Billionaire project makes Nigeria’s urea gain traction in Brazil

The war in Eastern Europe, the high costs of natural gas to produce nitrogen fertilizer in Europe, and the US$2.5 billion investments of the African billionaire Aliko Dangote, CEO of the Dangote group, to build a fertilizer complex “from scratch” in Nigeria have changed the picture of the list of urea suppliers to Brazil between January and July this year.

The input is the nitrogenous fertilizer most used in Brazilian crops, especially corn.

The Brazilians imported 3.8 million tons of urea in the first seven months of 2022, mainly from Oman (22%), Nigeria (19%), and Qatar (18%), according to a report prepared by the Itaú BBA Agro Consultancy based on federal government data.

A highlight among the movements, Nigeria climbed the list and, in less than a year, went from fifth-largest supplier, with a share of 7% in 2021, to second place today. In the same interval, Russia, at war with Ukraine, fell from second to fourth place.

Nigerian urea purchases grew 174% in 2022, reaching 736,000 tons, almost the same volume Brazil imported from the African country last year.

“Two factors are important [and explain the movement]: there was a more stressed market moment in nitrogenates in 2021, with some reduction in urea production in Europe, because natural gas [fertilizer feedstock] prices went through the roof; meanwhile, there was a large, uncommitted volume of new plants coming to market. Besides, the logistics [from Nigeria] are good. Exporting to Brazil ‘is a shot,'” says Marcelo Mello, director of fertilizer at consultancy StoneX.

NITROGEN COMPLEX

With an eye on the demand in Sub-Saharan Africa and the potential for sales to other regions, including Brazil, the Dangote group inaugurated the nitrogen complex in Lagos, Nigeria, in two stages – in March last year and in the first half of 2022.

The complex adds almost 3 million tons to Nigeria’s urea production capacity, which, with the increase, will be 5.8 million tons per year, says Luigi Bezzon, StoneX fertilizer and vegetable oil analyst.

According to the African company, Nigeria consumes 1.5 million tons of fertilizer annually. During the inauguration of the most recent structure, Aliko Dangote – ranked 130th on Forbes’ list of the world’s wealthiest people, with a fortune estimated at US$13.2 billion – said that the unit’s exports would go to Brazil (pointing out at the time that Brazilians depend heavily on Russia), the United States, India, and Mexico, Reuters reported at the time.

The African company landed in the segment at a time of high fertilizer prices, much higher than two years ago. Mello recalls that the Asian group Indorama also produces nitrogen fertilizers in Nigeria and has expanded its capacity.

Even though some suppliers have gained more space, the total volume of Brazilian urea imports from January to July (3.8 million tons) was 7.3% less than in the same period in 2021.

According to Annelise Sakamoto, an Itaú BBA Agro Consulting analyst, the drop is “more price and not so much availability”. With the increase in prices, producers have applied less fertilizer and taken advantage of the nutrient banks that the soil stores.

With information from Valor Econômico