Phosphate Rock Long Term International Issues and Trends

INTRODUCTION Our present estimates of world P205 consumption for all uses show an average annual growth rate of approximately 1.9% per year. The estimated 1985 consumption of 41.5 million tonnes of P205 is predicted to increase to 57.1 million tonnes of P205 by the year 2005, which represents a growth from 157.7 million tonnes in 1985 to 217 million tonnes of phosphate rock in 2005. The present situation of oversupply and extremely weak phosphate product prices is, however, expected to continue in the short term and a normal supply/demand balance may not be achieved until after 1990. The growth in P205 demand, in conjunction with the higher cost of replacing low cost mines as they are depleted, will place economic pressure on world farm economies through the increased cost of phosphate fertilizers. The availability of rock supply is not the challenge; rather, it is the economics of new rock supply. This economic challenge of providing new rock supply is by no means limited to the United States. Even in centrally controlled economies, the cost of rock from domestic mines of marginal quality and economic viability, coupled with burdensome infra¬structure requirements, may result in tonnage additions at very high cost. Although government subsidies to offset higher production cost is a factor in some countries, world production in the next 20 years will be directed, if not governed, by economic factors. Established infrastructure, good quality reserves, and existing operations will provide a competitive advantage for new prod¬uction. It is our opinion that the current world supply structure will remain relatively stable through 2005, in that most of the traditional suppliers will retain supply roles. U.S. rock production, although it is not expected to grow beyond the present level, will still be a major contributor to world supply. Although dramatic changes within mining, fertilizer production and farm economics may appear disruptive, the current supply scenario will, in general, continue with the major issue being production economics. WORLD DEMAND Demand for P205 by region in the world has been estimated using projections of population, crops and yield, arable land, economic and other data as a basis for future demand projec¬tions by Blue-Johnson and Associates, our col¬laborators on a recent multi-client study. Non-fertilizer P205 demands were estimated in the same general manner. These estimates of future demand are based on an assumption of reasonable world political and economic stabil¬ity, debt repayment requirements maintained at workable levels, and resolution of problems in the agricultural economy to a point where normal supply/demand forces can interact freely to provide a basis for continued P205 supply. The results of these studies indicated an average growth rate of 1.9% per year through the year 2005. This growth could be as low as 1.5% per year, or as high as 2.5% per year. It is our opinion that the estimated rate of 1.9% per year is most probable. This moderate growth rate considers both the major economic constraints facing the world agricultural industry today and the general problem of affordability of fertilizers and other crop inputs. WORLD SUPPLY There are adequately defined world reserves of phosphate rock today to provide supply well into the future, even at much higher levels of demand than presently projected. Using the U.S. Bureau of Mines estimates, which are based on stringent criteria for definition of reserves, the present world reserves base is approximately 35 billion tonnes. Identified resources raise the potential for production by orders of magnitude. Potential resources based on geological trends, and including offshore deposits, would again result in orders of magnitude increases in rock resources. Morocco leads the world in reserves base with approxi¬mately 21 billion tonnes. The U.S. is second, followed by the Republic of South Africa and Russia. These four countries control about 87%