In the OpenSea marketplace we see a lot of fertiliser cargoes traded in various areas around the world, therefore we thought it would be a good idea to present a few interesting things about this commodity and its market. We are sure that you have already come across such cargoes and you might also have fixed a vessel to load fertilisers. But have you had the time to dig further into what this cargo really is? How is the market structured and what precautions should you take when negotiating the terms of the charter and upon vessel’s loading/discharge?
There is little doubt on the importance of this raw material when you realize its huge contribution to the development of the production of grains. It has been found that fertilisers have contributed in more than 60% of the increase in the agricultural output worldwide during the last 60 years. Take for example India, with the massive population, which was purely an importer of grains about 50 years ago; however with the use of fertilisers the country has materially increased its production and lowered its dependence on grain imports. As a result, production of wheat in India increased from about 10 million tons in 1967 to about 90 million tons in 2017. Due to its importance in the production of grains, the dry bulk trade of fertilisers is accounted for about 3.2% of the total world dry bulk trade or about 8.5% of the total minor dry bulk trade (as per 2016 data). One could ask here: If the need of fertilisers for the production of grains is so high, why their trade is not higher to make it one of the major dry bulk cargoes? There are two answers to this question: First, because a small amount of fertilisers is required in order to produce thousands of tons of grains and secondly because some of the biggest producers of grains (e.g. China, USA, Canada, Russia) also produce fertilisers themselves and thus the need for imports is lower.
The three main chemical nutrients which are required for plant growth are: nitrogen, phosphate and potash while there are three other secondary chemical nutrients namely sulphur, calcium and magnesium. Nitrogen is the most famous nutrient since it is used for increasing the crop size, while the potash and phosphate chemical nutrients are used in order to improve the crop’s quality. All the fertiliser products have one or more of these chemicals in their contents. The most usual form of fertilisers is in granulated or powdered forms while the main nitrogen, phosphate and potash fertiliser cargoes are Urea, Diammonium Phosphate (DAP) and Muriate of Potash (MOP) accordingly. Urea contains 46% nitrogen, DAP contains 46% phosphate and 18% nitrogen. MAP contains 46% phosphate and 11% nitrogen. MOP contains 60% potash. The below table shows the dry bulk trade of fertilisers from 2007 until the end of 2016.
Table 1: Trade of Fertilisers from 2007 to 2016 (in million tons)
Imports & Exports
Fertilisers are exported out of various countries worldwide, mainly in shipments of handysize or supramax bulk carriers while in a smaller extend panamax bulkers are utilized. In order to get a clearer picture of the trade flows worldwide, let’s see the main importing and exporting countries of the main fertiliser cargoes.
Urea: Most of the urea is exported out of China, Black Sea countries (Ukraine, Russia, Romania) and Arab Gulf (Qatar, Saudi Arabia, Iran, UAE) while Russia also exports out of Baltic Sea. Urea out of Black Sea and Baltic Sea is mainly exported to Europe and Latin America, while Arab Gulf exports supply North America, India, South East Asian countries and Australia. Chinese exports are mainly shipped to India and other Asian countries. Also, urea from Egypt (which is one of the top 10 exporters) is exported to European countries. Except of these major trades, there are further trade-flows of urea such as those from Venezuela to USA and from Indonesia to other Asian countries, however they are exported in a limited extend and they are mainly used to affect the demand/prices for Black Sea/Arab Gulf product.
Potash: Canada is the main producer and exporter of Potash with more than 1/3 of the total exports worldwide, while Russia, Belarus, Germany, Israel, Chile and Jordan follow as the main exporters of Potash products. China who is also a major producer of Potash does not export since it utilizes its production for domestic use and it also imports a large amount of Potash coming from Canada, Middle East countries, Russia and Belarus. Other main importers are USA who primarily imports from Canada, Brazil who imports almost the total of its Potash needs imports mainly from Continent/ Baltic Sea while India which follows is the main importer of potash primarily coming out of Middle East and Russia.
Phosphates: Morocco is the largest phosphate rock exporter in the world which along with the rock exporters in the Middle East and North Africa represent almost ¾ of the world total world trade. On the other hand, India is the largest importer of phosphate rock, with a share of about 25 percent of the world imports. India imports phosphate rock and phosphoric acid to produce other fertilisers such as DAP and NPK products. The remainder of imports is spread among other countries in Asia, Europe and North America. As far as the processed phosphates are concerned, China is the largest producer of MAP and DAP and after it utilizes a part for its own use, it exports the balance amount mainly to India and other Asian countries such as Vietnam and Pakistan. USA who is the second largest exporter of DAP/MAP (along with China export more than 2/3 of the world fertilisers) exports in various countries worldwide but primarily to India, Canada, Argentina (who imports almost half of its MAP/DAP from USA), Australia and Japan.
Sulphur: There are two main types of Sulphur: The fertiliser type which is used for agricultural purposes and non-fertiliser which is used for industrial purposes. The statistics here refer to the fertiliser type of sulphur. The largest exporting countries are Canada, Saudi Arabia, Russia, Kazakhstan and USA while the largest importer is China, which imports more than 40% of the fertiliser type of sulphur worldwide followed by Morocco and South America.
Specific of Loading & Discharging operations
All these fertilisers, whether natural or manufactured, are loaded either in bulk or in bagged form and they need care in handling. Recommendations for the shipping of fertilisers may be found in the IMDG Code of the International Maritime Organisation. Since there are many types of fertilisers some of which are very dangerous and explosive, upon loading the shippers should provide exact information on the type and characteristics of the cargo. However, most of the fertilisers shipped nowadays are non-hazardous and they are commonly known as BHF (Bulk Harmless Fertilisers). This “BHF” name was initiated many years ago in the early days of transporting ammonium nitrates in bulk before this cargo faced a special processing treatment (calcining). Without such treatment, ammonium nitrate can become explosive under certain circumstances. Such a disastrous explosion with ammonium nitrate took place in Texas of USA on April 1947 on the vessel Grandcamp.
Also in cases that more than one grades of fertilisers are loaded, the IMDG Code should be taken into account even if the cargoes are BHF, since some fertilisers, even harmless, are incompatible one with the other. Last, but not least a main problem with many types of fertilisers is the fact that they may damage the paintwork in the cargo holds or cause severe corrosion to the unprotected steel. For this reason, one of the main precautions which should be followed is to keep the cargo as dry as practicable possible and the loading/discharge operation should be ceased during precipitation while the non-working cargo holds must remain closed during the port operations.
Charter Party forms
Despite the fact that generic charter party forms can be used in this trade, there are specific forms which are traditionally used in the fertilisers trade and which are highly recommended. The main charter party forms used in this trade are the following:
AFRICANPHOS 1950: It is mainly used for phosphate cargoes and especially for those which are loaded out of African countries such as Morocco or Tunisia.
FERTICON 2007: It was first published in 1942 and revised in 1950, 1974 and 2007. After its last revision, it is the most updated charter party form for fertilisers. It is issued by BIMCO and it includes reference into both bulk and bagged cargoes while it is can be used for loading fertilisers in any port worldwide while it is commonly used for imports into India.
FERTIVOY 88: It is also known as the “North American Fertiliser Charter Party 1978/88”, it is issued by Campotex Shipping Services Ltd of Vancouver and mainly used for fertiliser products which originate out of this region.
PHOSPHATE (FOSFO): Charter party specialized in the carriage of phosphates which are shipped ex North America.
In any case, before the parties enter into negotiations they should have clarified and understood what is the exact type of fertilisers. Some fertiliser cargoes, such as the Ammonium Nitrate (Class B of the IMDG Code) can not be loaded by all vessels, therefore, you have to check the vessel’s certificates to make sure that the vessel is capable of loading this exact cargo. Also, in some cases, lime washing of the cargo holds may be needed before vessel’s loading or excess washing after vessel’s discharge. In the case of time charter, this should be taken into account and a relevant clause to be incorporated. Otherwise, it should be taken into account when you run the freight calculations.
Now that you have read the basics, you are welcome to join the OpenSea marketplace to fix fertilisers. Those who have not fixed before can definitely find a few in our marketplace, while those who are already involved in this trade, will be able to take advantage of the new era of ship chartering and grow their fertiliser business.