Since the discovery of phosphate reserves in El Borouj near Oued-Zem in 1912, Morocco’s fertilizer industry has witnessed a major transformation giving rise to its global leadership in food security over the years. While the profitability of this industry has not been linear, mainly due to the fluctuations in raw materials priced at the global level (ammoniac, sulfur…), and energy required to run production facilities (natural gas, coal, electricity…), fertilizer prices have known all-time highs following unprecedented global demand prompted by food shortages. According to the World Bank, fertilizers are currently at their least affordable price point since the global food crisis in 2008. To be sure, as the graph below illustrates, three substantial peaks in fertilizers affordability can be identified: 1974, 2008, and 2021, all three years coinciding with global food crises.
2021: Another Phosphate Boom or the Start of OCP’s Golden Era?
While driving sustainable development in times of great need, OCP, Morocco’s phosphate mining firm, has seen its fertilizer prices, and other phosphate derived products, skyrocket in recent years. Indeed, Morocco’s fertilizer industry, run by OCP Group, is currently seeing increased profits from the expensive price tag the global crisis slapped on fertilizers’ bags. In 2021, OCP group’s turnover hit MAD 84.3 billion, securing a 50.1% increase in comparison to 2020. Fertilizers are to be credited, for the most part, for OCP’s exceptional profit margin in 2021 due to their 80% increase in prices attributed to rising global demand, soaring prices of input products, and trade restrictions and export bans. Phosphoric acid’s prices have also skyrocketed following demand recovery from Brazil, Turkey, India, and Mexico, according to OCP 2021 financial report. OCP’s greater profit margin in 2021 meant greater resources to reinvest into its commitment to creating a more sustainable future for its business, the community and the environment. As an emergency response to the global food security crisis and to improve immediate access to fertilizers across Africa, OCP offered African countries 180,000 tons of soil nutrients in assistance, and 370,000 tons at a reduced price, representing 16% of African demand this year and 25% of OCP Group’s sales on the continent, according to the African Development Bank, and distributed MAD 8.1 billion in dividends to shareholders, according to MAP Business. In terms of partnerships and agreements, multiple countries have turned to Morocco to get their fill of fertilizers so as to circumvent the current global shortage, chief among which are Brazil, Guatemala, Japan, and Gambia.
Marcos Montes, Brazil’s agriculture minister, embarked on a “fertilizer diplomacy” trip that landed him in Morocco where he shook hands with Mostafa Terrab, OCP Group’s President and Director, on a fertilizer plant project in Sao Luis. Going above and beyond, Olivio Takenaka, Brazil’s OCP Fertilizantes President, mentioned that a dicalcium phosphate facility for animal food production is also in the works, it is noteworthy to mention that OCP has a large range of animal phosphate feeds that provides the livestock with essential nutrients to help with digestion and nutrition and ensure sustainability. Guatemala also followed in the footsteps of Brazil and is currently proceeding with Morocco’s proposal to build a fertilizer plant so as to ensure local production leading to smaller prices for Guatemalan farmers. Japan has also expressed interest in importing Moroccan phosphate in the future, with the Japanese vice-minister of Agriculture, Forestry and Fisheries, Arata Takebe stating that “Morocco is a world power in phosphate and that is why my country is interested in importing a large amount of fertilizer.” Morocco has also agreed to supply Gambia with 13,000 tons of fertilizers at a special price, as part of King Mohammed VI’s initiative to ensure food security within the African continent. More recently, OCP’s Mostafa Terrab and USAID Administrator Samantha Power discussed opportunities for partnership to tackle food insecurity in addition to fertilizer distribution, affordability, and accessibility to smallholder farmers.
In addition to the aforementioned partnerships and agreements set in place following OCP’s exceptional performance in 2021 and the acute demand for fertilizers globally, the British company Emmerson announced the construction of a potash factory in Khemisset, the first of its kind in Africa. The 450-500 million USD project spanning 19 years is set to provide Morocco with potash, whose prices increased drastically seeing as 40% of its supply comes from Belarus and Russia. According to Lahcen Alloubane, Director of Emmerson in Morocco, this project’s electricity and water requirements will come from renewable energies and Khemisset’s wastewater recycling, respectively. Moreover, OCP Group will be launching ‘OCP Nutricrops’ that will implement OCP’s strategy in the field of soil and plant fertilization solutions, specializing in the manufacture of phosphoric acid, monoammonium phosphate, and all sorts of chemicals, including by means of phosphate processing, according to Decree No. 2.22.407. This company is expected to have a turnover of 3 billion USD by 2025.
For 2022, at the national level, OCP Group foresees the implementation of numerous development projects aiming to enhance Morocco’s fertilizer industry’s infrastructure and production facilities. According to the Ministry of Energy Transition and Sustainable Development, OCP Group is looking to implement or finalize the following projects:
- Washing plant in Benguerir, an investment amounting to MAD 3748 million;
- Mazinda mining project, with an investment budget of MAD 736 million dirhams (the storage facility related to this project is expected to become operational in the last quarter of 2022).
- Benguerir mining project, with an investment amount of MAD 274 million.
- Electrification project of the Gantour region with a total investment of MAD 75 million.
- Wastewater treatment project “STEP” in Kasbah Tadla, Fkih Bensalah and Khouribga, with an investment amount of MAD 665 million;
- Production program of 3 million tons of fertilizer in Jorf Lasfar with an investment budget of MAD 13,721 million.
- Project for the adaptation of NPK fertilizer lines, with an investment amount of MAD 200 million.
- Seawater desalination project in Jorf Lasfar – Phase II with an investment budget of MAD 380 million.
- PS4 sulfuric acid unit project in Safi, with an investment amount of MAD 1,185 million.
- Unit for the elimination of cadmium from phosphoric acid in Jorf Lasfar with an investment budget of MAD 260 million.
- Phosboucraa Program – Washing and dissolved-air flotation unit with an investment amount of MAD 1,442 million (this unit will be in operation during the second quarter of 2022).
1974 and 2008: Decisive Years for OCP Group
OCP’s exceptional performance in 2021 breathed new life into Morocco’s fertilizer industry allowing it to expand into new markets and invest in infrastructures and new technologies, both in Morocco and abroad, to transform agriculture for a sustainable future. Building on the momentum to reinvent itself and consolidate its position in the global market is not new to OCP Group. In fact, as observed in the World Bank’s fertilizer affordability chart above, fertilizer prices have known two other remarkable peaks in the global market, 1974 and 2008. Indeed, following global crises, in 1973 and 2007, fertilizer prices shot through the roof making for very profitable years for Morocco’s fertilizer industry.
In 1973, the oil shock triggered short and long term effects on the global market, among which was a global shortage of foodstuff, prompting phosphates prices to skyrocket. The phosphate boom died down quickly but it led to “quadrupling export earnings from phosphate and growing the government revenue by a factor of three between 1972 and 1975, encouraging it to embark on a risky policy of accelerated growth”, according to the OECD. Indeed, the OECD report adds that “the objectives of the 1973-77 Economic Plan were adjusted upwards and spending for capital and recurrent expenditure was much increased. In the agricultural sector, the schedule for dam construction and irrigation equipment was accelerated. Expenditure on consumer subsidies rose, this being used as a principal counter-inflationary measure. Largely as a consequence of the boom in phosphate revenues, the GDP growth rate jumped from 4% in 1973 to 7.5% during the 73-75 period.” Among the main projects invested in was the industrial complex in Jorf Lasfar that was inaugurated in 1986.
After decades in which phosphate prices were stable around 30 USD per ton, the demand exploded in 2008, catapulting the prices of phosphate from 30 USD per ton to 500 USD per ton, and eventually 150 USD. In addition to its transition from public corporation to public limited company status, OCP Group underwent a major transformation following the phosphate boom in 2008 that allowed it to move from what Amar Drissi, Executive Vice President in OCP Group, described as “chronic underinvestment” in the last decades. Indeed, OCP’s turnover hit MAD 60 billion, marking a 118% increase, and its debt decreased drastically from MAD 30 billion to MAD 4.5 billion in the span of one year. According to OCP, this success story helped the group get numerous loan offers from banks at advantageous rates to fuel its ambitious mission to feed the soil to feed the world. One of the noteworthy initiatives launched in 2008 was OCP’s investment program with a budget of MAD 200 billion spanning 10 years and aiming to “doubling mining production capacity, tripling industrial processing capacity, improving efficiency, strengthening logistics, and investing in infrastructure and digital transformation across the value chain”, according to the Ministry of Energy Transition and Sustainable Development.