Japan's trading houses expand fertiliser business in Africa and Asia

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Publish time: 20th January, 2012      Source: www.cnchemicals.com
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January 20, 2012

   

   
Japan''s trading houses expand fertiliser business in Africa and Asia
   
   

   

Japan''s major trading houses are expanding their fertiliser business networks in Africa and Asia upon sensing their promising growth opportunities.

   

   

Both Sojitz and Sumitomo Corporations will start building plants to produce raw materials for fertiliserin Angola. Mitsui & Co. Ltd and Mitsui Chemicals Inc. are launching a similar project in Brunei, so is Mitsubishi Corporation.

   

   

As fertiliser is necessary for growing enough food to keep up with global population growth, the trading houses are keen to leverage on this.

   

   

While visiting Sojitz''s headquarters in Japan last November (2011), a top official from Angola''s Ministry of Geology, Mines and Industry urged Yutaka Kase, the trader''s president to maximise use of Japan''s advanced technology in the African country.

   

   

With Angola''s abundant natural resources, including diamonds and oil, there was rapid economic growth after the end of civil war was achieved. Currently, Sojitz and Sumitomo Corporations have agreed to build an ammonia and urea plant there, with Toyo Engineering Corporation and Mitsubishi Heavy Industries Ltd to help with the design work.

   

   

Developing countries are showing growing interest in Japanese companies looking to expand their fertiliser production operations. Population growth and economic development in Africa, the Middle East and Southeast Asia have created the need for greater crop output, which in turn has stimulated the fertiliser market.

   

   

According to an estimate by the Ministry of Agriculture, Forestry and Fisheries of Japan, crop consumption in Asia is expected to surge to 1,128 million tonnes in 2020, an approximate of 20% increase from 2008. In Africa, consumption is seen jumping 40% to 266 million tonnes.

   

   

This expansion is fuelling a steep rise in the immediate prices of raw materials for fertilisers. Ending of October in Japan, the import prices of urea produced from ammonia was up 30% on-year.

   

   

The ammonia used for this process is derived from natural gas prices which trended lower for a long time. However, due to strong fertiliser demand, natural gas prices have been rising.

   

   

Angola aims to increase its foreign currency reserves by exporting half of the ammonia produced at plants built by Sojitz Corporation.

   

   

Japanese trading firms are increasingly entering the fertiliser plant business. Mitsui & Co. Ltd and Toyo Engineering have started feasibility studies in Iraq. Mitsui & Co. Ltd and Mitsui Chemicals Inc. plans to spend JPY230 billion (US$3 billion) to build a large fertiliser plant in Brunei, eyeing towards starting production and sales in early 2015.

   

   

Mitsubishi is also targeting Brunei, with plans to spend some JPY110 billion (US$1.4 billion) to launch production and sales there by 2016.

   

   

Much of what makes Japanese companies so appealing for countries looking to host fertiliser plants is their abundant cash, ability to procure raw materials, strong sales networks and advanced production technology.

   

   

One company with such appeal is Toyo Engineering, which sells manufacturing equipment for urea in Angola in cooperation with Sojitz and Sumitomo Corporations. The company boasts state-of-the-art technology for granulating urea, which only three companies in the world can do.

   

   

According to Toyo Engineering, global demand for ammonia is growing at a rate of 3.7% a year. A top engineer at the firm, Eiji Sakata estimates in order to meet the projected demand growth, three to five standard-size plants would need to be built every year, requiring an annual investment of about JPY100 billion (US$1.3 billion) each.

   

   

Yasushi Funatsumaru, head of Sojitz''s machine division, expressed optimism for the fertiliser business, saying the market "will get a further boost once the agriculture industries in emerging countries shift into high gear."

   

   

Over the years, Japan has accumulated an impressive amount of know-how on how to raise crop yields in a limited area. There are abundant opportunities to put this knowledge to use in developing countries.

   

   

The fertiliser plant business, led by trading companies armed with huge global networks, may very well emerge as a new source of profit for Japan.