Fertilizer needs drive decision-making about phosphates capacity

DYNAMICS OF PRODUCTION EXPANSION

Fertilizer needs, not feed, drives decision-making about phosphates capacity

The main use of phosphate rock today is to produce fertilizers. With approximately 85-90% of phosphate going into crop nutrition, its use for other applications, including feed, food, and technical applications such as metallurgy or LFP (lithium ferrophosphate) batteries, is quite small. At best, feed applications represent 5-6% of phosphate rock production.

In 2021, according to USGS, about 220 million tonnes of phosphate rock was produced in the world, representing about 47 million tonnes of P2O5. The three largest producers are China, Morocco, and the US, which make up 66% of total production. Approximately 74% of the phosphate rock is used to produce phosphoric acid. For the time being, phosphate producers continue to increase production to meet the ever-growing needs of the global agriculture sector. Therefore, phosphate rock mining will continue developing. Estimates vary from one source to another, but production should grow by 4-5% in the next three years. This represents approximately 2-3 million tonnes of P2O5, which is roughly equal to the entire estimated annual demand of feed phosphates.

This demonstrates the relative importance of feed phosphates for the fertilizer industry.

INEXPENSIVE ADD-ON TO COUNTER SEASONALITY OR MANAGE BY-PRODUCTS

Still, one can easily understand that fertilizer producers have an interest, albeit limited, in feed phosphates. This application is something of a midway point between fertilizer and food/ technical applications.

One advantage of feed phosphate production is that, unlike technical and food quality which require high purity levels and

World phosphate rock production in 2021

90 k LH: Phosphate rock mine production in '000 t. RH: Phosphate rock reserves in million tons

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Morocco China Egypt Other Countries Algeria BrazilSouth AfricaSaudi ArabiaAustralia Jordan FinlandUnited States RussiaKazakhstan PeruUzbekistan Tunisia Israel TurkeySenegal IndiaVietham Togo Mexico 0

VERY LONG-TERM PERSPECTIVE:

According to USGS, there is no substitute for phosphate rock to supply the world’s agriculture needs. That is true considering current demand and use. Phosphate recycling technologies are still in their infancy for the time being, with limited volume potential.

Still, world phosphate rock reserves are estimated at 71 billion tonnes, meaning that, assuming production levels remain constant, reserves will last for about 300 years.

Before the long-term supply of phosphate rock becomes an issue, the industry might instead need to face a potential lack of another input: sulphur. As discussed in a previous Feedinfo article, the phosphate industry is the main user of sulphur today, since most phosphoric acid is produced with sulphuric acid (the wet process). Because sulphur is a by-product of oil refining, if global consumption of oil products declines with the advent of greener energy sources, the volume of elemental sulphur available will drop significantly.

specific technologies, producing feed phosphates is relatively simple and inexpensive. In some cases, the production of feed phosphate is even done in refurbished fertilizer granulation units once used to produce NPK or DAP.

Another advantage is that, compared to DAP or MAP (major phosphate fertilizers produced today), its production cost is lower (given that the ammonia needed for fertilizer production requires natural gas, oil or coal). Indeed, feed phosphates offer a better return than fertilizers per P unit.

Moreover, producing feed phosphate along with fertilizer helps integrated producers to mitigate the seasonality of fertilizer sales since feed phosphate consumption is relatively stable from one month to another.

Finally, in some cases, feed phosphate production can be a way to deal with by-products from other processes. The best example is the production of potassium sulphate (also called SOP, or sulphate of potash). To produce SOP, potassium chloride (KCl) is digested with sulphuric acid to remove chloride. Consequently, large amounts of hydrochloric acid are produced as a by-product. One way to manage this by-product is to produce dicalcium phosphate (DCP), a feed product.

This process was originally developed in the 1930s by Tessenderlo Chemie in Belgium. In addition to the existing plants using it, there are several ongoing projects that would bring additional DCP capacities online in the coming months or years.

GROWTH PROSPECTS FOR FEED PHOSPHATES

In most cases, investment in new feed phosphates production capacities is linked to fertilizer production expansion. As discussed in a previous Feedinfo article, feed phosphates demand is not growing much, and is even declining in some cases. But this is not keeping producers from investing in additional production capacities; for the reasons mentioned above, it makes sense for fertilizer producers to invest in feed phosphates production even if demand is, at best, stagnant.

For this reason, we have seen in recent years the emergence of Russian producers on the international scene. The same goes for China, which is the largest producer of phosphate today, with about 40% of global production.

China has set food security as one of its top priorities in its most recent five-year plan on national security strategies. The fertilizer industry is key to meeting the plan targets. Therefore, phosphate production will keep on growing, and consequently, so will feed phosphates.

When it comes to fertilizer, China has strict controls on exports to ensure supply to local farmers at reasonable prices, but there are, so far, no restrictions on feed phosphates and no reason to believe that the authorities will restrict feed phosphate exports (as again, the size of IFP production is negligible compared to that of fertilizer).

We can see from trade statistics that China became the leading exporter of calcium phosphates in 2021, with 315,000 tonnes of DCP and 425,000 tonnes of MCP.

While most Chinese exports target the Southeast Asian markets, in the last two years we have seen clear growth in sales to Europe and Latin America.

Though it is difficult to estimate Chinese producers’ capacity utilisation rates, there is certainly quite a large untapped potential — and with the rapid modernisation of the feed industry in China, accompanied by the development of phytases and the lower minimum inclusion level for phosphates, Chinese producers must look for new markets.

In conclusion, unlike the market for food-grade or technical phosphates, the feed phosphates industry is deeply tied to the fertilizer industry. Indeed, to some extent it could even be considered a by-product of fertilizer production. Since few producers are focusing only on animal nutrition, decisions about production expansion are not driven by considerations in this market, but by those in the much larger fertilizer market.

Guillaume Milochau is Economic Intelligence Consultant of agricultural commodities, chemicals, and energy for Praxed. All views are his own.

“Feed phosphates demand is not growing much, and is even declining in some cases. But this is not keeping producers from investing in additional production capacities”

GUILLAUME MILOCHAU