/efma_annual_report_2007

ANNUAL REPORT 2007

EFMA 2007– What Next? The implementation of EFMA 2007 has been completed and the restructuring of EFMA is now concluded. Therefore, EFMA must devote all its energy to the pressing challenges that lie ahead. We need to clearly define, plan and implement our actions to able to succeed in our efforts. In support of this approach, this year’s Annual Report focuses on our future challenges: as well as presenting the achievements during this year, the chapters concentrate on the work that lies ahead.

An altered agricultural situation, an ever-changing legislative environment with special challenges related to the new climate change policy, constraints in terms of energy supplies and distorted market practices are the main issues that have bearing on our industry today. The EU’s ambition for Europe to be a low-carbon economy by 2020 will affect EFMA’s agenda and priorities during the coming years. The European fertilizer industry is ready to meet these challenges and we strive to be the reliable partner to our sole customer – the farmer – in order to continue to be a vital instrument in securing Europe’s food supply.

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From the President

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From the Director General

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Agriculture and Environment

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Fertilizer Consumption Forecast

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Technology, Environment and Safety

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Trade and Economic Policy

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Lobbying

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Branding

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Knowledge

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Facilitation

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Executive Committee of the Board

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Members

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Staff

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EFMA’s Core Values

CONTENTS

FROM THE PRESIDENT This year has been exceptional for the agricultural sector and agro-related industries. Grain prices have risen substantially as a result of a very strong demand and a disappointing harvest in different parts of the world. No one knows how long this situation will continue. However, there are indications of a more permanent change in the fundaments of world agriculture.

The world production of grain has kept pace with the growth of the world population. The growth of demand of grain has, however, separated itself from the growth of population and started to follow the growth of consumers’ buying power and change in dietary habits. Also, the strong demand for grain to use for biofuels has made the supply/demand situation tight.

The altered agricultural situation has reflected positively on the operating environment of the European fertilizer industry: as a whole, it has been a satisfactory year for the industry.

A strong demand for fertilizers in the world market has also contributed to a balanced market situation in Europe.

Europe’s economic development during 2007 has been more positive than during the last few years. Especially large Central European economies have finally started to take off. All Europeans should, however, realise that the present European growth rates are still very modest in comparison with certain other parts of the world.

Better performance is needed in order to guarantee the well-being of Europe’s ageing population as well as a prosperous future for our children.

HEIKKI SIRVIÖ Acting President

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During 2007, the European Commission has published important policy initiatives in areas of major interest to the European fertilizer industry. EFMA’s long-standing goal is to have a more competitive EU energy market, especially for natural gas. The Commission proposals, which are to be discussed and decided by the Member States during 2008, must heed our concerns. EFMA welcomes the proposals to make the natural gas markets more effective and urges the EU Member States to forget their national narrow-minded interests and instead accept the new policies for the sake of European industries and citizens.

Already in 2006, the Commission published tentative proposals on changing its present trade defence, namely anti-dumping legislation. Formal legal proposals are expected by the end of 2007. EFMA has very actively participated in this debate and has emphasised the need to maintain a well functioning set of trade defence instruments in order to protect European producers from unfair trading practices. We are delighted that our point of view is shared by many other associations representing European manufacturers in Brussels.

ANNUAL REPORT 2007

It is well-known that the major practice disturbing fair trade today is the Russian dual-pricing of natural gas. In spite of Russian decisions to increase the price of natural gas for domestic buyers, the gap between the domestic and export price has only widened.

During this year, the European Union has taken drastic decisions in order to fight climate change. The decision to cut total energy use and CO2 emissions by 20% during the coming decade, as well as to increase the share of renewable energy to 20% of the total energy consumption, represent challenges for the European industries and citizens, and all the consequences of these decisions are not yet known. Dealing with these challenges is a priority task for any energy intensive industry.

The fertilizer industry’s sole customer – the farmer – also finds himself in a new situation: more than ever is expected from him. There is a strong demand for different products of the countryside, including bioenergy. But the farmer is expected to meet the increasing demand for his products with fewer effects on the environment than previously has been the case. The discussion about the nutrient efficiency of agriculture and the recycling of nutrients will have a concrete bearing on the operating conditions for the European fertilizer industry.

A big change occurred within EFMA in September when Daniel Clauw, who has been EFMA President since December 2001, stepped down. The EFMA family owes a great deal to Daniel as his commitment and strong leadership has pushed the whole of the European fertilizer industry forward during difficult years. We thank Daniel Clauw and wish him all the best in his future endeavours.

In the beginning of 2007, the European Union enlarged its membership to include Bulgaria and Romania. EFMA has developed its contacts with the fertilizer companies in these two countries and is currently preparing to welcome them as members in our association from the beginning of 2008. EFMA has actually, more or less, doubled in size during the last few years due the enlargement of the EU from 15 to 25, and then to 27, Member States. This development has made it even more important to critically evaluate efficiency in promoting the interests of our members. What is true for the fertilizer companies is also true for EFMA: we must constantly seek to improve our operations.

The European fertilizer industry strives to be a reliable partner to the European farmers and the agro-food chain as a whole. EFMA recognises the economic and environmental pressures on the farming sector and supports farmers in their endeavours to secure the future of European farming in a more open, global competition.

EFMA expects the other parts of the agro-food chain to see the value of maintaining and developing a complete “from field to fork” concept in Europe and to support the fertilizer industry in matters essential to its well-being.

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FROM THE DIRECTOR GENERAL Internal Improvements at EFMA This year has seen internal improvements being made within EFMA. The EFMA secretariat moved to very functional and bright new offices on the CEFIC premises. The brightness and space is representative of the transparency and openness which prevails in our work.

The final decision to move the EFMA database and the other functions located in Zurich was taken in early 2007.

The move will be finalised during the spring of 2008. It is our strong belief that we can create more efficiency and synergy in our work by being located in one sole office.

Unfortunately all Zurich staff members have not been in a position to accept moving to Brussels and it will be a challenge to ensure that the expertise related to the database will be maintained at its current high level.

In September of this year, the Executive Committee of the Board accepted proposals to streamline and strengthen the administrative and financial management of EFMA. Besides increased efficiency, these changes will lead to increased transparency within our administration.

ESA HÄRMÄLÄ

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EFMA’s extranet was gradually taken into use during 2007 and feedback from EFMA members has been positive. Indeed, the extranet is a valuable, effective tool which increases interactivity between members and the secretariat. Our external communication has also been improved as the EFMA website has been further developed and renewed.

All these internal improvements give EFMA a firm base to meet the challenges of the coming years. However, the workload within the secretariat is continuously increasing and leaves me in no doubt that a decision must be taken, perhaps already next year, whether to prioritise items even more sharply on our agenda or whether to increase staff resources.

ANNUAL REPORT 2007

Overview of the Agricultural and Fertilizer Season The demand for agricultural products in the world market continued to be strong and lead to strong price increases for most agricultural commodities. As such, this situation was very positive for our customer – the farmer – although the strong increase of feed prices, combined with higher energy costs, caused problems for animal husbandry producers.

Besides the strong demand for food, especially in Asia, the increasing bioethanol production in the USA contributed to higher cereal prices. Due to this strong demand and below-normal yield levels in many production areas around the world, the stocks of cereal fell to perilously low levels.

In fact, the world cereal stocks corresponded to a global consumption of only 40 days.

No one knows how long this trend of positive demand leading to higher prices in the world agricultural markets will last. It is indeed a very positive situation for the fertilizer industry. Most experts are, however, of the opinion that there is no return to the past, and that a large part of the recent price increases are here to stay. Agriculture and related industries are globally growth industries and it is our task to ensure that Europe takes its fair share of the growth.

The 2006/2007 agricultural year in the European Union was marked by an increase in the production of both crop and livestock products. Producer prices in agriculture developed favourably. The agricultural income in 2006 increased by +2.6%, but there were large variations between countries and regions. Weather conditions were very variable, changing from heat waves and drought to chilly weather and heavy rainfall.

The total cereal production rose by +1.9% compared to 2005/2006. This was due to slightly higher yields than the previous season while the sowed area remained practically

the same. The oilseed area increased by +8.7%, mainly as a result of increased demand of rape seed for biodiesel.

The sugar reform, introduced in 2006, clearly continues to have an important effect on the EU-27 sugar production.

The area sowed decreased by a further -4% (-20% in 2006).

The global fertilizer demand increased by +4.8% in 2006/2007 in response to higher producer prices in agriculture as well as supportive policies in India and China.

World demand is estimated at 163.9 million tonnes nutrients compared to the 156.5 million tonnes of the year before.

Nitrogen consumption has increased by +5%, phosphorus by +5.2% and potassium by +3.2%. Region-wise the growth in consumption is strongest in North America (+8.7%), in response to maize-based bioethanol production.

Consumption also increased strongly in South Asia (+7.9%) and in East Asia (+4.1%). The consumption of fertilizers in Latin America started to recover (+4.1%), following last year’s sharp decline. There was a decline in fertilizer consumption only in Central Europe (-0.3%) and in Oceania (-4.4%). In Oceania, the decline was due to extreme drought in Australia.

Total fertilizer consumption in the EU-27 was more positive than previous years. Consumption of nitrogen increased by +0.9%, while phosphorus consumption decreased by -1.8%.

Potassium consumption increased by 1%. Consumption is still increasing quicker in the new Member States (+2.5%) than in the EU-15.

For the second consecutive year, the EFMA Forecast of Food, Farming and Fertilizer Use in the European Union predicts an increase in nitrogen consumption. It signals that the decreasing trend of the last decades has changed, albeit modestly. This situation seems mainly due to the positive developments in the production of bioenergy.

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AGRICULTURE AND ENVIRONMENT Towards Sustainability After the EU enlargement of 2004 where the EU became one of the biggest agricultural markets with 170 million hectares of used agricultural area, 2007 has seen a further 11.5% consolidation of this leading position due to the entry of Bulgaria and Romania.

DANIEL GRASSET & WOJCIECH LUBIEWA-WIELEZYNSKI

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ANNUAL REPORT 2007

However, this important political event has been overshadowed by two major developments: • The market development of bioenergy crops, which has increased during 2007; • The sudden public awareness regarding climate change, which has become the main overall environmental concern.

The new EU enlargement, as well as the developments in these two sustainability issues, have profoundly changed the context in which we have to prepare for the future of EU agriculture.

Bioenergy The role of biomass as a renewable source of energy has become increasingly important. This year has seen a heightening of this interest on a global level, especially in Brazil and the USA. As production is not following demand, shortages of commodities and resulting price rises have been evident.

A complete change of the situation in the EU has also taken place: the publication of the EU energy package, in January 2007, containing more ambitious targets, the bioenergy production which has become more profitable for farmers, as well as the growing concern for climate change, have given a new momentum to this development of energy crops. This situation is reflected in the current evolution of the areas which are planted with energy crops. Furthermore, as published in the EFMA Forecast of Food, Farming and Fertilizer Use in the European Union 2007-2017, an increase of nitrogen consumption is foreseen in the coming ten years, more significant than evaluated last year (+3.6%), and mostly due to this development of bioenergy crops.

In addition to raising awareness on bioenergy through producing publications, EFMA is now involved in the more technical and legal aspects of this development. The new and more ambitious EU targets have been conditioned by the EU Commission to respect sustainability criteria such as Green House Gas (GHG) emissions, biodiversity and carbon soil content. In close coordination with COPA COGECA and DG Agriculture and Rural Development, EFMA contributes already to the development of the GHG sustainability criteria by participating in the work process led by DG Transport and Energy.

Key Objectives • To better assess the bioenergy market evolution, so that the fertilizer industry can propose best adapted products and practices; • To raise further awareness; • To actively participate in the current legislative process in order to ensure correct evaluation of energy and GHG balance in fertilizer use.

Good Agricultural Practices and Sustainable Farming Systems Developing sustainability in EU agriculture is very much about further developing Good Agricultural Practices (GAP) and promoting them to all actors of the farming industry, including official bodies and policy makers. This is one of the main missions of the EFMA Agriculture & Environment Committee.

Previous EFMA work such as organising the conference Sustaining Fertile Soils and Productive Agriculture and producing publications has proven to be successful in convincing the main stakeholders of EU agriculture that the implementation of sustainable farming systems is a successful way to ensure high productivity in agricultural production while respecting the environment – a necessity which becomes more and more obvious now that the production of bioenergy has further increased the need to manage lands in the best way possible. Integrated Farm Management is now considered as an effective tool to facilitate the implementation of environmental measures, and EFMA has positioned itself as a leading organisation in this domain.

Key Objectives • To contribute to further development of Good Agricultural Practices; • To make sure that Good Fertilization Practices are disseminated within the EU – from farmers to policy makers; • To ensure that GAP and sustainable farming systems are appropriately included in official EU Action Plans for better environmental protection.

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Environmental Protection 2007 has been a very active year with regards to water protection. After the adoption in December 2006 of the revised Ground Water Directive, work has continued in the EU implementation Working Group on Guidance on Chemical Status Assessment and Threshold Value Establishment. EFMA has actively contributed to this work.

The implementation of the Water Framework Directive (WFD) has entered a more technical phase and practical recommendations will be proposed to Member States in order to achieve the WFD targets. EFMA has been asked to participate actively in this working process, and to especially focus on the role of sustainable farming systems in achieving these targets.

Regarding air protection, EFMA has contributed to the study, Integrated Nitrogen Management, carried out by Alterra for DG Environment, where the cross-impact of measures concerning air pollution and water protection has been carefully considered. This is a first step towards a more “horizontal approach” of environmental protection that EFMA welcomes for ensuring an acceptable balance between all environmental compartments, the necessary profitability of agriculture and the expectations of European society.

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With the enforcement of the Kyoto Protocol in February 2005, the EU has undertaken to monitor Green House Gas emissions from all EU soils. In 2007, the increased priority on the climate change issue has induced closer focus and new debate on the impact of agriculture on GHG emissions. As a consequence, EFMA is bringing its expertise on present and future developments on European farming to the EU working process, such as the work initiated by DG Transport and Energy.

Key Objectives • To provide appropriate information on fertilizer and fertilization techniques in order to help the EU legislator propose adapted measures; • To promote implementation of GAP as an appropriate and cost-effective method for achieving efficient environmental protection.

ANNUAL REPORT 2007

Improved Work Efficiency An essential success factor when promoting the use of Good Agricultural Practices is to ensure a wide and consistent circulation of the information. The coordination within our industry is therefore a major concern in all our actions.

Key Objectives • To further develop Good Agricultural Practices, especially in the new EU countries; • To facilitate the exchange of knowledge and expertise within our fertilizer industry, but also towards our main partners, farmers and other actors in the agricultural industry.

The achievement of the EFMA extranet has been, in that respect, a major step in facilitating the exchange of information without adding to the workload of our EFMA contributors.

During the year, new initiatives have also been taken to further improve the collaboration between the EFMA secretariat and the National Associations: for example, in the domain of national implementation of the water directives, a close coordination between the National Associations was set up, and these contacts are managed amongst the National Associations themselves.

The Agriculture & Environment Committee has continued to give substantial and regular support to the International Fertilizer Industry Association (IFA) regarding their long-term forecast: following our contribution in China in 2006, we assisted during the training on new Forecast methodology for South East Asia.

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FERTILIZER CONSUMPTION FORECAST EFMA experts have carried out a thorough analysis of data in order to provide a well-based outlook regarding the evolution of farming and fertilizer use over the coming ten years in the enlarged EU-27. While the main findings are set out in this chapter, EFMA also issues a yearly publication, Forecast of Food, Farming and Fertilizer Use in the European Union, which provides further detail and highlights some major issues and figures.

As a starting point, the Forecasting group carefully considers the agricultural trends identified by international organisations, such as the OECD agricultural department, the US Department of Agriculture (USDA), the Food and Agricultural Policy Research Institute from Iowa State University (FAPRI), and also DG Agriculture and Rural Development, with whom EFMA maintains a close and productive collaboration.

Besides the impact of the Single Farm Payment (SFP) adopted in June 2003, the political decision of the European Commission to support energy crops to meet the ambitious targets of 5.75% biofuels in 2010 and 10% in 2020 has favoured the cropping of cereals and oilseeds for that purpose, and part of the set-aside lands are devoted to it.

The current global scarcity of raw materials, and agricultural commodities in particular, seems to be long-term. This situation, together with the possibility of the abolition of compulsory set-aside is also part of our scenario.

PHILIPPE DUGAST

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The combination of these two factors will, for the EU-15, lead to a stabilisation of the cereals area (+1.7% for wheat) and a +45% increase of oilseed rape.

As for the cropping pattern forecast in the EU-15, wheat areas will increase slightly by around +1.7%, while sugar beet acreage will continue to decrease more drastically (production will decline by -6%) as a consequence of the new sugar regime after 2009. This decrease will only be partly compensated by the development of bioethanol.

A decrease in fertilizer use is predicted in almost all EU-15 countries. The slight increase of nitrogen in Sweden and Austria is due to the strong development of energy crops (production of biofuels & biogas). In Spain, the general increase of fertilizer use is partly due to an improvement of irrigated areas, and particularly of surfaces dedicated to olive trees, vines and citrus fruits. This is because of an increase of the fertilization rates for these crops, but also because of a particularly bad current situation: when the reference year used to calculate the percentage of evolution is exceptionally low, the foreseen evolution appears to be inappropriately high. In France, the stable situation is due

ANNUAL REPORT 2007

to the strong development of energy crops compensating the decrease attributed to the Single Farm Payment and to the cross-compliance measures.

In sum, our Forecast predicts a continuation of the general downward trend in fertilizer use in the EU-15. More specifically, consumption of the three major nutrients, nitrogen, phosphorus and potassium, will decline by -1.2%, -8.5% and -6.4% respectively over the next ten years.

On average over the last three seasons, fertilizers carrying 8.4 million tonnes of nitrogen, 2.5 million tonnes of phosphorus and 2.9 million tonnes of potassium have been applied to 99.1 million hectares of farmland each season (50.8 million hectares are not fertilized) in the EU-15. By 2017, the Forecasters expect these figures to have dropped to 8.3, 2.3 and 2.7 million tonnes respectively.

the most amongst the EU-12 Member States, since the current fertilizer application rates are still very low.

These results appear lower than those published in the 2006 Forecast: Poland, the major contributor to this new trend (Poland accounts for 48% the total nutrients consumption in the EU-12), revised its figures and provided a less optimistic forecast this year. This overall increase in the EU-12 countries (0.64 million tonnes for N+P+K), remains, in absolute figures, still slightly higher than the decrease in the EU-15 countries (0.49 million tonnes).

Thus, over the next ten years at EU-27 level, consumption of nitrogen will increase by 0.38 million tonnes, while consumption of phosphorus and potassium will decline slightly by 0.14 and 0.10 million tonnes respectively.

Key Objectives • Better integration of the new EU Member States in the EFMA Forecast procedure; • Better evaluation of the EU market development of the bioenergy sector.

For the 12 new EU Member States, there will be a significant increase in consumption: +21% for nitrogen, +11% for phosphorus and +14% for potassium, coupled with an expected +6% increase in cereal production.

Bulgaria will increase its volumes in relative figures,

Fertilizer Nutrient Consumption in the EU-27 Nutrient (million tonnes) 16

N

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P205

12

K20

10 8 6 4 2 0 1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

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TECHNOLOGY, ENVIRONMENT AND SAFETY The activities in the Technology, Environment and Safety Committee cover all aspects of production, transport and storage of fertilizers. A wide range of issues could potentially affect our industry and thus need to be addressed. Experts within EFMA meet regularly in the many Taskforces of the Technology, Environment and Safety Committee to exchange thoughts, discuss, prepare guidelines and position papers, or conduct joint research.

AREND WERNER & TORE JENSSEN

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ANNUAL REPORT 2007

Security

Safety

Security Issues The security issue concerning the misuse of chemicals, including fertilizers, for terrorist purposes has continued to receive close attention from DG Enterprise and Industry as well as DG Justice, Freedom and Security. DG Justice, Freedom and Security set up a number of Working Groups to prepare proposals and EFMA contributed to the Working Group dealing with precursors. One of the discussion outcomes of this Working Group was for supplies to retail sector, e.g. supermarkets and garden centres, and the proposal stipulates that the maximum AN concentration must be limited to 70%. The Working Group also agreed to propose a voluntary scheme similar to that of the Fertiliser Industry Assurance Scheme (FIAS) in the UK. EFMA has offered its Product Stewardship Program as a suitable vehicle for the voluntary scheme and has revised it to incorporate security-related requirements.

Globally Harmonised System (GHS) As proposed by EFMA in 2006, the new GHS “Blue Book” includes a footnote dealing with communicating about the explosive properties that some oxidisers may have.

Although this footnote has generally been found acceptable and satisfactory, there have been instances of misinterpretation by certain traders. An explanatory note has therefore been prepared by EFMA in order to resolve this issue.

A major conference on security was held to recognise the work achieved by the Working Group and EFMA presented a well received keynote paper to support the industry’s position.

UN Transport Regulations: EFMA Proposal At the final meeting of the UN Committee of Experts on the Transport of Dangerous Goods, EFMA successfully secured adaptation of its proposal to permit inclusion of calcium sulphate as a partial or full replacement of calcium carbonate/dolomite in straight-N fertilizers, in order to benefit the range containing between 70 and 80% AN. As certain national experts expressed a concern about impurities of calcium sulphate, e.g. from phosphorgypsum, a compromise was reached in which calcium sulphate was defined as a mineral form. EFMA has produced an internal note to explain the reason for this amendment.

Revision of the IMO Bulk Cargo Safe Code of Practice The Bulk Cargo Code is being revised by the International Maritime Organisation’s (IMO) Dangerous Substances Committee (DSC). Under the umbrella of CEFIC, EFMA submitted a formal paper to seek more flexibility in certain personal protection provisions in the new Code. An EFMA representative attended the DSC 12 meeting in London and succeeded in getting the paper approved. In addition, EFMA contributed to the Working Group established by DSC 12 in order to improve the new text of the revised Code which will be finalised in May 2008.

Seveso Directive Interpretation Issue In the last revision of the Seveso Directive made in 2003, the entries for ammonium nitrate were increased in number and revised to increase its scope. The new text for AN-based fertilizers has been interpreted differently by certain Member States, and as a consequence, the inclusion of AN-based fertilizers with >45% AN in the scope is incorporated in their legislation. EFMA was involved in the revision proposals and is aware that this outcome was not intended. Therefore, experts from the EU Commission and Member States have been invited to a meeting at EFMA where the rationale and examples of the intended application have been presented. This presentation has been accepted and the Commission will publish a paper explaining the correct interpretation to all Member States.

Environment Limit Values New Commission proposals regarding amendments to the existing Fertilizer Regulation EC2003/2003 have been discussed in the Fertilizer Working Group Meeting of DG Enterprise and Industry. The proposal concerns setting limit values for nutrients above which declaration is necessary, as well as maximum levels for a range of heavy metals above which marketing is prohibited. EFMA, as a participant of these meetings, has prepared a position paper in order to present a counter-proposal from the industry. The position paper was discussed with the Commission and will be further discussed with the Member States.

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Emission Trading In preparation of the second phase of the Emission Trading Scheme (2008–2012), certain EFMA members have lobbied their national authorities in order to secure the possibilities of opting in N2O. The discussions on the base level are in the final phase and a Commission proposal is expected before the end of this year.

EFMA Safety Seminar This year’s seminar was held in Germany and hosted by BASF. The central theme was Safety in Maintenance.

The conference was well attended with more than 30 participants from 11 countries and provided an excellent opportunity to share knowledge and experiences in order to improve safety.

The inclusion of carbon dioxide emissions from more industrial sources as well as other Green House Gases can be expected as from 2013. In preparation, EFMA has met with DG Environment to exchange thoughts and convey a preliminary industry position.

EFMA’s Benchmark Studies

Guidance Documents A comprehensive Guidance for the Storage, Handling and Transportation of Solid Mineral Fertilizers was published to replace the 1996 handbook. The new Guidance is wider in scope and more detailed.

Work is progressing well in completing the Guidance Document dealing with the periodic inspection of atmospheric, refrigerated ammonia tanks. This publication will replace a previous Guidance.

The EFMA 2005 Guidance for Transporting Ammonia by Rail has been revised and is now available both in English and German.

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Safety Statistic Survey Since 1996, EFMA members benchmark the safety performance of their employees and contractors in a yearly safety statistical survey. The improvements shown over the past years, as well as the decreasing Lost Time Injury Rate (LTIR) trends, continued also in 2007. Increasingly challenging targets for employees as well as contractors have been established for the coming year.

Environmental Benchmark Since 1996, EFMA members benchmark their emission performances of a large number of substances into air and water. Analyses show that emissions are decreasing over the years. The general trend for most substances is a decreasing one.

In preparation of the 2008 bi-annual global environmental survey of IFA, in which EFMA participates, EFMA will propose a new set of Best Available Techniques Reference (BATREF) Levels based on the BATREF Document Ammonia, Acids and Fertilizers drafted by the European IPPC Bureau (EIPPCB) in Seville.

Energy Benchmark The next EFMA Ammonia Energy Efficiency and Carbon Dioxide Emission Benchmark will be held next year.

The Benchmark will cover the years 2006/2007 and will be brought in line with the IFA Global Benchmark. Work is currently under way in revising the definitions of the carbon dioxide emission benchmark to include indirect CO2 emissions.

Product Stewardship EFMA’s Product Stewardship initiative has continued to make good progress. Activities during 2007 focused on an update of the program, the issuing of a product stewardship standard based on ISO, and preparation for the audit in 2008.

The Product Stewardship Program has undergone revision to include new requirements relating to security provisions.

To make EFMA members aware of this and to prepare the members for the 2008 audit, a training session was held in September. The session was well attended with 44 participants representing all EFMA member companies and a number of valuable comments were received at the meeting. New audits of member companies’ implementation of the Product Stewardship Program will commence shortly.

Safety, Health and Environment SHE Report An overview of EFMA’s Safety, Health and Environment (SHE) activities are highlighted in the yearly EFMA SHE Report. This report is a joint activity of the Technology, Environment and Safety Committee and the Agriculture and Environment Committee. It gives a good overview of SHE performances within the industry.

ANNUAL REPORT 2007

Health High Production Volume (HPV) The High Production Volume (HPV) data that EFMA obtained from The Fertilizer Institute (TFI) and which were completed by NOTOX, are currently being approved in OECD’s Screening Information Data Sets process. During 2007, fertilizers in the ammonia-, phosphate-, nitrate- and sulphate-groups were submitted for approval and were accepted by the OECD. This provides us with an approved dataset for further use in REACH. The fertilizer intermediates in the acid-group will be submitted during the spring of 2008.

REACH REACH, the European Chemical Regulation, came into force in June 2007. EFMA’s Taskforce REACH has proven to be a good platform for our members to prepare joint activities in order to meet the requirements under REACH. Ambiguities in the regulation have been solved: a list of substances has been selected for possible joint testing and gaps in data concerning available tests from the HPV program and what is necessary in REACH, have been defined.

Parallel to these activities, another Taskforce concerning Material Safety Data Sheets (MSDS) has started to revise the 1996 EFMA Guidance on the Compilation of MSDS. The revision is needed due to changes in legislation such as Global Harmonized System and REACH.

Facilitation In order to advance the Technology, Environment and Safety Committee agenda, a good participation in meetings with allies outside of EFMA is essential.

We participate for example in CEFIC Working Groups on issues like REACH, Occupational Exposure Levels, Transport (INDA), Seveso, and IPPC. EFMA also participates in the IFA Technical Working Committee and has established good contacts with fertilizer associations abroad such as The Sulphur Institute (TSI; USA), The Fertilizer Institute (TFI; USA); the Canadian Fertilizer Institute (CFI) and the International Fertilizer Development Centre (IFDC; USA).

EFMA has participated in the CEFIC pilot REACH Implementation Project concerning Chemical Safety Assessment and Exposure Scenarios, and used one of our NPK fertilizers as an example.

EFMA has also organised a IUCLID (International Uniform Chemical Information Database) training for our members.

This training, given by the CEFIC REACH centre, improved the understanding of the way registration of a substance has to be done to the European Chemical Bureau using the electronic IUCLID5 format.

EFMA is now facilitating the process of the formation of pre-consortia for a selected number of substances.

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TRADE AND ECONOMIC POLICY This year, the work of the Trade and Economic Policy Committee was characterised by two major themes: major consultations with EU policy makers on energy/gas liberalisation and trade defence, and consultations with industry associations in Russia and the Ukraine. Agreement did not always prevail – but there are signs of improved understanding.

Energy/Gas Liberalisation In September 2007, the European Commission finally released its all important proposed energy reforms.

Several desired outcomes – which EFMA had pushed the Commission and the Council for over recent years – actually appeared in the Commission’s generally pro-consumer package. Above all, the Commission backed two vital reforms which will in the medium-term promote better access for consumers to gas supply, i.e. unbundling and inter-connectivity. The Commission reforms promise improved access to new LNG terminals, unbundling of storage and all-round greater transparency, and EFMA will be supporting their speedy implementation.

Key Objectives • Participating in a joint consumer industry lobby (including also CEFIC and IFIEC), EFMA will lobby the European Parliament; an event is planned with the European Parliament’s Energy Forum Group in early 2008; • EFMA will hold a major gas conference in Brussels in February 2008;

• EFMA will continue to lobby the European Commission and Council; • The Trade and Economic Policy Committee will continue regular briefings and exchange with EFMA’s National Coordinators, especially since the EU legislation focuses on the Member States, and therefore makes them central to achieving real progress.

Trade Defence In response to the European Commission’s release of a Green Paper on Trade Defence in December 2006, EFMA made a major written contribution to the rather controversial debate.

EFMA joined together in a unique alliance of manufacturing sectors – notably chemicals, cars, metals and steel – to challenge the Commission’s pre-emptive introduction of the new ideas and concepts. Especially alarming was the Commission’s insistence on higher thresholds on presenting new cases, as well as a reluctance to accept the continuation of measures under five year sunset reviews, and the manipulation of Community Interest to weaken the position of manufacturing complainant industries.

RENSO ZWIERS & ARUNAS LAURINAITIS

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ANNUAL REPORT 2007

EFMA was not immune to the changes. Indeed, when the Commission proposed termination on a sunset ammonium nitrate case from the Ukraine in January 2007 – only just after supporting the continuation of a marginally weaker case on UAN solutions in September 2006 – EFMA’s National Coordination team uniquely and extraordinarily convinced 21 EU Member States to actually vote against the Commission’s rather strange termination proposal.

Equally significant, EFMA secured the opening of its fifth and final sunset review on ammonium nitrate from Russia in April this year. Thus all five sunsets cases handled by EFMA were successfully opened for re-examination.

To date, there are three conclusions: anti-dumping duties on UAN solutions were continued for 5 years in December 2006; AN Ukraine duties were continued for 2 additional years in April 2007; and in August 2007, the Minimum Import Price anti-dumping duty of Euro 115/mt was terminated. Urea from Russia is however subject to a unique monitoring system which allows EFMA to present a threat of injury case against Russia should injurious dumping problems arise.

Key Objectives • EFMA will continue to support the Sector Alliance seeking to assure the workability and effectiveness of EU trade defence instruments; more concrete Commission legislative proposals are expected by the end of November 2007; • Case work will continue on two sunset proceedings and three other exporter reviews currently alive in the EU system; • EFMA is improving its statistical and intelligence infrastructure – in light of the urea monitoring exercise and increasing demands outside the traditional straight nitrogen area, i.e. NPK and CAN are set to join the sensitive product categories.

Promoting the EU’s Market Economy Model Having first met with the Ukrainian fertilizer industry and government representatives in July 2006, EFMA was encouraged by the Commission to conduct a similar dialogue with the Russian government and the Russian industry in 2007. In the case of Russia however, there was no agreement on how to reconcile Russia’s dual-pricing policy with the EU’s correction of dual-pricing and the related dumping of fertilizer. EFMA also had a first-time meeting with the Russian Chemical Union in September 2007.

The EU and Russia are seeking a final agreement on Russia’s WTO Accession; the start up of a new bi-lateral economy treaty, i.e. the second Partnership & Cooperation agreement; and the development of a new energy relationship which should form part of any new bi-lateral relationship. Regarding the latter issue, EFMA will continue to insist that a pan-European competitive gas market must foresee the removal of Gazprom’s export monopoly; the opening of free transit rights across Russia as prescribed in the Energy Charter; and the free flow of gas from all independent sources in Russia and in the Caspian region.

Key Objectives • EFMA plans another meeting with the Ukraine fertilizer industry; • EFMA wishes similar exchanges to be conducted with the Russian industry; • EFMA will contribute to the groundwork policy formation in Brussels with regard to the WTO Accessions of Russia and Ukraine; and the bi-lateral treaty arrangements as they develop.

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LOBBYING EFMA knows how to lobby in Brussels. We are in contact with different European institutions on a daily basis, especially the European Commission. At its best, lobbying is seamless cooperation and interaction between the best experts from both sides – European civil servants and industry representatives. During the year, we have seen many concrete examples of how the EFMA secretariat together with member company representatives carry out lobbying in all our key areas: agriculture and environment, trade and economic policy, as well as technology, environment and safety.

HEIKKI SIRVIĂ–

ANNUAL REPORT 2007

Lobbying in Brussels also means being part of broader networks. During 2007, this has been especially true and visible in trade policy. There has been excellent cooperation between EFMA and other Brussels-based associations, especially in the areas of trade defence and natural gas.

Already in 2006, the European Commission published a Green Paper entitled Europe’s trade defence instruments in a changing global economy, which discussed the weakening of EU trade defence policy and the elimination of legislation which allows counter-attacks on unfair trading practices. These ideas caused alarm to EFMA as well as other associations representing EU manufacturing sectors. Further apprehension was experienced when it became clear that the European Commission was trying to implement changes before discussions between the Member States. As a consequence, a large Sector Alliance was formed to express the opinion and needs of the European industries to the European and national decision-makers, and this alliance has proven to be influential.

EFMA has also joined forces with other associations and coalitions in order to work for a more competitive and consumer-friendly European natural gas market. Commission proposals to improve the functioning of the natural gas market, which were published in 2007, are a step in the right direction, but it is our collective task to push these proposals even further forward.

Now and in the future, EFMA must lobby the European Parliament more than has previously been the case. We can see the increased influence the Parliament now has, especially in environmental matters. Furthermore, the role of the European Parliament has been very important in different matters related directly to the operating conditions of the industry, like for example REACH. During 2007, EFMA has made special efforts to improve the lobbying of the Member State governments by making it more efficient and systematic. For this reason, the frequency and content of the National Association meetings have been improved. Furthermore, the network of the EFMA National Coordinators has been updated.

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BRANDING Following the establishment of the Branding Function last year, work has focused on defining its mission statement and improving branding/communication activities. Projects which traditionally were handled by Communications in the old structure have been maintained, and past efforts such as the Product Stewardship Program, our contribution to sustainable farming practices and our persistent strive for free and fair trade, as well as the EFMA Core Values, have continued to constitute important elements of the EFMA brand.

The Branding Function’s mission statement has been defined as building an EFMA brand that continuously aligns with EFMA values & priorities based on our responsibility for providing a life essential product. The idea is to lever it towards all relevant stakeholders by assisting in the communication activities of the Committees, monitoring the appropriate use of the brand by members and Committees, and identifying brand development practices in terms of messages and targets in order to improve brand positioning.

We are currently examining the current Committee communication activities regarding the target audiences, key issues and key messages in order to check that communication activities are correct and well-targeted.

The next step will be to establish a framework for communication activities and to further develop the brand.

Tasks and services to the members, Committees and secretariat have been maintained. The Function has worked for example on publications, such as the Forecast of Food, Farming and Fertilizer Use in the European Union and The European Fertilizer Industry – Contributing to Sustainable Development. This year has also seen the Branding Function produce a graphic identity manual in order to ensure consistency amongst all EFMA publications.

The Branding Function has also contributed to presentations given in open forums such as the International Fertilizer Industry Association (IFA) Enlarged Council Meeting, as well as more restrictive, smaller expert forums when there was a special opportunity to promote the EFMA brand.

JAVIER GOÑI DEL CACHO & CAROL DEVLIN

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ANNUAL REPORT 2007

Furthermore, the Branding Function has supported information and integration efforts for the potential new EFMA members from Romania and Bulgaria.

The Branding Function has been responsible for the revamping of the EFMA website and has participated in work with the extranet.

In collaboration with the Trade and Economic Policy Committee, The Branding Function has commenced working on the EFMA gas conference to be held in February 2008 and will also support the work concerning the joint consumer industry lobby in the European Parliament.

Key Objectives • To establish a framework for communication activities and to further develop the brand; • To continue tasks and services to the members, Committees and secretariat; • To continue work on the gas conference to be held in February 2008 and to support the gas lobby.

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Source: Kemira GrowHow Oyj

KNOWLEDGE Implementation of the Knowledge Function In accordance with the mandate given to the Knowledge Function, namely to provide, manage and continuously improve the quality, scope, depth, coordination and efficiency of information, statistics and databases within EFMA, work during 2007 focused on achieving these objectives.

The immediate results have been an improved proactive approach on how members are integrated into EFMA’s information systems, as well as better coordination and closer cooperation of EFMA’s Committees on statistical matters.

This implementation has been carried out against a background of moving the database to Brussels, the increased information and support demands from the Trade and Economic Policy Committee, and the expansion of our statistics to cover and be expressed in function of the EU-27.

Future Challenges Further work is still necessary in order to fully integrate all current EFMA members, and the prospective accession of new members will require additional efforts. The collection of data and the timely delivery of statistics have become more challenging with the increased number of EFMA members.

The information and support demands for the preparation of anti-dumping cases for new products have and will put an extra demand on our systems and resources. At the same time, the relocation of the database to Brussels is imminent and utmost care must be taken in achieving a smooth transition as well as ensuring that there is no quality loss in its operation.

RICHARD BRABEC & WILLEM VAN DER WEIDEN

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ANNUAL REPORT 2007

Report of Activities Within the Knowledge Function, the Information Services Committee (ISC) continues to be the body responsible for EFMA’s systematic statistics, and most importantly, the EFMA database. The Committee’s mandate is to supply our Association with correct and verifiable data in a transparent manner while using consistent and clear definitions. The yearly activities of the ISC cover the collection, customisation and interpretation of statistical data, as well as special ad hoc projects with the objective of providing our industry with a reliable picture of current situations and expected developments.

We are currently in a transition period where some sets of statistics can only be expressed in EU-25 terms (e.g. AC Fiduciaire statistics) while for certain other sets of statistics, it has been possible to produce reports for the past years based on the EU-27.

During 2007, statistics were distributed to EFMA members to support their forecasting and benchmarking exercises.

Regular publications included among others: the statistical handbook, figures relating to production, exports and imports, production costs and product deliveries. The reference book Standard Statistics Issued by and for EFMA, containing the full inventory and examples of EFMA statistics, was delivered to all members.

The Information Services Committee worked closely with the Agriculture and Environment Committee to produce EFMA’s Forecast of Food, Farming and Fertilizer Use in the European Union. The ISC also provided regular support for the activities of the Trade and Economic Policy Committee, especially with statistics for our trade cases. Furthermore, the ISC supported the work of the Technology, Environment and Safety Committee by providing benchmarking exercises.

In the frame of information services, the remote access to the database is available to members (use restricted to authorised delegates only) and the mode of access has been simplified.

As for deliveries of N-containing fertilizers (in Kt N), members reported the following:

To EU-25 To Rest of World Total World

2006/2007 7,094 1,106 8,200

2005/2006 7,455 1,028 8,483

Change % -5 +8 -3

Import figures for all nitrogen-containing fertilizers from non-EU-27 countries into the EU-27 show that imports totalled 2,450 million tonnes N in 2006/2007 compared to 2,188 million tonnes in 2005/2006, i.e. 262 thousand tonnes more than the previous year. They accounted for 19% of consumption (including products used for technical purposes) compared to 17% in 2005/2006.

Key Objectives • To successfully relocate the database to Brussels; • To achieve the full integration of present and new EFMA members in the information systems; • To maintain and improve the timely delivery of statistics; • To further support the information needs of the Committees and secretariat, especially the Trade and Economic Policy Committee.

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FACILITATION The goal of the Facilitation Function is to increase cooperation and cohesion between all our members.

My predecessor, Dr Helmuth Aldinger, expressed it a year ago by writing “The ultimate purpose of these efforts is to obtain active participation, total commitment and full integration of all members”. The work of EFMA is carried out in different Committees and Working Groups and in daily contacts between members and the secretariat.

ESA HÄRMÄLÄ

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ANNUAL REPORT 2007

By definition, we can hardly ever say that we have completed the mission of the Facilitation Function. It is an endless road of continuous improvements, reacting to changing circumstances and learning by doing. I am, however, happy to report that we have made progress on that road.

The streamlining of our administration and increased efficiency of work through administrative and technical improvements is already expressed in the From the Director General chapter of this Annual Report. In addition, the role of the National Associations and National Coordinators has been strengthened.

Since the EU enlargement in 2004, both members and the secretariat have worked hard to integrate the new EFMA members and to adjust our work to the new situation. By and large, we have been successful in our efforts but more can still be done. Indeed it is also very much a matter of mental integration. It is important to always bear in mind that today’s map of EU is really very different compared to that of some years ago.

Within the EFMA secretariat we try our outmost to follow the fundamental principle of any association: all members are equal. This means that all members have the same rights and obligations, established either by the EFMA Statutes, through recognised working methods, or decisions taken by the decision-making bodies.

All members have the right to the same information and their concerns are of equal importance to us.

The equality between members does not, however, change the fact that as in any association, members participating more actively and devoting more resources to the work in the association, normally also get more out of their membership compared to less active members. There have been meetings during this year where we have really missed participants from certain member companies.

On the other hand, we do have to recognise that asking members to send representatives to approximately 100 EFMA meetings per year is a challenge for them.

The secretariat must explore if the number of physical meetings can be reduced, for example with the help of the extranet or teleconference meetings.

The EU expanded yet again at the beginning of this year when Bulgaria and Romania became members. An EFMA delegation paid a visit to these countries in April and had very successful meetings both in Sofia and Bucharest.

Already during 2007, two Bulgarian and one Romanian company applied for EFMA membership. We expect more members from Romania during the coming years.

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EXECUTIVE COMMITTEE OF THE BOARD

Daniel Clauw President and Chairman of the Lobbying Function until 27 September 2007

Willem van der Weiden Supporting Vice President to the Knowledge Function Yara International ASA

Yara International ASA

Heikki Sirviö Deputy President; supporting the Lobbying Function; Acting President from 27 September 2007

Renso Zwiers Chairman of the Trade and Economic Policy Committee, Vice President DSM Agro

Kemira GrowHow Oyj

Daniel Grasset Chairman of the Agriculture and Environment Committee, Vice President

Arunas Laurinaitis Supporting Vice President to the Trade and Economic Policy Committee AB “Achema”

GPN

Wojciech Lubiewa-Wielezynski Supporting Vice President to the Agriculture and Environment Committee

Arend Werner Chairman of the Technology, Environment and Safety Committee, Vice President BASF

PIPC

Javier Goñi del Cacho Chairman of the Branding Function, Vice President

Tore Jenssen Supporting Vice President to the Technology, Environment and Safety Committee

Fertiberia S.A.

Yara International ASA

Carol Devlin Supporting Vice President to the Branding Function

Krzysztof Lewicki Zakłady Azotowe Puławy S.A.

GrowHow UK Limited

Richard Brabec Chairman of the Knowledge Function, Vice President Lovochemie, a.s.

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Esa Härmälä Director General and Chairman of the Facilitation Function EFMA

ANNUAL REPORT 2007

MEMBERS CORPORATE MEMBERS AB “Achema” AMI Agrolinz Melamine International GmbH ANWIL SA BASF CUF - Adubos de Portugal DSM Agro Fertiberia S.A. GPN GrowHow UK Limited Kemira GrowHow Oyj Lovochemie, a.s.

Nitrogénmüvek Zrt. SKW Stickstoffwerke Piesteritz GmbH Yara International ASA Zaklady Azotowe Pulawy S.A. Zaklady Chemiczne POLICE S.A.

STAFF NATIONAL ASSOCIATION MEMBERS Belgium Association Belge de l'Industrie des Produits Azotés (ABIPA) France Union des Industries de la Fertilisation (UNIFA)

Esa Härmälä

Sean Mackle

Hans van Balken

Christian Pallière

Catherine Dielens

Samina Shamsie

Patricia Everaert

Sabrina Tawfik

Marjolaine Jaquet

Michal Wendolowski

Germany Industrieverband Agrar (IVA) Italy Associazione Nazionale dei Produttori di Fertilizzanti (ASSOFERTILIZZANTI) The Netherlands Vereniging van Kunstmest Producenten (VKP) Poland Polska Izba Przemyslu Chemicznego (PIPC) Spain Asociación Nacional de Fabricantes de Fertilizantes (ANFFE) United Kingdom Agricultural Industries Confederation (AIC)

Felipe Lemus

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EFMA’S Core Values •

Responsibility as provider of a life essential product As provider of a life essential product we recognise our responsibility towards all our stakeholders, customers, shareholders, employees, society at large and future generations. We are committed and act accordingly.

•

Sustainable delivery of value We deliver optimum value to our customers, suppliers, shareholders and employees in a sustainable manner.

•

Sustainable performance in matters of health, safety and environment We strive for the highest safety, health and environmental standards. Subscribing to the principles of Responsible Care, we conduct all our activities in a manner which contributes to the goal of sustainable development.

•

Science and innovation We base our activities on sound science. We strive for innovation and continuous improvement.

•

Free and fair trade We believe in, adhere to, protect and promote the concept of free and fair trade.

•

Ethical conduct Our conduct is ethical and honest, open and transparent

28 May 2003

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Photos: EFMA, Kemira GrowHow Oyj, PhotoDisc, ShutterStock, Yara International ASA Design: www.landmarks.be

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