce and the demand for food increases by the day as the world's population grows. Increasing the productivity of existing farmland therefore leaves more room for forest and other natural habitats.

Fertilizers make land use more efficient by reducing the need to transform forests or other natural environments into farmland. The potential for growth in crop yields in Europe is such that the existing farmed area can meet our future food needs.

Over the past 25 years, increasing farm efficiency in Europe has allowed its forests to grow over an area of five times the size of Belgium.

ďƒ

6%

Agricultural land use in the European Union (EU-27)

14%

20%

17%

1% 1%

17% 6%

7%

3%

6%

Source: Fertilizers Europe Forecast of Food, Farming and Fertilizer Use in the European Union 2011/2021

18

n n n n n n n n

n n n

Wheat Coarse grains Potato Sugar beet Oilseeds Other crops Fodder crops Permanent crops (fruit, vineyard, forest) Grassland fertilized Grassland non-fertilized Idle land

Fertilizer

trends

 Consumption  Cropping pattern  Price trends  Regulation

2011 Overview

19

Fertilizer trends

Fertilizer

consumption The forecast of consumption below is based on evaluating the individual cropping areas and nutrient application rates for each crop. Fertilizers Europe's publication "Forecast of Food, Farming and Fertilizer Use in the European Union 2011/2021" provides further detail and highlights the major market issues.

ďƒ F(EU-27)

ertilizer consumption in by nutrient

Europe

Nutrient (million tonnes)

2021 forecast (2011 base year)

16 14 12

Based on the average consumption of the last three years, fertilizers containing 10.2 million tonnes of nitrogen (N), 2.2 million tonnes of phosphate (P2O5) and 2.4 million tonnes of potash (K2O) are applied annually to 134.4 million hectares of farmland in Europe. Some 47.8 million ha. of farmland are not fertilized, including 36.3 million ha. of unfertilized grassland. By 2020/21, annual nutrient consumption is expected to reach 10.8, 2.6 and 3.2 million tonnes respectively, applied to 133.7 million ha.

Regionally, nitrogen consumption is expected to fall in Denmark, France, Ireland and The Netherlands after the positive trends of the past few years. A slight increase is expected in Austria, Finland, Greece and Sweden, with a steeper recovery in Portugal and Spain as well as in most EU-12 countries, following the increasing pace of agricultural development there. For P2O5 and K2O, significant growth is expected in Austria, Belgium, Luxemburg, Spain, Portugal and Sweden as well as in Romania, Bulgaria and Hungary.

+5.5%

10 8 6

+30.2% +19.8%

4 2

Nitrogen (N)

Phosphate (P2O5)

20 22

20 17

20 12

20 07

20 02

19 97

19 92

19 87

19 82

0

Potash K2O

Cropping

pattern

ďƒ FE

orecast changes in farming food crops in urope (EU-27) 2011-2021

Wheat Barley Rye, oats, rice

The anticipated cropping pattern over the next 10 years sees stabilization of the cereals area with an overall decrease of 1.8% (down 5% in the EU-12, but unchanged in the EU-15), a 5.9% increase in the area for oilseed rape and a 3% increase in that for sugar beet.

Grain maize Potato Sugar beet Oilseed rape -15 -10 -5 Cropping area (%)

0 5 10 15 Yield (%)

Source: Fertilizers Europe Forecast of Food, Farming and Fertilizer Use in the European Union 2011/2021

20

Stabilization of the grain area is compensated by a sustained 10% increase in yield. This translates into an increase in NPK consumption of approximately 12% for cereals.

Fertilizer price

omparison of the prices of an and urea with wheat

trends

600 500 400 â‚Ź/mt

The vast majority of fertilizer prices are based on global supply and demand, with hundreds of producers and traders around the world setting market prices. Market transparency is provided by several widely available references for spot and longer-term prices.

200 100

Trade flows include high tonnages across a variety of routes but there is a definite division between the major exporters such as Russia, Ukraine, the Middle East and Iran and the major importing regions of Europe, the USA and South America. The European nitrogen fertilizer market is one of the most globally integrated, typically with between 20-30% of the market serviced by imports.

Since the major international crash in 2008, markets have generally been demand-driven with fertilizer prices increasing globally. Competition is fierce, however, and high feedstock costs continue to have a major impact on producer profitability.

Over the past few years there has also been growing concern over the volatility of commodity markets,

300

AN (Black Sea FOB) Urea (Black Sea FOB)

12 Ju l1 2

Ja n

Ju l1 1

11 Ja n

10

Ju l1 0

Ja n

09 Ju l

09 Ja n

Ju l0 8

08

Ju l0 7

0

Ja n

ďƒ C

Wheat (Liffe)

with swings in the prices of oil, gas and agricultural products being especially notable. The gas-based nitrogen fertilizer market has historically suffered from volatility. In 2008 prices in Europe spiked and then dropped suddenly. They also rose and then dropped back in the second half of 2011 as international and local buyers decided to postpone their orders.

Fertilizer

regulation Fertilizers Europe is playing an active role in the development of a new EU fertilizer regulation. This will replace existing legislation and create a fully harmonized EU-wide approach to the manufacture, distribution and use of fertilizers across Europe. As well as covering all type of mineral fertilizer, it will also include organic fertilizers, soil improvers, growing media and bio-stimulants.

Europe to organize industry representation for all fertilizer types in four working groups. These cover regulation structure, fertilizer efficacy/nutrient content, contamination risks, and regulation implementation, labelling and enforcement.

The European Commission expects the working groups to complete their activities in 2012 and it will present its first proposals in the first half of 2013. The legislative process is then expected to take three to four years, with the new regulation becoming effective in 2016/2017.

Fertilizers Europe favours fully harmonized legislation based on common safety and security requirements and has organized a specific task force with experts from its Agriculture and Technical Committees to deal with issues relating to the new regulation. The European Commission has also requested Fertilizers 2011 Overview

21

Fertilizers

Europe

 Organisation  Board  Committees

 Members

 Staff

Fertilizers Europe's activities are governed by its General Assembly and Board and carried out by four committees – Agriculture, Technical, Trade & Economic, and Statistics – with working groups and task forces to support their activities.

General Assembly Board Agriculture Committee

Technical Committee

Trade & Economic Committee

Statistics Committee

Secretariat

 The Agriculture Committee follows the issues affecting Europe's agricultural sector and promotes the European fertilizer industry's interests among European decision-makers and other stakeholders within the food production chain, especially the farmers' organisations.

 The Technical Committee deals with all aspects of fertilizer production, transport and storage. The committee also serves as a platform where technical information and good practice are shared and formalized in guidance documents, with its Product Stewardship program being a key element.

 The Trade & Economic Committee’s main goal is to address international trade and competition issues that impact on the competitiveness of the European fertilizer industry.

These currently include gas pricing and EU gas market structures; EU trade defence actions; various EU tariff concessions; and bi-lateral Free Trade Areas.

 The Statistics Committee's primary role is to provide members with meaningful data on the fertilizer sector so they can benchmark themselves against the European market in terms of market share, production, production capacities and costs. The committee also provides a resource to other Fertilizers Europe committees in support of their work.

Fertilizers Europe's communication activities operate across the committee structure to achieve internal synergy and to make the most efficient use of common information and ideas in addressing broad-based issues.

22

Fertilizers Europe

Board GPN

Yara

Francis Raatzk Presidentk

Lovochemie

Petr Cingrk Vice-Chairman, Agriculture Committeek

GrowHow

Ken Hayesk Vice-Chairman, Tradek & Economic Committeek

OCI Nitrogen

Renso Zwiersk Chairman, Advocacyk

Tor Holbak Vice-Presidentk

IVA

Puławy

Paweł Jarczewski k Vice-President, Chairman, k Trade & Economic Committee k

BASF

Dietrich Pradtk Observer, Agriculture Committeek

Yara

Jean-Paul Beensk Vice-Chairman, Tradek & Economic Committeek

Achema

Arunas Laurinaitisk Vice-Chairman, Advocacyk

Robert Märklk Chairman, Technical Committeek

Fertiberia

Javier Goñi del Cachok Chairman, Statistics Committeek

Borealis

Gerald Papstk Chairman, Agriculture Committee k

Nitrogénmüvek

Istvan Blazsekk Vice-Chairman, Technical Committeek

Anwil

Tomasz Zieli´nskik Vice-Chairman, Statistics Committeek

Fertilizers Europe

Jacob Hansenk Director Generalk

2011 Overview

23

Fertilizers Europe

Communications T

hroughout 2011 and 2012 Fertilizers Europe has strengthened its communications activities with a range of electronic and printed publications, as well as via the Fertilizers Europe website and its social media platforms. The roll-out of the new member-orientated "members lounge" and "LIFE" magazine, as well as enhanced internal and external collaboration, have increased the prominence of the association's communications activities.

Members Lounge The new Members Lounge, which replaces the previous extranet, has been designed to enable members to quickly and easily source the information they require. With emphasis on a visual relationship, the concept replicates the physical characteristics of a typical member's desk on a virtual platform.

Specially designed to suit all mobile platforms, Fertilizers Europe's members are now able to instantly access relevant news, follow the association's calendar of events, plug into its social media activities, browse the video collection and utilise the webconferencing suite. This in addition to being able to access a freshened and more userfriendly document-sharing function.

Phase II of the Members Lounge is already under development and will be launched in the coming months. It will integrate a full member’s directory, allowing a 360° view of the association.

LIFE The new "LIFE" quarterly magazine was launched in the third quarter of 2011 to provide members with a better insight of the association's activities. Fertilizers Europe had sensed that while members were aware of the activities of their individual committees, a gap was evident in publicising work across the association. The fourth issue of the magazine is currently in preparation.

Global Communication Initiative The Global Fertilizers Communication Initiative has developed over the past few years. The initiative brings together communications professionals from the industry and regional associations to discuss the latest best practice and set the scene for how the industry can best

24

Our communications activities are gaining increasing prominence among members as well as relevant external target audiences."

Mark Cryans, Head of Communications

meet future challenges. Fertilizers Europe was delighted to host the 2011 International Fertilizers Communications seminar in Berlin in October. A major outcome of the seminar was the signing of a memorandum of understanding between Fertilizers Europe and counterparts in the USA (TFI), Canada (CFI), Brazil (ANDA) and the International Fertilizer Industry Association (IFA).

This has enabled the launch of the industry-wide "RootsForGrowth" campaign (www.RootsForGrowth.com), which highlights the important role fertilizers play in addressing global food security responsibly, efficiently and sustainably. The campaign provides a suitable platform to engage with stakeholders on a global basis and is primed to be used at the upcoming Rio+20 sustainable development conference in June 2012.

Life magazine

product stewardship fertilizers

Product Stewardship Members lounge

RootsForGrowth

Website & social media

Branding The Fertilizers Europe logo is now well recognised in relevant circles. To add to the visibility of the association's Product Stewardship program and cement its commitment to it, a bespoke logo for the program has been developed in partnership with the Technical committee. The logo, which coincided with the redesign of the Product Stewardship website (www.productstewardship.eu), is now recognised as a stamp of excellence.

The Fertilizers Europe advocacy function 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. Fertilizers Europe has also made presentations at many European and International forums and conferences throughout the year on a range of issues in keeping with its core values.

Recent publications

2011 Overview

25

Agriculture F

inalisation of the CAP post2013 proposals was a major focus for the agriculture Committee during 2011. The year also saw its increasing cooperation with the food production chain, initial work on calculating the carbon footprint of fertilizers, and the Fertilizers Europe conference promoting the efficient use of natural resources.

Common Agricultural Policy In October, the European Commission presented its final CAP 2014-2020 proposals, intended to create a more competitive and sustainable agricultural sector in Europe and support the rural economy. Approval of the different regulations is expected by the end of 2012, or more likely 2013, after debate by the European Parliament and the Council, with the reforms coming into effect in January 2014 or 2015.

Fertilizers Europe actively contributed to the initial CAP debate in June 2010 with its position paper "CAP after 2013" and the possible impact of the proposals on crop production and fertilizer consumption were set out in the "Forecast for Food, Farming and Fertilizer Use in the EU 2011/2021", published in October 2011.

The Committee's reaction to the final CAP proposals is that they only partly respond to the challenges facing European agriculture.

The reintroduction of compulsory set-aside, called "ecological-focus-areas", seems misguided in the light of the global drive for greater food production.

The sustainable intensification of farming in Europe is the way to improve competitiveness, providing income stability for farmers, and increase its self-reliance in food production, improving its contribution to the global food supply. Furthermore, increased productivity will ensure that no additional land is required for agriculture, safeguarding natural areas and biodiversity.

Modern agricultural practice and fertilization techniques today enable Europe's farmers to use less land to feed twice the number of people than they did 50 years ago. The Committee actively encourages the promotion of integrated farming, as well as fertilization based on the appropriate fertilizer according to crop and soil characteristics

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The sustainable intensification of farming in Europe is the way to improve competitiveness, providing income stability for farmers."

Christian Pallière, Director, Agriculture Committee

(right product, right location) and precision application techniques (right rate, right time).

Food Chain Life-cycle assessment (LCA) principles are increasingly being applied throughout the food production chain to address the environmental impact of manufactured products and the Committee has made a significant contribution to several projects.

In the area of sustainable use of natural resources, it has continued its active involvement in the “Food Sustainable Consumption and Production Round Table”.

This three-year initiative, co-chaired by the European Commission, aims to ensure that food production closely meets consumer consumption needs and is environmentally sustainable. The Round Table's Working Group 3 interim report was released for public consultation in mid-2011, with the full report due for finalization by mid-2012.

2012 is the EU's European Year of Water and the Committee is working on ways to monitor water management at farm level and increase water-use efficiency. It aims to seek broad collaboration with the European Commission on the promotion of agricultural techniques to increase efficiency, where it can provide considerable experience in combined fertilization and irrigation (fertigation) techniques.

Carbon footprint In conjunction with the Technical Committee, work started in 2011 on a carbon footprint calculator to assess the environmental impact of fertilizers over their complete life-cycle. Following calculations for the production and distribution of different products, the Committee is now focusing its efforts on their application and use.

The calculator is due to be completed during 2012.

Sustainability The Fertilizers Europe conference "Increasing agricultural productivity through better use of natural resources" took place in Brussels in October 2011. Some 150 participants listened to presentations from a variety of independent experts, decision-makers and stakeholders on the challenges facing the agricultural sector in Europe and how it can optimize its use of non-renewable natural resources.

The conference included reactions from MEPs and representatives of the farming community, food chain, environmental NGOs and the fertilizer industry. The conference presentations can be found on the website www.sustainablefood.eu.

Fertilizers Europe was also a speaker on phosphate resource availability at the European Commission's Resource Efficiency conference in Brussels during its Green Week in May and on the longer term availability of NPK nutrients at its Joint Research Centre workshop in Brussels in December.

Following its activities within the Gothenburg protocol as a member of the working group on reducing ammonia emissions in agriculture, Fertilizers Europe has also actively participated in the UN Economic Commission for Europe (UN ECE) task force on reactive nitrogen. The association is now closely involved in a new UN ECE panel, where it co-chairs a working group addressing the relationship between “nitrogen and food”.

Climate Change As the EU continues to focus on climate change, air pollution and water protection remain priorities for the Committee. The EU 2050 Roadmap for the mitigation of GHG emissions by sector, introduced in 2009, required agriculture and forestry to provide effort-sharing reductions of 10% and the Committee is currently monitoring the implications of this on the agricultural sector.

2011 Overview

27

Technical M

ajor Committee activities in 2011 have included monitoring the introduction of ETS III, the evolving Fertilizers Europe Product Stewardship program and the annual Safety Seminar.

In addition to the on-going work on benchmark studies, the technical committee has also closely followed developments in the new EU fertilizer security legislation and its new Fertilizer Regulation.

ETS and Climate Change Implementation of the ETS III Emission Trading Scheme has been carefully followed in close cooperation with other Fertilizers Europe committees. As part of the process, Fertilizers Europe has advocated that DG Competition recognize the sector as one "at risk" and so qualify for possible state aid to mitigate its carbon costs on electricity use.

Fertilizers Europe set up a task force in 2011 to develop a carbon footprint calculator.

Its aim is to calculate the footprint of the production, transport and use of fertilizers via a life-cycle analysis. The work on fertilizer production is being undertaken by the Technical Committee. The Committee is also closely monitoring developments in longer term EU projects such as the DG Climate Action Roadmap 2050.

Product Stewardship Product Stewardship has been the umbrella programme for Fertilizers Europe's environment, safety and security activities since 2003. In 2011, all members successfully completed the Product Stewardship audit. They were presented with Product Stewardship certificates by Mr Klaus Berend from the European Commission (DG Enterprise) this March.

The International Fertilizer Industry Association (IFA) entered into an agreement with Fertilizers Europe in 2011 recognizing the Fertilizers Europe Product Stewardship standard to be at the highest level. A new look Product Stewardship website (www.productstewardship.eu) was also brought on-line and a Product Stewardship brochure published.

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The updated Fertilizers Europe Product Stewardship program has been recognized by the IFA to be at the highest level and has been adopted as the international standard."

Antoine Hoxha, Technical Director

Benchmark Studies Fertilizer Europe regularly undertakes a number of benchmark studies covering, safety, environment and energy. The data collected provide key references in discussions with the European Commission and other institutions. The studies are also useful to Fertilizers Europe member companies in benchmarking their own performance.

 Emissions: Fertilizers Europe has benchmarked the main emissions (N2O, CO2, NOx etc.) from members' production plants since 1996. Data from the Emissions survey has played a leading role in Fertilizers Europe's discussions with the European Commission on ETS III.  Energy efficiency survey: Ammonia production in Europe is the most energy efficient in the world. Fertilizers Europe monitors members' performance on a three-yearly basis with the next survey being organized in 2012.

database is very useful for members and the safety recommendations in its accident reports serve as a learning tool. The database will become available to members on-line via the Fertilizers Europe Members Lounge in 2012.

Security: Fertilizers Europe has closely followed developments in Europe and elsewhere on the risk of misuse of fertilizers.

The European Commission’s new legislative proposal restricting the supply of explosives precursors to the general public is currently under discussion in the European Parliament and Council.

Environment The Best Available Techniques Reference (BATREF) documents developed by the European Commission guide national authorities in permitting new fertilizer plants.

The existing BATREF “Ammonia, Acids and Fertilizers” will be revised in 2013 and several Committee task forces have proactively prepared for this.

2012 focus: Climate change, security and product stewardship Climate change remains an important issue affecting the future of the European fertilizer industry. The Committee is focusing on developing a long-term vision for the industry that clearly shows the efforts it is currently making to reduce its environmental impact and will continue to make over the longer term when novel technologies like carbon capture and storage (CCS) become available on a commercial scale.

As far as fertilizer security is concerned, Fertilizers Europe will continue to cooperate closely with DG Home Affairs to evaluate measures to be put in place to reduce the risk of fertilizer misuse..

Promotion of the Fertilizers Europe Product Stewardship program and related activities remains one of the Technical Committee's main objectives.

 Safety performance: In 2011 Fertilizers Europe Technical Committee decided to start collecting data on the Total Injury Rate (TIR), which is a more complete indicator of safety performance than the Lost Time Injury Rate (LTIR).

Safety, Security Safety Seminar: The Committee has organised an annual Safety Seminar since 1997. It provides a platform for members to discuss safety and related issues in order to exchange experience and learn from it. The 2011 Safety Seminar, focusing on storage safety among other issues, was held in Norway in May and was widely published in the fertilizer press. The 2012 Safety Seminar took place in Chester, UK, in April.

Incident database: The Committee maintains a database of some 800 incidents that have taken place in the industry since 1920. The

2011 Overview

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Trade & Econo T

he trade & economic Committee continues to emphasise the imperative of achieving a level playing field for the European fertilizer industry. A key theme remains the need to secure sufficient profitability for the industry's long-term continuation.

Fertilizers Europe advocates that a 15% return on capital is necessary for its economic and environmental sustainability.

Gas Market Progress continued on the 3rd Gas Directive, with the European Council declaring that it must be implemented by 2015. The implementation work of the Madrid process and ACER, the new European regulator, progressed well. In particular, the network codes, congestion and cross-border management, and operator cooperation all received attention.

The Committee maintained political pressure for speedy implementation of the Directive with a joint Fertilizers Europe/CEFIC seminar at the European Energy Forum in the European Parliament in February 2011. This was closely followed by an Expert Seminar on the EU gas and carbon markets, where the European Commission outlined its 2050 energy and carbon vision. The Committee continued its close collaboration with other energy-intensive user groups such as CEFIC and IFIEC. At the request of the Fertilizers Europe Board, the Committee's Gas Task Force held a special meeting on the prospects for shale gas in Europe. The meeting's consensus was support for shale gas development but realisation that the key oil and gas and engineering industries directly involved should take the lead in its promotion. The European Commission is currently relying on Member States to make their own decisions on shale gas according to local circumstances.

Russian gas agreement

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Arguably the most significant event of the year was Russia’s agreement, as part of its WTO membership, to price gas to its local industrial users on a full cost plus profit plus investment basis. Russia's recognition that it is no longer justifiable to sell gas below cost is significant. Gas prices to local fertilizer producers may well rise to US$4 to 6 per MMBTU in the coming years. As new, more expensive gas fields are opened, the

mic

With some of the highest gas prices in the world and the arrival of "EU only" carbon charges in 2013, the industry’s profit margins will be under constant pressure."

Sean Mackle, Director, Trade & Economic Committee

gas price will also rise accordingly. There are, however, already signs that Russia’s interpretation of the agreement differs from that of the other members of the WTO.

Trade Defence The Committee's trade defence activities were driven by both regulatory and judicial factors, with the five-year sunset reviews on UAN solutions and AN (Ukraine) being the predominant activity. Despite warnings about Russia’s continued artificial gas pricing and the existence of export only plants, antidumping measures on UAN from Algeria, Belarus, Ukraine and Russia were removed in December.

On the judicial front, the Committee worked with the European Council and the European Commission on defending the “gas adjustment” at the General Court in Luxemburg. Two companies, JSC Eurochem and JSC Acron, allege that the adjustment, based on Waidhaus Russia - German contract prices, is inappropriate as it does not reflect the reality of Russian gas pricing.

Fertilizers Europe again emphasised that, in order to avoid carbon leakage, Ukraine must be included in ETS 2013, or a similar scheme using the EU’s “linking” facilities.

For the first time, the Committee's trade defence complaints included evidence of carbon leakage.

More generally, the EU’s “Good Neighbourhood" policy, a key component of its Global Europe strategy, was subject to significant stakeholder consultation in late 2011 and early 2012. Its Eastern Partnership with many former Soviet Union countries and the Euro-Med Dialogue, involving North African and near MidEast countries, will therefore receive the Committee's attention in the coming months.

Tariff Concessions The Committee welcomed the new European Commission proposal on the Generalised System of Preferences, a scheme providing tariff concessions to developing countries or countries in need of special assistance, such as those from the former Soviet Union.

Since the proposal removes concessions to countries with a per capita income above US$ 4,000 per annum, Russia and Belarus are excluded but Ukraine will benefit. The scheme is currently being scrutinized by the European Parliament and the Council but looks set for approval and implementation

by January 2014.

The companies also raised objections on the profit rating, where the European Commission has allocated a rating of over 30% return on sales, rather than the 5% used in earlier investigations. The EU institutions argued that they were obliged to use data that was contemporary with the period under investigation.

International Trade With the failure of the Doha Round of negotiations, growth in EU partnership freetrade areas accelerated in 2011. Special interest focused on the Ukraine’s Partnership and Cooperation Agreement, with a study exploring how its future HSE and climate change legislation might be integrated with that of the EU.

2011 Overview

31

Statistics T

he Committee continues to support the activities of other Fertilizers Europe committees. For Agriculture, it contributed to the annual "Forecast of food, farming and fertilizer use" providing actual consumption figures.

It also assisted the Technical committee with BAT (Best Available Technology) and ETS issues and provided regular support for the Trade & Economic committee in trade defence cases.

Industry Database Activities have been directed at the creation of the new industry database, which is expected to go live in the first half of 2012.

An updated list of publications and statistics available to members was distributed at the beginning of 2011.

The survey on NPK fertilizer consumption and production has been resumed as a bi-annual exercise and the branding of the statistical reports improved.

Industry Statistics The Committee has distributed industry statistics to members throughout the year to support their forecasting and benchmarking activities. The statistics are produced in compliance with European competition law.

Regular publications include figures relating to European fertilizer consumption, capacities, production, exports and imports, deliveries, as well as the Industry Profile covering industry turnover, investment and employment.

The Committee also produced the Fertilizers Europe annual survey of members’ production costs for the main fertilizer products. This survey identifies trends within the industry as a whole and serves as a benchmarking tool.

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We will continue to provide members and stakeholders with reliable statistics to help them to understand the trends in the fertilizer market."

Michał Wendołowski, Statistics Manager

Fertilizer Trade Fertilizer imports into Europe (EU-27) in 2010/2011 from countries outside the EU were 0.9 million tonnes more than the previous year. These accounted for 25% of total European fertilizer consumption compared to 20% the year earlier.

annual meeting The annual meeting of the full Committee in Warsaw in October gave members the opportunity to review the activities and upcoming projects. In 2012, the Committee will work on ensuring the accuracy and timely delivery of the industry statistics and continue its activities on the new modernized industry database.

Nitrogen fertilizer trade balance (million tonnes of N)

2010/2011

% change

Imports to EU-27

2009/2010 2.4

3.3

+37

Exports from EU-27

1.1

1.3

+18

Nitrogen fertilizer consumption in EU-27 (million tonnes of N) 2009/2010

2010/2011

% change

Agricultural use

10.2

10.9

+7

Technical use

1.96

1.99

+2

2011 Overview

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Fertilizers Europe

members corporate

AB Achema, Lithuania Anwil SA, Poland Azomures, Romania BASF AG SE, Germany Borealis Agrolinz Melamine GmbH, Austria 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

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Fertilizers Europe

staff

Jurga Lenktaityte Technical & Trade Analyst

fertilizers Europe activities are managed by a small dedicated team at its secretariat in brussels.

Jacob Hansen Director General

Christian Pallière Agriculture Director

Ermis Panagiotopoulos Agricultural Economist

Mark Cryans Head of Communications

Charlotte Prestini Communications Assistant

Sean Mackle Trade & Economic Director

Marjolaine Jaquet Manager Administration & Human Resouces

Patricia Everaert Senior Secretary

Gabor Marton Trade & Business Analyst

Michał Wendołowski Statistics Manager

Monika Drazek Trade & Business Analyst

Antoine Hoxha Technical Director

2011 Overview

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

2011 OVERview

www.fertilizerseurope.com www.facebook.com/fertilizerseuropepage Group Fertilizers Europe twitter.com/FertilizersEuro www.youtube.com/fertilizerseurope