OCP: A Giant in the Making? (1/4)

Venezuela, Russia, and Australia have the world’s largest reserves of oil, natural gas and gold, respectively. Be that as it may, their share of the aforementioned commodities does not exceed 24.4%, 19.9%, and 17% of the global ressources, respectively. Enter Morocco, a country with more than 70% of the world reserves of phosphate rocks containing Phosphorus, a mineral essential for the production of fertilizers, which guarantee the maintenance or increase of the soil fertility translating into high and good-quality crop yields.

Come the COVID-19 pandemic and the Russia-Ukraine conflict, the global food crisis became even more pronounced due to disruption in supply chains, export restrictions on commodities due to sanctions on Russia and Ukraine’s ports blockade, and the soaring prices of fertilizers on the global market. For OCP, Morocco’s state-owned phosphate-mining firm, “one man’s meat is another man’s poison.” Indeed, OCP is basking in the glory of its success having benefited from the 80% surge in fertilizers’ prices in 2021, a fact corroborated by the World Bank’s fertilizer price index to food price index ratio hitting 1.63 in December 2021, the highest in over ten years, catapulting OCP’s turnover from 5.88 to 8.4 billion USD in the span of one year, equipping it with greater resources to support its ambitious plans to empower African farming and move the dial towards meaningful and sustainable change. OCP Group, and Morocco for that fact, is well-placed to lead the change on food insecurity globally, with 702 to 828 million people affected by hunger in 2021, 150 million people more than in 2020, according to The State of Food Security and Nutrition in the World report. 

OCP: The Road to State-Ownership

Before delving into OCP’s creation, it is important to travel back in time to pinpoint the moment Morocco was made aware of its rich phosphates reserves. As mentioned in OCP’s 2020 annual report, in celebration of 100 years of OCP Group, Abel Brives, geologist and author of “Travels to Morocco (1901-1907)”, is to be credited for suggesting the presence of phosphates deposits in Chichaoua et IminTanout, South of Marrakech. But, it was not until 1912 that the official discovery of phosphates deposits was made by MM. Combelas and Lamolinerie in El Borouj region. In 1920, the OCP Group was created marking the nationalization of the industry. The following years, Morocco started mining phosphates and cities like Youssoufia and Khouribga, close to phosphates deposits, were built from scratch. In 1960, Morocco gained full commercial sovereignty over its phosphates products after leaving “The Comptoir of North African Phosphates.” One year after the Green March, Morocco acquired 65% of PhosBoucraa from the National Institute of Industry, under the jurisdiction of Spain, and the remaining 35% in 2002. 70 years after its creation, the inauguration of OCP India kickstarts OCP Group’s quest for international leadership that will be consolidated throughout the years. Since 1994, OCP Group has put sustainable development and innovation at the forefront of its strategy within the framework of Social Responsibility. An example of OCP’s action on sustainability is the introduction of the Slurry Pipeline which “doubled the mine’s capacities and ensure flexibility for the production and logistical chain while decreasing the cost of phosphate carried to Jorf Lasfar by 45%,” in addition to saving “nearly 3 million m³ of water yearly due to the preservation of the rock’s natural moisture,” and impacting “positively the carbon footprint by cutting CO2 emissions by 930 Kt per year and saving 160,000 tons of fuel oil yearly”, according to MAP. OCP Africa was founded in 2016 with the aim “to realize its vision of a sustainable future for the continent, giving farmers the resources and technology they need.” Presently, and according to the 2021 OCP Group Integrated report, OCP Group has 4 mining sites, Khouribga (43%), Gantour (37%), Meksala (18%), and Boucraa (2%), two processing platforms, in Safi and Jorf Lasfar, and 4 phosphate ports, in Laayoune, Safi, Jorf Lasfar and Casablanca.

OCP’s Contribution to Morocco

During the pandemic, OCP Group contributed MAD 3 billion to the Special Fund for the Management and Response to the COVID-19 pandemic created by King Mohammed VI and launched several initiatives in the spirit of solidarity, among which is the design of protective equipment and accessories for medical professionals on the frontlines of this pandemic. Throughout the years, the Group solidified its expertise and consolidated its presence worldwide allowing it to rightfully position itself as an indispensable player in the global market, more notably in Africa. This commitment is evidenced, among other things, by the ongoing operation of 550KT of fertilizers distributed as donations and as products at reduced prices to African countries that need it the most, in response to the current food crisis. 

 OCP Group’s contribution to Morocco’s GDP averages 5%, particularly noteworthy for a single company, albeit the largest private sector company in Morocco. As mentioned before, OCP’s numbers for 2021 shot through the roof due to the current food crisis, which allowed it to generously offer 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. The Group also announced the distribution of MAD 8.1 billion in dividends to shareholders, according to MAP Business. In the graph below, we can observe OCP’s turnover evolution throughout the years, scoring a peak in 2008 and 2021, exceptional years for OCP marked by global agricultural crises.

OCP Group’s main phosphates products include fertilizers, phosphoric acid, and phosphate rocks. Be that as it may, fertilizers constitute the bulk of OCP Group’s profit, as the graph below illustrates. Indeed, fertilizers’ prices have more than doubled going from 3671 to 8656 dirhams per tonne from June 2021 to June 2022, according to the Exchange Office. This allowed Morocco to score 57.46 billion dirhams, which translates to an increase of 84% in the same period. Moreover, OCP Group announced that it will “increase its production volumes by around 10% in 2022 to meet demand in rapidly growing markets in which the group continues to strengthen its position as world leader.”

From Phosphate Rock to Fertilizer: A Sustainable, Environmental-Friendly Transformation?

In line with OCP’s vision that rests on shared value creation and sustainable growth for everyone, mining and manufacturing a natural resource indispensable to life itself undergoes robust management to ensure minimal impact to the environment, producing more with less. Indeed, under the current circumstances, characterized by the increase of natural gas, ammoniac, and sulfur prices, necessary to the production of fertilizers, Europe decreased its output, we cite companies like Yara International ASA and Borealis AG. China, a top exporter of fertilizers (alongside Russia, USA, Canada, and Morocco), imposed restrictions on its fertilizers’ exports due to the surging prices of coal and rationing of electricity to ensure self-sufficiency and avoid depleting its own resources. So, amid these self-imposed restrictions, why is Morocco increasing its production by 10%? Can the OCP Group afford to deplete its resources and up its production capacity if one were to take into consideration the severe water shortage hitting Morocco and the ever-increasing cost of energy? Concurrently to these self-imposed restrictions, OCP states that Morocco has found a way to sustainably increase its production capacity by 10% in support of the growing global food security challenge.

However, before we delve into OCP’s sustainable strategy, it is important that we take a look at their diverse operations. OCP’s operations start at mining, followed by washing plants and the transportation of phosphate by the Slurry Pipeline to industrial plants where they are manufactured to be then shipped by ports. For example, the journey of phosphates emanating from Khouribga’s mining basin, holding 70% of the Group’s production, is as follow: “The phosphate extracted at the Khouribga mine is transported over 187km via our Slurry Pipeline to our processing site in Jorf Lasfar and by rail to the port of Casablanca for the export of the phosphate rock.”

As aforementioned, OCP Group’s interests and activities go beyond mining, producing and exporting fertilizers and other products, and extend to sustainability and environmental protection. In fact, the Group recognizes that, as a highly valuable resource, Phosphate, needs to be extracted sustainably. Adding that “estimates by the US Geological Survey (USGS) suggest that economically extractable phosphate reserves will last for many centuries at the current global production rate – with undersea resources in the Atlantic and Pacific pushing the estimate to be sufficient for 1,200 years.” 

According to the 2021 OCP Sustainability Integrated Report, 2.3 Billion USD is invested for Clean Tech development and Green Energy Program, 87% of OCP needs are covered by clean energy, and are set to reach 100% by 2030, in addition to that, 30% of the water needs are covered by non-conventional sources, and are also set to reach 100% by 2026. Moreover, it aims to reduce carbon emissions by 50% by 2025 and reach carbon neutrality by 2040, according to the Ministry of Energy Transition and Sustainable Development. It is important to note that OCP’s activities only consume 6% to 7% of Morocco’s energy and 0.5% of its water consumption. Within the same lines, Amine Kaf, Director of Jorf Lasfar Site, told JeuneAfrique in 2018 that “Our President, Mostafa Terrab, has outlined our strategy. As soon as we increase our production, we have to systematically think about how to do so while reducing costs, ensuring industrial flexibility and integrating the notion of sustainable development. To solve this equation, we have been able to call on the best consultants and exchange with our industrial partners such as the Americans from Jacobs Engineering Group or DuPont.”

OCP Worldwide: Global Shares and Joint Ventures

OCP Group’s global reach has expanded over the years to encompass all five continents. Indeed, OCP is present in different major cities around the world: New York, Paris, Amsterdam, Geneva, São Paulo, Buenos Aires, Abu Dhabi, Beijing, Singapore, Addis-Abeba, Abuja, and more. OCP Group joint ventures include Dupont OCP Operations (to reduce risk and improve operations and processes), JESA (to manage many engineering projects in Morocco), and Teal Technology Services (to accelerate digital transformation). In the OCP Group Integrated report 2021, Koch Ag & Energy Solutions (Koch) and OCP’s agreement signed in 2021 is said to grant a Koch affiliate a 50% interest in Jorf Fertilizers Company III (JFC III) from OCP, and when closed, the transaction will establish a 50/50 joint venture. In addition to this, OCP Group has also established committed partnerships in terms of research with institutions such as: The Fraunhofer, UM6P, Fertinagro, Forbon, Prayon, Solvay, MIT, HEC, according to the same source.

OCP Group’s market shares worldwide are significant reaffirming its international leadership. As detailed in OCP’s latest report, the Group’s market shares are as follow: 21% (North America), 35% Central America, 46% South America, 46% Europe, 30% South Asia and Middle East, 8% East Asia, 17% Oceania, and 60% Africa. The graph below showcases OCP’s main markets’ evolution from 2018 to 2021, with South America in the lead, followed by Europe and then Africa. 

Focusing on Communities to Transform Lives 

  Going above and beyond, OCP’s activities are not limited to industrial operations and investments, the Group is also lauded for its involvement in human development through various projects and initiatives put in place by OCP Foundation. More famously, OCP Foundation created the Policy Center for the New South, “a Moroccan think tank aiming to contribute to the improvement of economic and social public policies that challenge Morocco and the rest of Africa as integral parts of the global South” and Lycée d’Excellence Benguerir (Lydex), in partnership with the Ministry of National Education, Professional Training, Higher Education and Scientific Research. In numbers, OCP Foundation 2021 report states that it implemented more than 160 projects in 2021. In the field of education, more than 3600 scholarships were awarded via FIRSI, 29 new schools were sponsored, and 9400 students benefited from 29 CPGE equipment projects. In terms of social and solidarity economy, OCP Foundation is supporting 600 cooperatives through the Cooplab UM6P, coaching more than 400 women, creating 3 training centers for women, and adopting 30 projects. In terms of agriculture, OCP Foundation is raising awareness on sustainable management of soils for 8200 farmers in Bangladesh, 2376 of which are women. For COVID 19 relief operations, the foundation offered 9000 protection kits in India, organized awareness-raising campaigns for the profit of 7508 people and trainings related to sewage works for the benefit of 120 people in Sub-Saharan Africa. 

To cater for the needs of the inhabitants of Boucraa, OCP Group launched the Phosboucraa foundation that promotes and supports entrepreneurship in the region. In addition to the creation of 54.000 full time jobs between 2018-2026, Phosboucraa reinvests 100% of the profits made in the region. The Phosboucraa Foundation launched different programs in the region, we cite: the Entrepreneurship Program of the Phosboucraa Foundation Learning Centers (more than 6,000 young people initiated into entrepreneurship, 140 companies created, 9 regional entrepreneurship competitions), the Integration Program through Economic Activities in Partnership with the Mohammed V Foundation for Solidarity (39 facilitators trained to support project leaders, 48 projects funded and in the process of post-funding support, 83 in the process of financing), the Cooperative Strengthening Program in the Laayoune Sakia El Hamra region (64 cooperatives being supported). In addition, to granting of honor loans with the Moubadarat of Tarfaya, Dakhla, Es-Semara, Boujdour, Laayoune (291 projects financed and supported and 112 projects selected for funding).