Nov
23
Something of Far More Concern Than an Oil Shortage
November 23, 2010 | 1 Comment
Most folks think an oil embargo or a running out of supply would be a disaster, some even realize oil could drive nations to war. But there is a much more frightening prospect – a shortage of phosphorus – that if suddenly short would dramatically cut food production.
Phosphorus is an element needed by both plants and animals for metabolism. At the current world population most all noteworthy food producers use phosphorus as a fertilizer. From home gardens to great swaths of the planet a few pounds of phosphorus spread out greatly increases production. Much of the phosphorus is taken away with the harvest and finds its way spread along the food chain to the sewage systems and landfills.
Phosphorus Forms Combined Photo, waxy white (yellow cut), red, and violet phosphorus. Click image for the largest view.
Phosphate fertilizer is the engine powering modern agriculture, and its reserves are in decline almost everywhere except Morocco. Most phosphate mines, including those in the U.S., which produces 17 percent of global supply, have been in decline for the past decade, running out of quality rock and hindered by environmental regulation. That has forced companies to look farther a field for supplies.
Common Mono Ammonium Phosphate Fertilizer. Click image for the largest view.
In 2010 Mosaic Co. spent $385 million for a 35 percent stake in a Peruvian mine to supply rock to its phosphate operations in the U.S. and South America. Australia’s BHP Billiton Ltd., the world’s biggest mining company, made a $40 billion hostile takeover offer for Canada’s Potash Corp., a major supplier of both potash and phosphate.
The 2007-08 food crisis illustrates how a shortage might play out – rising food prices led to riots across Africa and Asia. Before the crisis was over, China had levied a 135 percent export tariff on its phosphate to protect its domestic food supply; phosphate there is still taxed at 110 percent at the height of the buying season.
People planet wide are consuming more grain, more meat, and more biofuels, thus demand is expected to rise at a rate of 2 percent to 3 percent per year, according to the International Fertilizer Association. Dana Cordell, co-founder of the Global Phosphorus Research Initiative, predicts that phosphate production will “peak” within the next 50 years. Meanwhile – at what price?
Add to that, not all phosphate becomes fertilizer. About 15% is turned into detergents or food additives, such as the tangy phosphoric acid in Coca-Cola or the moisture-retaining salts in salami. Phosphate is also a growing component of lithium ion batteries.
Morocco is home to the world’s biggest known deposits of phosphate, much near the town of Khouribga. Now it gets interesting.
Morocco’s King Mohammed VI, 47, owns more than half the world’s phosphate reserves. Mohammed VI is the unofficial overseer of the state-owned phosphate monopoly, Office Chérifien des Phosphates (OCP), Morocco’s largest industrial company. Everyone expects OCP to drive the commodity’s price higher, which means the cost of making everything from corn syrup to iPads will be going up.
Mohammed VI, called the King of the Poor for his efforts to raise Morocco’s living standards, has about $2 billion in assets, which places him seventh on Forbes’ list of the richest royals. Not technically the head of state, he has control of the country as both a secular and religious leader. He appoints the Prime Minister and his Cabinet, and has the power to overrule or dissolve the elected Parliament. His portrait adorns the first page of OCP’s annual reports, and his face appears in nearly every home and coffee shop.
But the phosphate is in Western Sahara, a disputed territory, and is also where Morocco’s best phosphate lies. The region known to the King as “Moroccan Sahara” begins just south of the fishing village of Tarfaya on the Atlantic coast.
The UN calls it “the non-self- governing territory of Western Sahara” and deems it “occupied.” It’s a place where phosphate rumbles to the coast on the world’s longest conveyor belt, while tanks and soldiers roam alongside, defending the shipments from Sahrawi separatists. How safe is the supply?
When Spain withdrew from Western Sahara in 1975, some 350,000 Moroccans marched into the region with tents on their backs. The native Sahrawi fought back for 16 years under the leadership of the Algerian-backed Polisario rebels, signing a cease-fire in 1991. The UN continues to monitor the agreement with 215 uniformed peacekeepers, but a planned vote on self- determination has been repeatedly delayed. Today, approximately 90,000 Sahrawi live in refugee camps in Algeria, separated from their families in Moroccan-controlled territory by a 1,400-mile- long earthen berm dotted with land mines.
Now there is a lot more money involved and an opening exists for trouble. International politic is coming into the game. The U.S., in addition to needing the phosphate, sees Morocco as an ally in the war against terrorism. Last year the U.S. reaffirmed support for Morocco’s plan of “limited autonomy” for the territory, which stops short of the independence demanded by the Polisario. A kind of “to hell with the dispossessed” point of view.
Companies in Australia and Norway have said they no longer use phosphate mined in Western Sahara. In August, Mosaic told the advocacy group Western Sahara Resource Watch that it has stopped buying rock from the territory. Conscience has a foothold.
But the element has to be provided to keep the world fed.
Even if all stays calm the Moroccan supply will run out in a few decades. All this signals an intensive hunt for phosphorus that can be made into phosphate is essential.
Just like oil, the supplied price will moderate demand. Yet when it comes to food demand will answer differently than for oil. As a practical matter a lot of phosphorus is getting lost – it’s an element that can be endlessly recycled.
The circumstances seem clear, whether for food or fuel a steady, reliable and affordable market supplying phosphorus needs built.
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