Current Price Drivers for Phosphate Market

A number of factors have caused strong fertiliser demand which in turn has led to the recent increases in phosphate rock price. These factors include:

– The world population continues to expand. Data from the United Nations indicates that the world population growth is currently around 1.2% per annum. At the same time there has been per capita income growth (using real GDP per capita as a proxy) with current income growth at over 2.8% per annum;

– Much of the recent income growth has taken place in developing countries which has resulted in a corresponding increase in demand for foods with higher protein content. Added demand for protein has a multiplier effect on grain demand, since grains are a primary feed for livestock. Depending on the type of animals involved, the production system and location, between 2 kilograms of grain (low case for poultry) and as much as 11 kilograms of grain (high case for beef) is required to produce 1 kilogram of meat. There has also been an increased demand for milk and eggs, which requires intensive feeding of the animals;

– World arable land per person continues to decline, with less than one-quarter of a hectare responsible for feeding the average person in the world. In Asia, in particular, little more than one-tenth of a hectare per person is available for agriculture. This has implications for fertiliser use as greater land productivity is necessary;

– Grain consumption for biofuels processing is approaching 5% of global grain production.

Australia

Australia’s largest deposits are found in Middle Cambrian phosphorites of the Georgina Basin, where the substantial Phosphate Hill and Ardmore deposits lie. Australia’s phosphate market has the ability to offer diversity of supply, proximity to markets, additional supply and, quite importantly, political stability.

Africa

Africa is target of large investment projects and is home to the largest producer of phosphate rock, taking advantage of competitive costs.

North America

North America is a large phosphate rock producer. Though American consumption of phosphates has remained flat, export opportunities have prompted key developments, as export production shifted to Diammonium Phosphate (“DAP”) at the expense of Monoammonium Phosphate (“MAP”). This has been driven by rising Indian imports of US DAP, which have increased sharply by 78% over five years to hit 3.1 million tonnes in 2009.

Russia

Russia has seen substitution away from MAP production, which fell from a peak of nearly 1.5 million product tonnes in 2007 to 846,000 tonnes in 2009, in favour of DAP, which grew steadily from 1.1 million tonnes to almost 1.4 million tonnes over the same period. The growing Indian DAP import market has been a key driver of this switch.

The Middle East

The Middle East is rich in raw materials for phosphates – Jordan is the largest producer and exporter of phosphate rock in the region through Israel and Syria are also significant producers of phosphate rock.

India

Indian phosphate consumption has grown in recent years, while capacity and production of phosphate fertilizers remained flat. The gap has been filled by imports of ammonium phosphates, which have grown significantly.
India has the world’s largest non-integrated phosphates industry. Companies produce ammonium phosphates, using a combination of phosphate rock and phosphoric acid as raw materials.
In a pure economic sense, much of India’s capacity is high cost. As a result, Indian companies are keen sponsors of upstream integrated projects and joint ventures producing phosphate rock and phosphoric acid in resource-rich countries.

In Summary

As evidenced by the following table it can be seen that the US, China, Africa and Russia are the world’s largest producers of Phosphates collectively producing 70-75% of the worlds total phosphate rock. Whilst this may be the case, it is understood that the US is past peak production and is now importing. It is expected that China too will soon import. Canada is now importing due to its mines nearing exhaustion, along with other importers such Brazil, Europe, most of South America and the rest of Asia apart from Vietnam. North Africa, Peru and the Middle East are supplying those importers.

Mine Production Reserves4
2010 2011*
United States 25,800 28,400 1,400,000
Algeria 1,800 1,800 2,200,000
Australia 2,600 2,700 250,000
Brazil 5,700 6,200 310,000
Canada 700 1,000 2,000
China5 68,00 72,000 3,700,000
Egypt 6,000 6,000 100,000
India 1,240 1,250 6,100
Iraq 5,800,000
Israel 3,140 3,200 180,000
Jordan 6,000 6,200 1,500,000
Mexico 1,510 1,620 30,000
Morocco and Western Sahara 25,800 27,000 50,000,000
Peru 791 2,400 240,000
Russia 11,000 11,000 1,300,000
Senegal 950 950 180,000
South Africa 2,500 2,500 1,500,000
Syria 3,000 3,100 1,800,000
Togo 850 800 60,000
Tunisia 7,600 5,000 100,000
Other Countries 6,400 7,400 500,000
  World total (rounded) 181,000 191,000 71,000,000

Source: US geological Survey, Mineral Commodity Summaries, January 2012