Industry / Business
Phosphate fertilizer shortage is worldwide
Last week W. J. (Jack) Turbeville took off for Europe with some bad news and some good news for companies that desperately need U.S. phosphate rock. The bad news is that total world demand will exceed supply sharply for the next two years or so. U.S. exports, a key factor in the world supply picture, likely will decline during this period. The good news is that by 1977 more U.S. rock will be available again for export—in fact, the entire world supply-demand equation will be in much better balance by then. Mr. Turbeville is chairman of the board and chief executive officer of the Phosphate Rock Export Association (Phosrock), the Webb-Pomerene-type association that handles the bulk of the U.S. foreign sales of phosphate rock. Working through Phosrock, its five member companies—Agrico Chemical, International Minerals & Chemical, American Cyanamid, W. R. Grace, and Occidental Chemical—account for about 78 to 80% of all U.S. phosphate rock exports. Before he left for Europe, Mr. Turbeville traveled to White Sulphur Springs, W.Va., where he told the 4th International Marketing Conference of the Fertilizer Institute essentially the same story. The world will be short of phosphate fertilizer this year and faces the most serious scarcity of phosphate rock that it has ever known. Phosrock estimates that world production of phosphate rock in 1974 will be about 108 million metric tons, 2 million metric tons short of consumption. The balance will have to be made up out of already dwindling inventories. Most of the pressure, Mr. Turbeville explains, results from supply patterns. In phosphate fertilizer, there are "have" and "have not" countries. Even within countries, there are supply inequities. Except for those countries that actually produce phosphate rock, most of the developing world is critically short of phosphate fertilizer. Bangladesh, India, Pakistan, and other de10
C&ENJune24, 1974
Phosphate rock production will lag demand for next year or so before new U.S. mining capacity helps bring a better balance Shortage of phosphate rock should end by 1977 Thousands of metric tons Production
1974 1975 1976 1977 1978
Consumption
110,300 120,150 129,800 137,800 144,100
108,300 119,250 130,300 143,250 151,500
Source: Phosphate Rock Export Association
U.S. is world's leading phosphate rock producer
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Thousands of metric tons
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U.S. U.S.S.R. Morocco Tunisia China Nauru Island Togo Senegal South Africa Spanish Sahara Christmas Island Jordan Israel Algeria Ocean Islands Others TOTAL
1974
1978
41,800 23,000 19,000 3,600 3,000 2,500 2,400 1,800 1,600 1,500 1,500 1,500 1,000 800 600 2,700 108,300
55,000 31,000 26,000 5,200 3,600 2,500 2,800 2,200 3,200 6,000 2,000 3,000 1,700 2,400 600 4,300 151,500
Source: Phosphate Rock Export Association
veloping nations desperately need phosphates, but they can get no rock and not enough phosphate fertilizer. Mexico is in short supply and must depend upon African sources for 40% of its requirements. The communist countries are fairly well supplied, primarily because the U.S.S.R. will produce an estimated 23 million metric tons of phosphate rock this year, about 21% of the world total. However, Mr. Turbeville points out that Romania, in an effort to improve trade relations with the U.S., has designed fertilizer plants based on Florida rock. Now it can get none. Japan and Australia probably have enough phosphate fertilizer for home consumption. Canada, although it enjoys a preferred status as far as U.S. exports are concerned, and has fared well compared to others, won't be happy with available supply. Last year, virtually all of Canada's 3.6 million tons of rock imports came from the U.S. Western Europe, a traditional market for Florida rock, bought more than 4 million tons of Florida rock two years ago. Next year, it will receive less than 2 million tons. Among the industrialized countries, however, the most serious supply-demand imbalance is in the U.S. "There is daylight at the end of the tunnel insofar as U.S. phosphate fertilizer is concerned," says Mr. Turbeville, "but it will be at least two or three years before that will be true of phosphate rock." U.S. producers of phosphate fertilizer already have enough capacity under construction to handle U.S. demand beginning in the second half of 1975. Agrico, IMC, W. R. Grace, CF Industries, Texasgulf, and Occidental have expansions in the works that will increase existing U.S. capacity for phosphate fertilizer by about 40% when they all are completed by 1976-77. Because of this new capacity buildup, the U.S. phosphate fertilizer shortage probably will last no longer than
the 1975 spring season, says Mr. Turbeville, and within two years the U.S. should be able to satisfy domestic requirements and still have substantial amounts of concentrated phosphates for the export market. Phosphate rock, however, will remain a problem. The buildup in U.S. phosphate rock mining capability is coming along much slower than the increase in fertilizer capacity. There will be enough rock available to supply the new fertilizer plants. But because U.S. producers will have to curtail sharply their exports of rock to meet the requirements of these plants, foreign buyers will have to change either their sources of supply, the form in which they receive their phosphate, or both. During the last three years of the 1960's, Florida-North Carolina rock production exceeded sales by more than 10%. Although this does not
Turbeville doubts that the total inventory of high-grade Florida rock would equal one month of production now. "This means that the cushion is gone," he says, "and we are starting the 1974-75 fertilizer year with practically no inventory reserves." Western U.S. rock producers are in the same boat. They have yet to get back to production levels that they reached eight years ago. During the overproduction debacle of the late sixties, four western mines were shut down and only one of them is back in operation today. The Florida-North Carolina producers, who account for about 82% of U.S. rock output, have several mine expansions under way and more are expected. However, the cost of draglines has more than doubled and delivery is slow. And because all Florida rock is produced by strip mining, mining com-
Mr. Turbeville sees an "adjustment period" for the phosphate fertilizer trade, during which rock will be tight, but concentrated phosphates available for export will become more plentiful. During this period, rock production will have a chance to expand and catch up with demand. Foreign rock producers also are increasing their capacity and within five years, Mr. Turbeville estimates, worldwide capacity for phosphate rock will increase 46 million tons to a total of 160 million tons. Almost half of the expected overseas increase will be in Morocco, which is expected to boost output from this year's 19 million metric tons to 26 million metric tons by 1978. Producers with mines in the Spanish Sahara, U.S.S.R., Algeria, Jordan, Tunisia, and Australia all have major expansion projects planned. Until this new capacity becomes
Florida and North Carolina account for most of U.S. phosphate rock production
Fiscal year
FLORIDA-NORTH CAROLINA ShipProducments tion
1959-60 1960-61 1961-62 1962-63
13,600 14,830 15,760 15,340
13,340 14,130 14,920 15,590
2000 2170 2850 2680
2020 2150 2940 2690
3280 3490 2900 3230
3290 3230 3110 3110
18,890 20,500 21,510 21,250
18,650 19,520 20,970 21,390
1963-64 1964-65 1965-66 1966-67
17,600 20,450 25,420 30,280
17,250 19,630 25,270 28,840
2730 2840 3080 2950
2780 2860 3050 2970
3470 4050 5970 5420
3770 4000 5280 4920
23,800 27,340 34,470 38,660
23,410 26,490 33,610 36,730
1967-68 1968-69 1969-70 1970-71
34,060 31,900 29,810 31,510
29,760 29,270 29,660 31,570
3120 3190 3180 2940
3030 3100 3220 2920
4850 4960 4300 4350
4950 4640 4570 4420
42,030 40,040 37,290 38,800
37,740 37,020 37,460 38,900
1971-72 1972-73 1973-74* 1978-79*
33,170 34,550 35,200 52,100
34,860 36,440 36,900 49,300
2350 2440 2500 2500
2440 2560 2600 2500
4400 4880 5300 6500
4460 4730 5300 6500
39,920 41,870 43,000 61,150
41,760 43,740 44,800 58,300
WESTERN STATES Produc- ShipProduc - Shipments tion ments tion (Thousands of tons) TENNESSEE
TOTAL U.S. Produc- Shipments tion
a Estimate by Phosphate Rock Export Association. Source: U.S. Bureau of Mines
sound like much, it caused producers panies face stiff opposition from envito triple their inventories, Mr. Turbe- ronmentalists. As a result, he thinks ville says, to a high of 13 million tons by that the increase in rock production the end of the 1969-70 fertilizer year. won't be large enough, soon enough. Following this inventory buildup, He has suggested that the Florida prices plummeted and production was mining companies be allowed to team cut back. Producers let maintenance up- in their mining ventures. Such joint slip and cannibalized their equipment, ventures would decrease demand for so that capacity is lacking now that it draglines and would lessen the environis needed. It has taken five years for mental impact of strip mining. HowFlorida-North Carolina producers to ever, this suggestion is certain to run boost rock production back to 1967-68 into antitrust complications. levels (34 million tons). Even this year, Meanwhile, Mr. Turbeville is pessiMr. Turbeville estimates, Florida- mistic about supplies of U.S. rock for North Carolina rock output will be export. He expects the tight situation only 3% higher than it was in 1967-68. to continue through 1976. By 1977, reShipments have been increasing and quirements for the new U.S. fertilizer probably will total 36.9 million tons plants will have been satisfied, domesthis year, 24% more than they were tic demand will level off, and the five years ago. However, this increase availability of phosphate rock for exhas come out of inventory and Mr. port will improve.
available, however, the phosphate rock market will continue to be under pressure, with higher prices resulting. Recently, the price of one grade of North African rock was increased to $63 per metric ton. Only a year ago it was $12. A similar grade of Florida rock is $42 per long ton, f.o.b. Florida, under contracts that were written on a fiscal-year basis. Some Florida rock, sold on calendar-year contracts, carries a $30 price tag and a very few long-term contracts, soon to run out, price rock as low as $10 to $12 per ton. Obviously, when these low-cost contracts are rewritten, the price will skyrocket. Phosrock will decide by October what its prices will be for next year. Although they may not go as high as the North African price of $63 per ton, they are certain to increase. June 24, 1974 C&EN
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