Chapter 2
Industry structure and regulation
2.1
This chapter discusses the nature and structure of the fertiliser
industry including the main industry players and market concentration and
provides information on production and consumption of fertiliser in Australia. The
chapter also reviews the regulatory arrangements under which the industry
operates.
Global fertiliser suppliers
2.2
The global fertiliser industry comprises a number of large manufacturers
of fertiliser products. The committee understands that between 80 and 85 per
cent of the world's rock phosphate is controlled by five entities.[1]
The principal suppliers of imported fertiliser products are detailed below:
- OCP – the national Moroccan phosphates company. It is the
world's largest exporter of phosphates and derivatives, operating on five
continents.
- Mosaic – is one of the world's leading producers of concentrated
phosphate and potash crop nutrients.
- Foskor – is one of the world's largest phosphate and phosphoric
acid producers. Foskor exports its phosphate based products to a number of
countries including Australia.
- Middle East producers – the major suppliers are Sabic (Saudi
Arabia), Qafco (Qatar) and PIC ( Kuwait/Bahrain).
- Wengfu – Chinese supplier of phosphate fertiliser and phosphate
chemicals for world markets.
- Agrium – global producer and distributor of agricultural crop
nutrients and other agricultural products and services.
- PCS – an integrated producer of fertiliser, industrial and animal
feed products. The world's largest fertiliser enterprise by capacity producing
the three primary plant nutrients.
- CANPOTEX – international marketing and distribution company
wholly owned by Agrium Inc, Mosaic and PCS.[2]
2.3
Each of the companies listed above has supplied, or sought to supply,
the Australian market.[3]
The Australian fertiliser industry
2.4
Fertilisers are one of the major physical inputs to Australian
agricultural production and account for more than 12 per cent of the value of
the material and service inputs used in Australian agriculture. The fertiliser
industry has annual sales in excess of $2 billion. The industry's full economic
effect on Australia's GDP is in excess of $8 billion each year.[4]
2.5
Approximately 50 per cent of the 5 to 6 million tonnes of fertiliser
used in Australia each year is manufactured in Australia with the balance
imported from a variety of overseas countries. Superphosphate, manufactured
from imported phosphate rock makes up 50 per cent of the domestically
manufactured product sold in Australia. Some 62.5 per cent of nitrogen fertilisers,
33 per cent of phosphate fertilisers and 100 per cent of potassium
fertilisers are imported into Australia.[5]
2.6
Over the five years to 2005–06, Australia imported an average 1.1
million tonnes of urea, around 700 000 tonnes of mono-ammonium phosphate (MAP),
and around 200 000 tonnes each of triple superphosphate and di-ammonium
phosphate (DAP). However, since 2006–07, there has been a decline in fertiliser
imports. Imports of urea fell by 25 per cent in 2006–07, MAP declined by
16 per cent, while triple superphosphate and DAP declined by 47 and 60 per cent
respectively. This is due to a number of reasons, including increased demand
from other countries, particularly the United States, for fertiliser imports
and a drought induced decrease in Australian cropping.[6]
2.7
By element, imports account for around 54 per cent of Australian
phosphate consumption, 69 per cent of nitrogen consumption and 100 per cent of
potash consumption.[7]
2.8
In addition to domestic use, Australia exports between 200 000 and
400 000 tonnes of fertiliser year, primarily from the Incitec Pivot Ltd (IPL)
ammonium phosphate plant in North Queensland.[8]
IPL indicated that approximately 250 000 tonnes or 26 per cent of DAP and
MAP production from Phosphate Hill is exported.[9]
Fertiliser products
2.9
There are many solid, soluable and liquid products used as fertilisers
in Australia. Solid mineral fertilisers make up the majority of the fertilisers
used, although the production and use of liquids is increasing. Significant
quantities of nitrogen are also applied as anhydrous ammonia – a liquefied gas.
2.10
The major fertilisers used in Australia are listed in Table 1. Many of
these are used in blends to meet specific nutrient needs of crops and
pastures.
Table 1: Major fertiliser
products
| Product |
Approximate
percentage of principal elements* |
|
|
N |
P |
K |
S |
Ca |
|
Single superphosphate |
- |
9 |
- |
11 |
20 |
|
Urea |
46 |
- |
- |
- |
- |
|
Mono-ammonium phosphate
(MAP) |
10 |
22 |
- |
2 |
- |
|
Di-ammonium phosphate (DAP) |
18 |
20 |
- |
1.5 |
- |
|
Potassium chloride (muriate
of potash) |
- |
- |
50 |
- |
- |
|
Ammonium sulphate (SOA) |
21 |
- |
- |
24 |
- |
|
Triple superphosphate |
- |
20 |
- |
1 |
15 |
|
Anhydrous ammonia |
82 |
- |
- |
- |
- |
*N – nitrogen P –
phosphorus K – potassium S – sulphur Ca – calcium
Source: Fertilizer Industry
Federation of Australia (FIFA), Fertilizer Industry Environment Report
2006, (FIFA, 2008), p. 13.
Industry structure
2.11
The Australian fertiliser industry comprises manufacturers, importers,
blenders, retail distributors and agents, fertiliser applicators, and a number
of associated service industries. Both manufacturers and importers market
through dealers and/or agents who provide farmers with a local service point
and often employ advisory agronomists. Many manufacturers also operate regional
distribution and blending service centres.
2.12
The main fertiliser companies and their areas of activities are listed
below.
Table 2: Major fertiliser
companies
|
|
Description of
fertiliser activities
|
Premises locations*
|
|
ABB Grain Ltd (Fertiliser)
|
Import, distribution,
sales, advice
|
SA, Vic
|
|
CSBP Ltd
|
Import, manufacture,
distribution, sales, advice
|
WA
|
|
CSR Distilleries Operations
Ltd
|
Manufacture, distribution,
sales, advice
|
Qld
|
|
Elders Ltd
|
Import, distribution,
sales, advice
|
WA, SA, Tas, Vic, NSW, Qld
|
|
Ruralco Holdings Ltd
(Growforce)
|
Import, manufacture,
distribution, sales, advice
|
Australia-wide
|
|
Hi Fert Pty Ltd
|
Import, manufacture,
distribution, sales, advice
|
Vic, Qld, SA
|
|
Impact Fertilisers Pty Ltd
|
Import, manufacture,
distribution, sales, advice
|
Tas, Vic
|
|
Incitec Pivot Ltd
|
Import, manufacture,
distribution, sales, advice
|
SA, Tas, Vic, NSW, Qld
|
|
Interfert Australia Pty Ltd
|
Import, distribution,
sales, advice
|
SA, Vic
|
|
Landmark
|
Sales, advice
|
Australia-wide
|
|
Summit Rural (WA) Pty Ltd
|
Import, manufacture,
distribution, sales, advice
|
WA
|
|
Superfert Pty Ltd
|
Import, sales, advice
|
WA
|
|
United Farmers Co-operative
Company Ltd
|
Import, manufacture,
distribution, sales, advice
|
WA
|
|
Whitford Fertilisers
|
Import, distribution,
sales, advice
|
WA
|
*While some companies listed
have principal state location(s), their products may be distributed in other
parts of Australia.
Source: FIFA, Fertilizer
Industry Environment Report 2006, p. 7.
Industry concentration
2.13
The industry is dominated by two major companies. Incitec Pivot Ltd has
a dominant market position in eastern Australia – with a 70 per cent market
share at the wholesale level and a 58.5 per cent market share at the
distribution level.[10]
2.14
In Western Australia, CSBP Ltd has an approximate market share of 65 per
cent and annual sales of about one million tonnes, being a mix of imported and
locally manufactured fertilisers. CSBP's market share has fallen from an
estimated 90 per cent in 1995-96 as new fertiliser suppliers have entered the
WA market. Summit Fertilisers has an estimated market share of 25 percent and
United Farmers Co-operative an estimated market share of 10 per cent. A number
of smaller operators, including Superfert, Whitford Fertilisers and ABB also
operate in Western Australia.[11]
2.15
The Australian Competition and Consumer Commission (ACCC) noted that a
number of market participants are vertically integrated and have a presence
across more than one level of the supply chain. IPL, for example, operates a
mine at Phosphate Hill in Queensland from which it sources phosphate rock for
the manufacture of phosphate fertilisers. In addition, IPL, through Southern
Cross International (SCI), supplies companies at the distributor level
(including the IPL distribution business) and distributes to its agents and
dealers at the retail level as well as engaging in some sales direct to end
users in Tasmania. The agents and dealers who are supplied by IPL also source
supply from distributors who are themselves supplied by SCI.[12]
2.16
Manufacturers CSBP and Impact also have distribution facilities/networks
in Western Australia and the eastern states of Australia respectively. The distributor
Hi Fert Pty Ltd is owned by retailers Elders and Landmark through their
joint venture, ELF Australia Pty Ltd. Hi Fert supplies fertilisers to Elders
and Landmark as well as their competitors.[13]
2.17
A study by IBISWorld of fertiliser manufacturing in Australia has
characterised the level of industry concentration as 'high'.[14]
According to the study the top two players alone (IPL and Wesfarmers CSBP) are
estimated to account for roughly 70 to 80 per cent of industry revenues,
indicating a 'high level' of industry concentration. The study commented that
these concentration levels have risen in recent times following the merger of
Incitec and Pivot in 2003. The study noted that IPL's acquisition of Southern
Cross Fertilisers in 2006 'has served to boost concentration levels further'.[15]
2.18
Details of the main producers/manufacturers; distributors/wholesalers
and retailers are provided below.
Producers/manufacturers
2.19
Manufacturers source raw materials through imports or from domestic
sources as well as importing finished fertiliser products from international
suppliers. In general, fertiliser products are supplied by manufacturers to
distributors or to dealers and agents at the retail level.
2.20
There are only three manufacturers of fertilisers in Australia – Incitec
Pivot and Impact Fertilisers Pty Ltd operate in the eastern states while CSBP
operates in Western Australia.[16]
Of the major fertiliser manufacturers, Incitec Pivot has an estimated national market
share in manufacturing of 55 per cent, CSBP (13 per cent) and others (32 per
cent) in 2007.[17]
Incitec Pivot Ltd
2.21
Incitec Pivot is the dominant force within the Australian fertiliser
manufacturing industry with a national market share of 55 per cent, and an east
coast market share of 65-70 per cent in 2007.[18]
2.22
Incitec Pivot is an ASX listed Australian company, involved in the
manufacture of fertiliser and industrial chemical products. It is the major
company involved in the fertiliser industry in Australia. The company was
formed in 2003 with the merger of the Incitec and Pivot companies. Its scale
and production capacity greatly increased with the purchase of Southern Cross
Fertilisers in 2006, Australia's only manufacturer of MAP and DAP fertilisers.
2.23
The company supplies more than 50 per cent of Australia's agricultural
plant nutrient needs. Incitec Pivot operates a phosphate mine and ammonium
phosphate manufacturing facility at Phosphate Hill in Queensland. IPL also
manufactures urea, single superphosphate (SSP) and anhydrous ammonia
fertilisers at sites in Queensland, NSW and Victoria. In addition to its
manufacturing operations, IPL also imports substantial volumes of fertilisers.
2.24
The company supplies about three million tonnes of fertiliser per
annum, generating sales revenues in excess of $1 billion annually. IPL supplies
fertiliser to retailers in the eastern and southern states. The distribution
network is through a network of business partners, comprising independent
distributors as well as IPL agents. Of IPL's 220 contracted business
partners, 70 are agents and 150 are resellers or dealers.[19]
2.25
The table below shows the dominant market position of IPL in relation to
market share of fertiliser products, especially DAP and SSP, where the
company's market share in eastern Australia was 50 per cent and 67 per cent
respectively in June 2008.
Table 3: Proportion of market share held by IPL in Eastern Australia by product – MAP, DAP, SSP
|
|
MAP
|
DAP
|
SSP
|
|
June 2003
|
54%
|
62%
|
85%
|
|
June 2004
|
49%
|
56%
|
82%
|
|
June 2005
|
47%
|
59%
|
84%
|
|
June 2006
|
48%
|
52%
|
74%
|
|
June 2007
|
50%
|
48%
|
64%
|
|
June 2008
|
44%
|
50%
|
67%
|
Source: IPL,
Correspondence, dated 7 October 2008.
CSBP Ltd
2.26
CSBP Ltd is a wholly owned subsidiary of Wesfarmers Ltd, an Australian
public company. The company operates the fertiliser and chemicals business of
the Wesfarmers group in Western Australia. It is involved in the manufacture
and supply of fertilisers primarily to the broadacre cropping, horticulture,
pasture and dairy sectors in WA, as well as providing soil and plant testing
and agronomy services. It is also involved in the manufacture and supply of
chemicals and acids for industry, mining and mineral processing. CSBP has
manufacturing and distribution facilities at Kwinana (WA) and further
distribution facilities at Geraldton, Bunbury, Albany Esperance and six inland
depots.
Distributors/wholesalers
2.27
Distributors source fertiliser products from either domestic manufacturers
or directly from international suppliers. The main distributors of imported
fertiliser product in Australia are:
2.28
The companies marked with an asterix only operate in Western Australia.
The other companies operate only in eastern Australia with the exception of ABB
which operates in both markets.
2.29
For MAP and DAP many of the same companies that import also distribute
product purchased from Incitec Pivot. According to the Fertilizer Industry
Federation of Australia (FIFA), all of the domestically produced urea is sold
by Incitec Pivot. Most of the companies sell through agents such as Elders,
Landmark, CRT and other independent rural merchants.
2.30
The main distributor of fertiliser products is IPL, which has a market
share of 58.5 per cent in the distribution of fertiliser in eastern Australia –
this declined from 73 per cent in 2003.[20]
Other distributors include CSBP and the companies listed below.[21]
Hi Fert
2.31
Hi Fert Pty Ltd is an importer and distributor of imported and locally manufactured
fertiliser products. It is a joint venture company between Elders Ltd and
Landmark Rural Holdings. Hi Fert markets and distributes fertiliser in eastern Australia
(South Australia, Victoria, NSW and Queensland). Hi Fert operates 9 major
distribution centres throughout Australia. It distributes more than
500 000 tonnes of fertiliser products each year. Hi Fert does not
manufacture its own fertiliser products nor own production facilities.[22]
Hi Fert has a 15 per cent market share nationally.[23]
Impact
2.32
Impact Fertilisers Australia Pty Ltd is a joint venture between Impact
Fertilisers Pty Ltd of Hobart (Tas) and the multinational Swiss-based company
Ameropa AG, a corporation with fertiliser operations throughout the world.
Impact supplies fertiliser products on the eastern seaboard mainly to
independent dealers.
2.33
Other companies include:
-
ABB Fertiliser – a part of ABB Grain – an agribusiness with rural
services which includes fertiliser and agricultural chemicals supply. ABB
distributes its fertiliser products in SA, WA, Victoria and NSW.
-
Megafert – is a supplier of a range of fertiliser products in South
Australia, Victoria and NSW.
-
Summit Fertilizers – supplier of a broad range of fertiliser
products in Western Australia from five locations located at Kwinana,
Geraldton, Bunbury, Albany and Esperance.[24]
Retailers
2.34
Retailers, often also described as agents and dealers, are involved in
the day-to-day sale of fertiliser to end-users (customers).
2.35
The market share of the retail sector in eastern Australia is shown in
Table 4 below. The largest part of the retail distribution market are the
independents – numerous privately owned businesses – generally family owned and
operated.[25]
However, Elders and Landmark have a relatively large share of the retail market
in eastern Australia.
Table 4: Retail fertiliser
market in eastern Australia
|
Independents
|
68%
|
|
Elders
|
13%
|
|
Landmark
|
12%
|
|
RuralCo
|
4%
|
|
GrainCorp
|
3%
|
Source: Submission 26, IPL, p. 27.
2.36
The major companies include:
-
Elders Ltd – Elders is a wholly-owned subsidiary of Futuris
Corporation Ltd. Elders is a leading distributor and retailer of products and
services in the agricultural sector. It provides fertilisers, chemicals and
agronomic advice from locations across Australia. Elders is a 50 per cent
participant in the ELF Australia joint venture (the owner of Hi Fert).
-
Landmark – is one of Australia's leading national retailers of
fertiliser; in addition to providing a range of other farm services. Landmark
sources its stock through from major suppliers, including IPL, Impact, CSBP and
Summit. Landmark is part of a joint venture with Elders Ltd, through ELF
Australia, which owns Hi Fert.
-
GrainCorp – publicly listed Australian agribusiness predominantly
involved in grain bulk handling. Operates under the Ag Plus brand for rural
merchandise.
-
RuralCo – operates through a number of businesses (CRT, Roberts,
Ruralco, Growforce) that specialise in rural merchandise, fertiliser, stock
feed, grain storage and other activities.[26]
Production
2.37
Australian fertiliser manufacturers produced nearly 3 260 000
tonnes of fertilisers in 2006.[27]
Manufacturing includes processing raw materials such as phosphate rock or
atmospheric nitrogen into easily-used products, or coating existing products
with trace elements. Table 5 lists the quantities of each of the main products
in Australia, and their main nutrient constituents.
Table 5: Fertilisers made
in Australia in 2006 and the nutrients they supply (tonnes)
| Major products |
Total
tonnes |
Nitrogen |
Phosphorus |
Sulphur |
Calcium |
|
Urea |
214 000 |
98 440 |
0 |
0 |
0 |
|
Sulphate of ammonia (SOA) |
237 983 |
49 976 |
0 |
57 116 |
0 |
|
Anhydrous ammonia |
69 812 |
57 246 |
0 |
0 |
0 |
|
Di- ammonium phosphate (DAP) |
342 985 |
61 737 |
68 597 |
5 145 |
0 |
|
Mono- ammonium phosphate
(MAP) |
255 710 |
25 571 |
56 256 |
3 836 |
0 |
|
Single superphosphate |
1 026 651 |
0 |
92 399 |
112 932 |
205 330 |
|
TOTAL |
2 147 141 |
292 970 |
217 252 |
179 029 |
205 330 |
Source: FIFA, Fertilizer
Industry Environment Report 2006, p. 22.
2.38
More recent data indicates that just under one million tonnes of MAP and
DAP is produced in Australia, all from the Incitec Pivot plant at Phosphate
Hill near Mt Isa (Qld). Incitec Pivot exports between 250 000 and
300 000 tonnes of MAP and DAP annually. Export tonnage is almost all DAP,
as this is the preferred product in target markets (Asia and the Subcontinent),
although there are occasional exports of MAP. Approximately 230 000 tonnes
of urea is produced per annum. Domestically produced urea is rarely exported
from Australia. Approximately 80 000 tonnes of anhydrous ammonia is
produced annually and 250 000 tonnes of sulphate of ammonia (SOA) per
annum is used in agriculture.
Consumption
2.39
The total tonnage of the major fertiliser products (imported and
domestic) used in Australia, and the total tonnage of nutrient elements in those
products are listed in Table 6. Including other less common products, just over
5 million tonnes of fertilisers were used in 2006. Urea (for its N), single
superphosphate (P and S), and DAP and MAP (N and P) are the main products.[28]
Table 6: Tonnage of major
imported and domestic fertiliser products used in 2006
| Product |
Tonnes |
Approximate
tonnage of principal elements |
|
|
|
N |
P |
K |
S |
Ca |
|
Single superphosphate |
1 065 488 |
0 |
95 894 |
0 |
117 204 |
213 098 |
|
Urea |
1 032 066 |
474 750 |
0 |
0 |
0 |
0 |
|
Mono-ammonium phosphate
(MAP) |
676 766 |
67 677 |
148 889 |
0 |
13 535 |
0 |
|
Di-ammonium phosphate (DAP) |
579 171 |
104 250 |
115 834 |
0 |
8 688 |
0 |
|
Potassium chloride (muriate
of potash) |
299 993 |
0 |
0 |
149 997 |
0 |
0 |
|
Ammonium sulphate (SOA) |
288 841 |
60 657 |
0 |
0 |
69 322 |
0 |
|
Triple superphosphate |
106 944 |
0 |
21 389 |
0 |
1 070 |
16 042 |
|
Anhydrous ammonia |
69 814 |
57 246 |
0 |
0 |
0 |
0 |
|
TOTAL |
4 119 081 |
764 580 |
382 006 |
149 997 |
209 819 |
229 140 |
Source: FIFA, Fertilizer
Industry Environment Report 2006, p. 13.
2.40
Total NPK consumption in Australia has generally increased in the past
20 years – from around 730 000 tonnes in 1983 to a peak of
1 670 800 tonnes in 2004. The effect of severe drought has had a
significant impact on fertiliser demand over the past few years.[29]
Regulation of the industry
2.41
Regulatory arrangements in relation to the description, sale and use of
fertilisers in Australia are the responsibility of state and territory
governments. No state requires that fertilisers be registered, however, all
have specifications for how fertiliser must be described and labelled, and the
maximum permissible concentrations for certain impurities.[30]
2.42
For example, in Western Australia the Fertilizers Act 1977 and
the Fertilizers Regulations 1978, set out the labelling requirements in
that state. These labelling requirements specify that the name and brand of the
fertiliser; name and address of the manufacturer or formulator; and minimum
percentages of specified ingredients are to be attached to the fertiliser
container. There are no specific requirements for MAP and DAP fertilisers, but
the general labelling requirements apply. The nitrogen, phosphorus and sulphur
levels in these products are required to be on the product label or invoice.[31]
2.43
The states generally, with the exception of Victoria, do not undertake
regular testing of ingredients in fertiliser products, such as NPK levels. Victoria
does sample testing each 2-3 years, with the last testing undertaken in 2004-5;
further testing is scheduled for 2009. Some states, such as NSW, undertake
testing when a problem has been identified to the department. Other states view
the issue as a fair trading issue, more appropriately addressed under that
specific legislation.[32]
2.44
One study noted that the state and territory acts 'vary considerably in
their scope and detail'.[33]
The study also noted that FIFA has identified in excess of 150 specific
differences in fertiliser regulations between the states.[34]
2.45
Under laws that had applied since the 1930s (until the 1990s in some
states) companies wanting to sell fertiliser products were required to have the
product registered. They also had to provide detailed information about its
content. In recent decades there has been a move to self regulation in the
industry. Some commentators have argued that the move away from a strict regime
of registering fertiliser products has effectively meant that companies now 'police
themselves'. With the demise of the registration process, it has been argued
that state agriculture departments are no longer in a good position to know
what is on the market in relation to fertiliser products.[35]
The WA Department of Agriculture and Food described that state's fertiliser compliance
regime as 'reactive', with the department limited to investigating complaints
from suppliers, farmers and the general public.[36]
2.46
Other regulations also apply to fertiliser products. Fertiliser imports
are subject to Australian quarantine regulations administered by the Australian
Quarantine and Inspection Service. Most fertiliser products require an import
permit and are required to conform to import conditions. Certain fertilisers are
classified as 'dangerous goods' and storage, transport and handling are
regulated under state dangerous goods regulations. Fertiliser import,
transport, storage, manufacture and use may also be subject to regulation
relating to environmental risks. State environment departments and Environment
Protection Agencies administer these regulations.[37]
Fertilizer Working Group
2.47
A Fertilizer Working Group, which is convened by the Department of
Agriculture, Fisheries and Forestry (DAFF), and includes representatives of the
states, CSIRO, Food Standards Australia New Zealand and the industry, has been
established with the aim of ensuring that environmental and food safety
standards for fertilisers are consistent across jurisdictions.[38]
2.48
The Working Group has succeeded in harmonising permissible heavy metal
levels in fertilisers but there are still a large number of inconsistencies
including product labelling and the requirements and wording of warning
statements.[39]
2.49
With regard to labelling, the members of the Working Group have agreed in
principle to the development of an Australian standard or industry code of
practice that would specify the appropriate description and labelling for
fertilisers to ensure harmonisation between states. The states are expected to
continue to include public interest measures such as maximum permissible
concentrations of certain impurities, and OH&S, environmental and food
safety warnings in their regulations.[40]
In August 2008, the Working Group agreed that the states would review a draft
code of practice for fertiliser description and labelling developed by FIFA to
determine any areas where it conflicts with current regulation.[41]
Committee view
2.50
The committee considers that the states and territories should have
uniform standards relating to the description, sale and use of fertiliser
products. The committee notes that the Fertilizer Working Group has agreed in
principle to the development of an industry code of practice that would specify
the appropriate description and labelling for fertilisers. The committee
believes that this work should be concluded as a matter of priority.
2.51
The committee is also firmly of the belief that state agriculture
departments, as part of their regulatory oversight functions, should regularly
test the specified ingredient levels, such as NPK levels, in fertiliser
products to ensure that users have confidence in the integrity of these products.
2.52
The committee will consider these and further issues related to the
regulation of the industry in its final report.
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