Phosphorus is one of the key elements that are essential for all living things, including bacteria, plants and animals. We get our phosphorus from the food we eat, which in turn comes from the phosphate fertilizers we apply to crops. Phosphate fertilizer is crucial for modern food production and is the defining factor in crop yields. Phosphate is a critical global resource, along side water and energy.
Phosphorus is a key element for agricultural production and plays multiple roles in plant health, including photosynthesis and the construction of DNA and RNA as well as ATP (adenosine triphosphate), the energy- carrying molecule. Phosphate is a key component in bone health, comprising roughly 1% of average body weight. Lack of phosphorus in plants leads to a decrease in leaf and root size growth, and ultimately lower yields.
There is no known substitute for phosphate.
The majority of the world's agricultural fields today rely on fertilizers derived from inorganic minerals, including phosphate rock. Phosphate rock is a non-renewable resource and recent studies suggest that the world's higher quality reserves are being rapidly depleted*.
We see a unique opportunity to create value in the development of the abundant and high quality marine phosphate deposits identified by RCR by deploying innovative solutions which are both sustainable for the marine ecosystems and beneficial for the local communities. We believe that marine phosphates could provide the agricultural industry with a dependable, high quality, and low cost supply of a critical and non renewable mineral resource.
KEY DRIVERS OF THE CONSISTENTLY GROWING DEMAND
• The world population recently exceeded 7.2 billion and is currently increasing by ~75 million people per year at an average rate of 1.15%. By 2050, the world population is expected to grow by a further 34% ***. To feed a larger and richer urbanized population, world food production will need to increase by 70% in the coming decades***.
•Arable land is projected to increase by only 4% by 2050**** and the yield of existing land is rapidly decreasing due to unbalanced fertilization, pollution and soil deterioration.
•A shift in the dietary preferences of the population in developing countries towards meat and dairy products require significantly higher consumption of phosphate fertilizers – consumption of meat requires 7 times more grain for stock feed compared to a vegetarian diet.
•Projected annual phosphate rock demand will increase from 223Mt in 2016 to 333Mt in 2037 which is equivalent to an increase in demand of 5.2 Mtpa every year.
KEY DRIVERS OF THE CONSTRAINED SUPPLY
•79% of global phosphate reserves are situated in countries with high sovereign risk and are controlled by state owned corporations (Syria, Algeria, Morocco, Egypt, Jordan and Israel) - high risk of interrupted supplies.
•Phosphate is a finite resource, higher quality reserves and high grade ores are rapidly depleting, and existing facilities have limited capacities to increase production or experience delays in ramping up production (Morocco).
•High grade phosphates are often diverted to domestic fertilizer production and often unavailable on the seaborne market.
•Morocco supplies more than 70% of all global phosphate exports and over 70% of known reserves are located in the Western Sahara.
Phosphate is a counter cyclical commodity and its price tends to rise when an economic crisis looms.
GLOBAL MARKET TRENDS
Our analysis suggests that there are new trends, such as supply lag and quality constraints, which are emerging on the global phosphate market.
•No new large deposits have recently been discovered, and a combination of investment risks with increased exploration uncertainty and the costs of bringing mines into production lead to growing concerns in agricultural economies regarding security of supply.
•Producers, like China and US, are becoming net importers of phosphates. In response to the growing phosphate demand, several producing countries have taken measures to restrict their exports to ensure sufficient availability of phosphates to meet their internal needs. In 2008 China imposed a 135% tariff to discourage exports and protect supply for the domestic market.
•Phosphate supply security for net importers (mainly EU) has been recently undermined by the decreased quality of available phosphates, in particular polluted by heavy metals such as cadmium and uranium.
•Prolonged usage of fertilizers with high level of contaminants leads to their accumulation in the soil, and potential pollution of the water supply (e.g. France and China);
*Peak Phosphorus: the sequel to Peak Oil. Institute for Sustainable Futures, University of Technology, Sydney (UTS) Australia.
**The World Bank.
**** Global McKinsey Institute. Resource Revolution: Tracking global commodity markets . September 2013.
****Expert Meeting on How to Feed the World in 2050. Food and Agriculture Organization of the United Nations Economic and Social Development Department.