Arabian Gulf petrochemicals majors are increasing output of fertilizers, amid a brewing food crisis caused by booming populations in emerging markets.
Annual output of producers in the region is tipped to reach 32 million tonnes by 2016, up from 21 million tonnes last year, estimates the Gulf Petrochemicals and Chemicals Association.
The region's abundant reserves of gas, a feedstock used to make fertilizer, give it a competitive advantage over Europe and global producers.
"This growth enhances the industry's ability to meet the increasing demand for fertilizers at both the regional and global levels and consequently its ability to participate in the realisation of food security and sustainable development globally," said Rashid Ahmed bin Fahad, the Minister of Environment and Water during a keynote speech yesterday to open the third annual GPCA Fertilizer Convention.
Globally, the fertilizer industry is expected to grow only 2 per cent this year as a surplus of new plants outweighs demand from food producers for chemicals to grow crops and feed livestock. But longer term, the outlook for the industry is rosier.
The United Nations food and agriculture organisation estimates agricultural output needs to rise by 60 per cent over the next four decades to meet demand from surging populations in Africa, Asia and South America. Rising income levels of consumers will stoke demand further.
"More than 16 billion people are moving from poor to middle class and this means people's tastes change. It takes more energy to produce meat than vegetarian food," said Yahya Saleh Al Yami, the vice president for phosphate and industrial minerals at the Saudi Arabian Mining Company (Maaden), a part-government owned mining and fertilizer producer in the kingdom.
In partnership with Saudi Basic Industries Corporation (Sabic), Maaden is already running the largest ammonia plant in the world, producing 1.1 million tonnes per year.
It is also developing a 21 billion Saudi riyals (Dh20.56bn) phosphates project in Umm Waal in the north of Saudi Arabia.
Qatar Fertilizer Company finished work on the world's largest single-site factory for both ammonia and urea last year.
The UAE already has 34 fertilizer plans including seven making organic fertilizer. Abu Dhabi Fertilizer Industries, one of the largest players in the UAE industry, is planning further expansion.
"The UAE has supported the fertilizer industry since the first factory opened in the country in 1977," said Mr bin Fahad. "Ongoing development will not only see the expansion of capacity but also further advances in health and safety and environmental performance."
Higher output across the Gulf should help the region capture a greater share of the global market. Within five years, the region is set to corner 36 per cent of global urea exports and a quarter of the world trade in phosphate fertilizers.
"The GCC states have successfully converted their gas and sulphur feedstock advantage into a high-value downstream industry responsible for a significant proportion of the region's non-oil exports and providing much-needed local jobs," said Abdulwahab Al Sadoun, the general secretary of the GPCA, which represents the industry in the region.
tarnold@thenational.ae
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
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THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Company profile
Name: Dukkantek
Started: January 2021
Founders: Sanad Yaghi, Ali Al Sayegh and Shadi Joulani
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Number of employees: 140
Sector: B2B Vertical SaaS(software as a service)
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Investors: Global Founders Capital, Colle Capital Partners, Wamda Capital, Plug and Play, Comma Capital, Nowais Capital, Annex Investments and AMK Investment Office
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