Phosphate mining - supply and demand
Graduate student Gautam Narayanan and Professor Edward Spooner from the Department of Earth Sciences at the University of Toronto, Canada, review the current state of the world phosphate mining industry.
Phosphate four ways: principal uses
8% industrial (eg detergents)
7% animal feed
3% derivatives (eg flame retardants)
An expanding global population and the subsequent increased need for food crops is placing pressure on phosphate miners to meet the fast-growing demand for this inorganic chemical, which has long been used in agricultural fertilisers. While this increase in demand is nothing new, and has been steadily rising over the last 50 years, factors including climate change and geopolitical issues are placing uncertainties not only on how this demand could change but also on how a significant increase can be met.
While phosphate has several uses, the agriculture sector dominates. Fertilisers provide essential nutrients for plants and are responsible for growth, development and productivity.
There are five principal phosphate fertilisers:
- directly applied phosphate rock
- mono-ammonium phosphate
- di-ammonium phosphate
- single superphosphate
- triple superphosphate
The phosphate industry has been growing at a rate of 3% a year for the past 50 years. In 1961, global demand was approximately 10Mt P2O5 (contained) and is currently approaching 45Mt P2O5 a year. In 1961, much of the demand came from North and South America as well as Europe. In contrast, Asia is now at the forefront of phosphate demand – not surprising, due to its high population. Since 1960, Asian demand has been rising at a rate of 6.2% a year and currently accounts for 58.5% of global consumption. Alongside this steady increase in Asian consumption, there was a marked drop in European consumption from 1989–1993.
These changes in demand can be attributed to several factors. While arable land, biofuels and climate change all play a role, population is the most important, as nations must secure stable supplies of food for their inhabitants. This factor alone is a key reason for current Asian significance. In particular, China and India have populations of 1.35 billion and 1.24 billion respectively, and so consume significant amounts of phosphates as fertilisers to produce food crops. Other Asian countries with large populations include Indonesia (248.7m), Pakistan (183m), Bangladesh (154.5m) and Japan (127.2m).
The amount of arable land for growing crops is the second most significant factor in determining phosphate demand. As it increases, so does use of phosphate fertiliser. While this relationship may seem simple, there is the added complexity that as arable land declines, phosphate fertiliser usage may actually increase as the country attempts to increase crop yields.
The development of biofuels derived from living organisms, such as crops, was intended to counter the rising costs and, ultimately, the worries of decline, in fossil fuel capacity. As growing demand for biofuels increases that for crops such as maize and sugarcane, an increase in phosphate fertiliser demand inevitably ensues. In November 2013, an article published in the New York Times revealed a leaked United Nations draft issued by the Intergovernmental Panel on Climate Change (IPCC), which brought to the fore the issue of climate change and the risks it poses to global food security. The draft was said to highlight the issue of rising temperatures being detrimental to crop production, and that the agricultural risks are greatest for tropical countries and those with high populations.
According to the article, the IPCC suggested a reduction in agricultural production by as much as 2% per decade. If this conjecture proves true, then it is even more important to identify ways to meet the demands of growing populations. One solution is to increase crop yields by using more fertilisers, an aspect of so-called sustainable intensification.
Meeting the demand
Currently, phosphate production is dominated by China, the USA and Morocco. In 1968, China produced only 1% of the world’s phosphate, compared to 43% in 2012. In contrast, the USA produced 37% of the world’s phosphate in 1968, but 14% in 2012, according to United States Geological Survery (USGS) figures. Morocco hasn’t seen such a drastic historic change – in 2012, it produced 13% of the world’s phosphates, compared to 10% in 1968. Today, other major producing countries are Russia (5%), Jordan (3%), Brazil (3%) and Tunisia (3%), while minor producers Egypt, Israel, Australia, Peru and South Africa each account for around 1%.
Apart from China, supply is highly skewed towards the Middle East and North Africa (MENA). The single largest phosphate producing company is the state-owned entity Office Chérifien des Phosphates (OCP), in Morocco, which in 2012 produced 27.8Mt of phosphate rock. As illustrated in the table opposite, Morocco has the potential to continue to be a significant producer in the future, based on large reserves of around 50 billion tonnes. Large deposits also exist in Algeria, Syria and Jordan, each having reserves of more than one billion tonnes of phosphate rock.
Future supply risk
Major phosphate producers such as China and the USA have low reserve lifetimes of 42 and 48 years respectively, and herein lies the critical risk for future supply. It is important that major consumers of phosphates find other sources, rather than relying solely on the MENA countries for this supply. Historically, the countries in this region have been exposed to conflict, which can significantly influence phosphate production. In North Africa, for example, there is ongoing tension between Morocco and Algeria regarding the independence of Western Sahara. Should this situation escalate, phosphate production from Morocco and Algeria could decline, and supply from Morocco could diminish significantly for the duration of the conflict. In addition, the region is home to Al Qaeda in the Islamic Maghreb, associated with Mokhtar Belmokhtar, as well as the Movement for Unity and Jihad in West Africa. These organisations jointly claimed responsibility for an attack on the Somair uranium mine and processing facility near Arlit, in northern Niger, in May 2013. A previous Salafia Jihadia attack in May 2003 struck civilian targets in Casablanca, resulting in 33 fatalities and more than 100 wounded. This history of conflict, in particular those incidences associated with mining operations, suggests that any further political unrest could place uncertainty over security of supply from mining operations in this region.
The recent Arab Spring has also significantly influenced production, with the majority of phosphate entities in the MENA area being state-owned. Population unrest and labour strikes have been prominent, an added negative contribution to phosphate production. For example, the USGS estimates that the revolution in Tunisia in December 2010 caused phosphate production to decline by around 70%. Similarly, the political turmoil in Syria in 2012 almost resulted in the EU banning phosphate imports from the country.
With this in mind, it is important that mining companies and other producing entities diversify the locations of global phosphate production. Joint ventures with Moroccan phosphate extraction company OCP will only allow for other entities to be involved in downstream production, as the state has reserved the phosphate resources. However, this is not the case with every producing entity in the MENA area. Mosaic, a large US company and the biggest manufacturer of downstream phosphate products, is part of a joint venture with Saudi Arabian companies Ma’aden and SABIC. The companies are looking to develop a US$7bln greenfield phosphate project in northern Saudi Arabia, Wa’ad Al Shamal, with an installed capacity of around 3.5Mt of phosphate a year.
Junior mining companies are also developing projects in Brazil (MBAC Fertiliser Corp and Aguia Resources), Canada (Arianne Resources and PhosChem Chemical Corp), Guinea-Bissau (GB Minerals), Kazakhstan (Sunkar Resources), Peru (Focus Ventures and Stonegate Agricom Ltd) and the USA (Stonegate Agricom in Idaho). Several companies are also evaluating unconventional phosphate deposits. For example, Chatham Rock Phosphate is planning to develop marine phosphates off the coast at Christchurch, in New Zealand, and Namibian Marine Phosphate Ltd is developing a phosphate project around 60km off the coast of Namibia. Despite all the potentially negative implications regarding phosphate production and prices, the good news is that there is now strong evidence of regions with major phosphate reserves that are also good mining jurisdictions – the likes of Brazil, Peru, Senegal, South Africa, parts of the USA and Canada. As mineral exploration for phosphates increases, more reserves will be added to the list that will help to secure future global phosphate supplies, with the potential to make major positive contributions to global food security.
But it is important to remember that while geologically, phosphate supply may not be at risk, politically it might be.
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