The Client, a leading producer of potassium nitrate (NOP) and specialty fertilizers, was concerned with tightening regulations on NOP consumption and distribution in several markets.
To manage the effects of such restrictions on their business, the Client was considering an investment case to increase in production of other products, namely high-solubility NPK fertilizers. CRU Consulting was requested to undertake an analysis of the high-solubility NPK market and recommend whether and how to expand production.
Our recommendation
CRU Consulting found that, given ample capacity to meet global demand among current market participants, the Client would need to gain market share at the expense of existing suppliers. Our team recommended that in order to successfully expand its production and sales of high-solubility NPKs, the Client must leverage its strengths and reputation with distributors in its existing NOP markets to align its distribution of NOP and high-solubility NPKs and ensure future supply opportunities. Further, CRU Consulting recommended that the Client would need to increase its marketing and sales efforts, including potentially developing a local presence, to penetrate existing markets. We concluded by identifying target markets based on the results of our netback analysis as well as a selection of high-solubility NPK product formulations to include in their product portfolio.
Methodology
CRU Consulting began by presenting its regional analysis and outlook for the high-solubility NPK market including our identification of demand trends by region and major market to identify possibly future supply opportunities. We also analysed trade and prices in order to assess the competitive environment and identify markets in which the Client may be able to access the highest netback prices. As part of this analysis, CRU Consulting presented high-solubility NPK price forecasts for major markets and regions of interest to the Client. Sourcing of high-solubility sources of phosphate and nitrogen were also analysed.
We profiled existing suppliers of high solubility NPKs and presented a breakdown of their product capacity, sales volumes, and presence in international markets. We assessed the strategies of major suppliers in developing their high-solubility NPK sales and marketing networks overtime. These strategies were related back to the Client’s existing network to determine possible paths for its new production to enter the market. Finally, we surveyed dozens of current suppliers to identify and categorize relevant high-solubility NPK formulations, including those which are most highly demanded in targeted markets based on their crop selection as well as climatic and soil conditions
Outcome
The Client gained valuable market insights into the high-solubility NPK market and an understanding of the risks and opportunities of introducing new production into a well-supplied market. This has enabled the Client’s management to take an informed decision on the case for investment.
