In the picture
Phosphate management system at OCP's El Halassa Wash Plant in Khouribga, Morocco [TSK].
The war in Ukraine has meant an energy supply crisis that has led Europe to largely replace Russian gas with gas from other countries, including the United States. Inflation has affected not only European citizens; almost half of the world's countries have recorded double-digit inflation this year. Others, however, have found in the global crisis an opportunity to increase the production and export of certain commodities. This is the case of Morocco with phosphates.
Prior to the international sanctions applied after the invasion of Ukraine, Russia was the world's leading fertilizer exporter, with a 15.1% market share. Before the war, Europe was particularly dependent on Russian fertilizers, which accounted for 30% of the European Union's fertilizer imports. Not only that: until March 2022, 37.1% of the EU's gas supply - the main component of phosphoric and nitrogen fertilizers - came from Russia.
By way of context, fertilizers are substances used in agriculture to provide nutrients to the soil and favor the development of crops. Their importance lies in the fact that, as the soil loses its productive capacity with each harvest, it is necessary to restore or artificially increase these nutrients. They are divided into three main categories according to their composition: nitrogenous, potassic and phosphoric.
Due to the growing world population, the fertilizer industry is booming. In 2020, the global market for this product accounted for more than $190 billion, with a growth forecast of 2.6% between 2022 and 2030 (2.4% in volumetric terms).
Fertilizers are therefore core topic to ensure global food security. For the same reason, they can easily be used as an economic pressure tool . Morocco, a major producer of phosphates, an element core topic in the manufacture of fertilizers, has seen its exports of this raw subject material and of fertilizers increase as a result of the war in Ukraine. Phosphates account for 20% of Morocco's exports and contribute 5% to its GDP. In 2022, the country saw a 54.8% increase in phosphate exports compared to 2021, which was an unprecedented leap that brought in nearly €10 billion.
The state-owned phosphate mining and production company, Office Chérifien des Phosphates (OCP), has control over just over 70% of the world's phosphate reserves and a global market share of 31%. Under the present circumstances, Morocco is expected to position itself as the world's leading exporter. Other factors are expected to contribute to this, such as Morocco's access to large reserves of phosphate rocks at low production costs, or the restrictions imposed by the markets on fertilizers from China, which have increased the price of phosphates, thus increasing OCP's profits. core topic . According to the company's latest report company's latest financials, in 2022 it posted earnings of $8,955 million, up 39% from the previous year.
OCP's presence is felt around the world. For example, it was in India that the company experienced the most significant growth in 2022: 66% compared to 2021. In India, 50% of phosphate-based fertilizers come from the Moroccan company; in Brazil, 40%, and in Europe, 41%. But where OCP undoubtedly takes the biggest slice of the cake is in Africa, with 54% of exports, playing an almost hegemonic role in some countries such as Nigeria, to which it supplies 90% of the fertilizers that this country imports annually, and where the construction of a fertilizer production plant has been announced.
OCP has fertilizer production and storage facilities around the world, but especially in Africa, contributing to the Alawite country's growing influence on the continent. OPC has 12 subsidiary companies in Africa, and plans to open more factories in the future.
The Moroccan state-owned business exports phosphates to various African countries in the form of donations or at greatly reduced prices; for example, in July 2022 it earmarked 20% of its production for this modality, and announced the shipment of 15,000 tons of fertilizers to Rwanda, where it also plans to build a factory this year.
Brazil, Japan and Bangladesh, among others, have already turned to Morocco for alternatives to Russian fertilizers. Brazil' s agriculture minister met with the OCP president in May 2022 to sign a agreement for the construction of a phosphate processing factory in the South American country. His Japanese counterpart also requested an increase in phosphate imports and a agreement was signed with Bangladesh for the shipment of 40 thousand tons of fertilizers.
Some difficulties
Morocco has also suffered some difficulties in its fertilizer production due to restrictions on Russian shipments. As noted above, Morocco was previously the world's second largest exporter of phosphates. However, it depends on imports for the manufacture of certain compound fertilizer products, especially those containing nitrogen. This is the case of ammonium anhydride, a compound of which it is the fourth largest importer globally and which it traditionally purchased from Russia. Due to the sanctions imposed on Moscow and the worsening of its relations with Algeria, from which it also imported this product, Morocco has been looking for new suppliers during 2022, especially opting for Egypt and Saudi Arabia.
The price increase that the phosphate market has experienced will possibly decline slightly once China increases its exports, which were strongly affected by the Covid crisis. On the other hand, demand in the European Union has been slightly weakened in 2022 as farmers have reduced fertilizer applications in the field due to affordability issues and availability. In the long term deadline, it is possible that the environmental policies that the EU has developed, including some such as the inclusion of phosphate rock in the EU list of critical raw materials, the EFSA safety limit (ADI) for phosphorus in food (2019) and the Economics circular policies, will have a negative impact on phosphate imports. Despite this, and in view of the general weakening of Economics, there is still considerable time before the effect of these policies is felt.
The ongoing conflict in Western Sahara
The status of Western Sahara also seems to weigh Morocco down. OCP, the national phosphate company, strives to give a good image of its activity in Western Sahara, where it reportedly carries out numerous educational and social initiatives with the local population. Of the four major mines the company operates - Khouribga, Benguerir, Youssoufia and Boucraa - the last one is in the occupied territory of Western Sahara, where it operates with its subsidiary "Phosboucraa", which in turn acts as a social foundation.
According to OCP, the Boucraa mine accounts for only 2% of the country's total reserves (with 8% of the total annual phosphate rock extraction of business), which makes it the least profitable and the one that generates the least income of the four mines operated by OCP. This does not prevent the company, through its foundation, from carrying out various social initiatives to promote development in the local communities, especially in terms of innovation projects and Education , according to business. It almost seems that the disbursement of the foundation exceeds the profits earned by the mines, because the still latent conflict in Western Sahara also affects the company's image abroad.
In the words of the company, 100% of the profit obtained is reinvested through the foundation in the Moroccan occupied Sahara. If so, someone might think that Western Sahara should be a territory with a high rate of human development and general stability. Nothing could be further from the truth; several organizations have been denouncing for more than a decade the continuous violations by Morocco of human rights in Saharawi lands. The Moroccan authorities systematically repress any movement in favor of the process of self-determination of the Saharawi people, in addition to obstructing the work of NGOs, not allowing their registration and even physically assaulting journalists and activists. The Saharawis have been denouncing for many years that Morocco is illegally benefiting from their natural resources, including phosphates.
Despite this, Morocco has not ceased to garner support for its claims to Western Sahara. In September 2022, Kenyan President William Ruto withdrew his recognition of the Saharawi Arab Democratic Republic, a gesture applauded by the King of Morocco. Shortly after advertisement, the Moroccan Foreign Ministry declared the strengthening of trade ties with Nairobi, especially with regard to food security, which goes hand in hand with fertilizer exports. status similar was experienced that same September with Guatemala. The Central American country signed with Morocco a agreement focused on agriculture and fertilizers, during which Guatemala expressed its support for Morocco's sovereignty plan over the Sahara. Meanwhile, Peru expressed its support for the Saharawi people and the referendum of self-determination, which cost Morocco the cancellation of the shipment of 150,000 tons of fertilizers to the country. This subject of events highlights the importance of phosphates and fertilizers in Morocco's diplomatic game.
As has been seen, Morocco's phosphate industry plays a crucial role in its external relations, particularly in the Western Sahara dispute. The country's dominance in the global phosphate trade and the fertilizer shortages caused by geopolitical tensions have made it a player core topic in the global fertilizer market, status which is likely to become more entrenched in the future. As demand for fertilizer remains high, the importance of phosphate to Morocco's Economics is likely to continue to grow in the coming years, and with it, the chances of Rabat putting its privileged status at the service of its diplomatic efforts to secure sovereignty over Western Sahara.