European Union Enlargement New Challenges for an Enlarged European Fertilizer Industry

1 The Fertilizer Round Table, Winston-Salem: October 2003

Enlarged EU: a new picture Main Economic Indicators

Area (‘000km2) Population (Mio) GDP (Mio €) GDP in Agriculture (Billion €)

Labour Force in Agriculture (Mio)

The Fertilizer Round Table, Winston-Salem: October 2003

EU – 15

AC – 10

EU – 25

% Increase

3.235

739

3.974

+23%

379

75

454

+20%

8.524

340

8.864

+4%

151

12

180

+8%

7.1

3.7

10.8

+52%

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Enlarged EU: a new picture Agriculture: basic indicators EU-15

AC-10

EU-25

change

Total Agricultural Area (Mio ha)

130

39

169

+ 30%

Average size of farm (ha)

18.7

9.0

15.5

-3.2 ha

Agriculture: share in GDP (%)

2.0

3.8

2.0

Agriculture: share in labour force (%)

4.3

14.3

5.7

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The Fertilizer Round Table, Winston-Salem: October 2003

Enlarged EU: a new picture Agriculture: EU Funding 2006 EU – 15

AC – 10

41.8

2.6

Total agricultural land ('000 ha)

130 004

38 620

EU Funding per hectare (€/ha)

321.5

68.6

EU Funding per hectare adjusted (PPS/ha) for purchasing power standards

321.5

153.1

Total EU Funding 2006 (Bio €)

The Fertilizer Round Table, Winston-Salem: October 2003

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Accession Criteria Evaluation ‰ Main economic developments » “Over the period 1997-2001, in most candidate countries economic growth was above the EU average of 2.6%. GDP per capita reached 39.3% of the EU average in 2001. Over the five-year period, most countries did catch up. Candidate countries have continued to adjust their production structures. The agricultural sector’s share in GDP declined over the period, and the service sector further increase, although not yet reaching EU levels.” p.14 » “These countries have made further and sufficient progress in macroeconomic stabilization and economic reform and the continuation of their current reform paths should enable them to cope with competitive pressure and market forces within the Union.” p.15

‰ Acquis communautaire: general statement » “In most cases, candidates generally meet the commitments made in the negotiations. In some cases, candidates have problems, ... mainly in the areas of agriculture, environment and fisheries.” p.12 Source: European Commission – Towards the Enlarged Union, Strategy Paper, Oct 2002

The Fertilizer Round Table, Winston-Salem: October 2003

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Acquis Communautaire ‰ AGRICULTURE » “In the agriculture sector, most countries need to finalize alignment of their legislation and to reinforce their administrative capacity to implement and enforce the CAP acquis. The candidates concerned will be unable to benefit fully from the CAP support systems.” » “A number of countries still need to conclude the process of agricultural land reform.” p.19

‰ ENVIRONMENT » “In the environment sector, candidates need to reinforce their overall administrative capacity to apply the acquis, in particular in the areas of waste management and industrial pollution. The provision of necessary financial means needs to be ensured.” p.17 Source: European Commission – Towards the Enlarged Union, Strategy Paper, Oct 2002 The Fertilizer Round Table, Winston-Salem: October 2003

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Acquis Communautaire ‰ INDUSTRIAL POLICY » “Privatization of the economy has made impressive progress since 1997, reaching levels comparable to the EU, but efforts are required to complete the restructuring of a number of sectors.” p.15

‰ COMPETITION » “As regards state aid, ... incompatible existing aid schemes, ... should be brought into line with the acquis and the enforcement track record needs to be developed. A number of countries still need to improve state aid control in certain sectors where restructuring plans need to be implemented.” p.17 Source: European Commission – Towards the Enlarged Union, Strategy Paper, Oct 2002 7

The Fertilizer Round Table, Winston-Salem: October 2003

EU-15 Nitrogen Balance Excluding Trade (1999-2002 – kT N) 14000

12000

11553

11142

11043

10484 10334

10375

10313 10010

kT Nitrogen

10000

8000

6000

4000

2000

0

1999

2000 Capacity

2001

2002 Consumption

Sources: Capacity: EFMA – Consumption (ag+tech estimated): EFMA, IFA The Fertilizer Round Table, Winston-Salem: October 2003

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CC-10 Nitrogen Balance Excluding Trade (1999-2002 – kT N) 4000

3441 3500

3500

3333

3295

3000

kT Nitrogen

2500

2035

2032

1929

2000

2060

1500

1000

500

0

1999

2000

2001

Capacity

2002 Consumption

Sources: Capacity: EFMA – Consumption (ag+tech estimated): EFMA, IFA 9

The Fertilizer Round Table, Winston-Salem: October 2003

EFMA Nitrogen Capacity 3 Major Waves of Restructuring since 1985 -35% in 17 years

18000 16440 16000 14491

-12.7% in last 4 years

14000 12221 12000 10665

10218

kT N

10000

8000

6000

4000

2000

0

1985

1990

1998

2002

2006

Source: EFMA Capacity survey , June 2003; NB: EFMA = EU-15 + Norway & Switzerland The Fertilizer Round Table, Winston-Salem: October 2003

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EFMA Shutdowns 1999-2002 Capacity Closures in WE in 1999, 2000, 2001, 2002 Product Capacity KT

(Alternative Capacities not included) Plant

AN

CAN

NPK

NP

Ur e a

UAN

M AP

AS

KTN

570

Arklow , Irland (IFI)

70

Aviles, Spain (Fertiberia)

200 250? 507 250 50 200

Balaruc, France (Cedest) Barreiro, Portugal (Adubos de P.) Belf ast, UK (IFI) Cartagena, Spain (Fertiberia) Cartagena, Spain (Fertiberia) Cologna, Italy (Kappa)

400

Cork, Irland (IFI)

45

Cokeries, France

180 250

Drapetsona, Greece (Cooperative) Fredericia, Denmark (Kemira)

285 70

Huelva, Spain (Fertiberia)

215

Hurel Arc, France (Hydro)

660

Immingham, UK (Hydro)

175

Landskrona, Sw eden (Hydro)

41

Luchana, Spain (Sef anitro)

650

Ludw igshaf en, Germany (BASF)

250

Mazingarbe, France (GP)

33

Mont.Noter.D, France(Cedest)

200

Montoir, France (Hydro)

110

Nera Montoro, Italy (Hydro)

400

Ostende, Belgium (CNO)

330

Pernis, NL (Kemira)

240

60

Porsgrun, Norw ay (Hydro)

450

Porto Marghera, Italy (Enichem)

174 166

Puertollano, Spain (Fertiberia)

520 150 350

Rozenburg, NL (Kemira) Schw edt, Germany (PCK) Schw edt, Germany (PCK)

230

220

Sevilla-Tablada, Spain (Fertiberia)

80

Torviscosa, Italy (Chimica del Friuli)

320

Toulouse, France (GP)

360

90 366 837

various, Spain (Fertiberia) TOTAL k t M at

1 310

Total k t N

2 415

435

3 052

285 52

1 170 539

276

273

575

33

121

157 19 34 0 127 20 18 16 184 9 72 38 32 19 221 48 13 98 68 4 67 51 108 79 21 95 60 291 40 91 18 17 300 126 9 917

646

459

2002 k t M at

0

570

1 207

0

400

0

450

2001 k t M at

320

350

720

0

360

90

0

45

476

2000 k t M at

990

1 095

615

0

230

747

273

0

1 076

1999 k t M at

0

400

510

285

180

0

0

80

330

0

2 561 680

Note s :

Source: EFMA Capacity survey , June 2003; NB: EFMA = EU-15 + Norway & Switzerland

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The Fertilizer Round Table, Winston-Salem: October 2003

Acceding Countries Nitrogen Capacity Disparate Restructuring Efforts between 1990 and 2002 Capacities 1990 (kT N)

Capacities reduced significantly Little or no capacity reduction Increased Capacities

Capacities 2002 (kT N)

% Change 1990-2002

Acceding Countries

4.007

3.500

Hungry Czech Republic

841 427

320 315

Poland

1.982

1.890

5%

Slovenia Estonia Latvia Cyprus Malta

1 83 44 0 0

0 83 44 0 0

-100% 0% 0% 0% 0%

318 311

328 520

3% 67%

Slovakia Lithuania

The Fertilizer Round Table, Winston-Salem: October 2003

Source: EFMA Capacity survey , June 2003

-13% -62% -26

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EU-15 Fertilizer Consumption 10 Year Forecast: Declining Nutrient Consumption - 0.9 million tons of N+P+K nutrient between 2002 and 2012 12 000

Nitrogen P2O5 K2O

Nutrient ('000 tonnes)

10 000

8827

8 000

6 000

4 000

3143 2728 2 000

0 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: EFMA

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The Fertilizer Round Table, Winston-Salem: October 2003

AC-10 Fertilizer Consumption 10 Year Forecast: Increasing Nutrient Consumption + 1 million tons of N+P+K nutrient between 2002 and 2012 3500

3000

Nutrient ('000 tonnes)

1989-91: Collapse of agriculture in former communist countries

Nitrogen P2O5 K2O

2500

2350 2000

1500

1000

815 660 500

0 1960

1965

1970

Source: EFMA The Fertilizer Round Table, Winston-Salem: October 2003

1975

1980

1985

1990

1995

2000

2005

2010

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Trade: New EU-25 Borders ‰ NEW Regulatory Scene » Trade defense instruments do not apply anymore to the 10 new members as of 1 May 2004 » EU new borders: Current anti-dumping measures vis-à-vis Extra EU-25 countries will apply automatically in the new countries » Customs enforcement of existing duties at new borders » Competition issues become crucial

‰ Need for EU-25 intelligence and statistics to work this new scene

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The Fertilizer Round Table, Winston-Salem: October 2003

EFMA MEMBERS EFMA’s NEW MEMBERS

EFMA’s CORPORATE’ MEMBERS ‰ ‰ ‰ ‰

‰ ‰ ‰ ‰ ‰ ‰

Austria Finland France Germany

Agrolinz Melamin GmbH Kemira Growhow Oy Grande Paroisse SA BASF AG Fertiva GmbH K+S Aktiengesellschaft SKW Stickstoffwerke Piesteritz GmbH Phosphoric Fertilizers

Greece Industry Netherlands DSM Agro BV Norway Norsk Hydro ASA Portugal ADP-Adubos de Portuga Spain Fertiberia S.A. UK Terra Nitrogen (UK) Ltd.

The Fertilizer Round Table, Winston-Salem: October 2003

‰

Czech Republic Lovochemie A.S.

‰

Hungary

Nitrogenmûvek

‰

Lithuania

SC Achema

‰

Poland

‰

Slovak Republic Duslo

Anwil S.A. Zaklady Azotowe“Tarnow” SA Zaklady zotoweKedzierzyn”SA Zaklady Azotowe “Pulawy” SA Zaklady Chemiczne “Police” SA

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Imports Market Share of EU-15 Nitrogen Fertilizers Imports from Extra EU-25 & AC-10; 1999-02 Total

40%

37%

Will remain external trade 2/3

30%

Imports market share (%)

Will become part of the single market 1/3

Total

34%

35%

Total

30%

Total

25%

25% 20% 15% 10% 5% 0%

1999

2000

2001

Market share of imports from AC-10

8%

13%

10%

2002 10%

Market share of imports from Extra EU-25

17%

24%

23%

20%

Source: Eurostat 17

The Fertilizer Round Table, Winston-Salem: October 2003

Imports Market Share of AC-10 Nitrogen Fertilizers Imports from Extra EU-25 & EU-15; 1999-02 40%

Will become part of the single market 1/5 Will remain external trade 4/5

Imports market share (%)

35% 30%

Total Total

28%

35%

31%

Total Total

26%

25% 20% 15% 10% 5% 0%

Market share of imports from EU-15 Market share of imports from Extra EU-25

1999

2000

2001

2002

5%

4%

5%

5%

23%

22%

26%

30%

Source: Eurostat The Fertilizer Round Table, Winston-Salem: October 2003

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Main Importers into AC-10 Nitrogen Fertilizers Imports from Outside EU-25 into AC-10 ~ 2/3 comes from RUSSIA - 1999-2002 – kT N 700 TOTAL

619 600

TOTAL

Romania; 73

531

Kt NITROGEN

500

TOTAL

TOTAL

441

448

Ukraine; 18

Ukraine; 25

Russia 343

Russia 343

Ukraine; 37

Romania

Ukraine; 82

Ukraine

400

Russia

300

Russia 418

Russia 387

200

ROW (excl. EU-15)

100 ROW (excl. EU-15); 75

ROW (excl. EU-15); 75

ROW (excl. EU-15); 71

ROW (excl. EU-15); 77

2000

2001

2002

0

1999 The Fertilizer Round Table, Winston-Salem: October 2003

Source: Eurostat

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Critical Messages ‰ Important agricultural sector but structural problems still need to be solved ‰ Increased fertilizer consumption will not balance the increase in fertilizer production capacity ‰ Meeting the acquis communautaire » Installing competitive structures - restructuring » Modernizing production – environmental standards

‰ New external trade borders » Need to work jointly to work the new trade instruments scene successfully » Competition issues will gain importance The Fertilizer Round Table, Winston-Salem: October 2003

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