Phosphate rock costs, prices and resources interaction
Introduction
There has been much debate in recent years as to if and when mankind is likely to ever to face phosphorus (P) supply constraints as a result of phosphate rock (PR) resource limitations. The implications of a PR supply-driven constraint are immense, given the irreplaceable nature of P in biological processes. In particular, a supply-driven fall in production would imply hugely increased PR production costs and, as a result, vastly inflated price levels. This would undoubtedly increase sharply the number of farmers who can't afford nutrients to fertilize their soils. Even today, amidst it seems a plentiful supply of PR, farmer access to P nutrient with which to grow food varies widely across the globe. In some areas, farmers are currently able to afford to use more fertilizer through direct and indirect subsidies whilst others, just because they happen to live in landlocked countries with no local PR production, find transport and handling costs put fertilizer beyond their means. Just as we live in a world of hunger whilst producing enough food to feed everyone on the planet, we also live in a world where producers of PR can fulfill all demand requirements, yet many farmers continue to struggle to grow crops through inequitable access to fertilizer nutrients (Chart 1, Chart 2).
So as we debate the rate of use of PR resources and the degree of urgency to recycle and cut P losses, it is imperative that we do not lose sight of the need also to develop the means of improving access to P as a nutrient for all farmers globally.
Section snippets
Production costs relatively stable — market prices less so
In the foreseeable future, I believe that it is not PR production cost escalations we need to plan for, but significant market price fluctuations. There is an economic incentive for PR producers to minimize production costs. According to studies performed by industry experts, average PR cash production costs (excluding the cost of capital) have fallen in real terms in the last 30 years.
Calculations show that the average cost of mining PR globally has increased by less than general inflation in
Production cost impact on market prices
Cash production costs (when added to logistic and other costs) provide a theoretical low-end price limit below which a producer will begin to lose money. In theory, this provides a progressive brake on PR supply volumes as PR prices fall, with the higher cost producers coming under pressure first. (History has shown us that this is by no means a perfect mechanism, however).
In contrast, there is no immediate upper limit to PR price levels when the market is short of product. Prices can escalate
Impact on food prices
The small increase in PR production costs (in nominal terms) that we have seen in the last 3 decades, I believe, would not in itself generate any upward pressure on food prices. However, a 6–8-fold spike in PR prices is potentially significant, particularly as both of the PR price spikes seen in the last 30 years were accompanied by price escalation in other sectors, energy, freights, sulphur, ammonia, etc. that, combined did put significant upward pressure on global food price levels.
In order to
Reserves/resources — longevity
Overall, the global PR reserve/resource that can be recovered for use at some point in time is an unknown quantity, as is the level of demand for mined product going forward. The recent JDC plant construction in Florida, which is commercializing the relatively new Improved Hard Process, has shown that today's tailings pile is tomorrow's reserve, given new technology
The PR industry has been accused by some of complacency over the issue of future resources. It is true that most companies work on
Recycling and losses
Unlike energy commodities, we don't consume the P we mine, we dissipate it, mainly into the oceans where biogenic processes concentrate the P minerals once more over geological time. It is the long time-scale of this process that creates a break in what would otherwise be a closed P cycle. There are potentially any number of routes through as yet unimagined technologies that could reduce this gap, but from today's perspective, directly harvesting P from seawater seems a tenuous hope on which to
References (7)
Phosphate rock cost report
Phosphate rock market outlook (quarterly)
Annual Phosphate Rock Statistics 1970–2013
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