Morocco’s phosphate giant OCP put to test as Africa’s fertilizer market heats up
Al-Monitor Pro Members
Journalist and analyst specialized in North Africa
Mar. 13, 2023
Morocco’s phosphate producer, the Office Chérifien des Phosphates (OCP), has seen its turnover jump to a record Dh114.57 billion ($11.034 billion) in 2022, driven in large part by a spike in global phosphate and fertilizer prices which peaked last April. With 70% of global phosphate reserves, OCP is one of the world’s largest industry players, gobbling up some 31% of the global phosphates trade. The company operates across four continents but its expansion has been most notable in Africa. That said, other global players have also taken an interest in the African market in recent years, with fertilizer producers from countries such as Saudi Arabia and Russia now competing for a larger share of the pie, especially to the east of the continent. In this context and as price volatility looms, OCP’s dominant position, especially in Africa, will be put to the test in the coming months and years.
- Morocco is the second largest global phosphate rock producer with an output of 40 million tons in 2022, according to estimates by the United States Geological Survey (USGS).
- According to figures by Morocco’s Office des Changes, the entity in charge of the country’s trade statistics, exports of phosphates and associated products reached Dh115.5 billion ($11.1 billion) in 2022, a 43.9% increase from 2021 figures.
- Morocco’s OCP, which is 94% owned by the state, dominates the country’s phosphates industry.
- Global phosphate price increases over the past two years have brought a windfall for OCP. The firm’s turnover jumped by 50% in 2021 to Dh84.3 billion ($8.1 billion), and by an additional 36% in 2022 to Dh 114.57 billion ($11.034 billion), its highest ever.
- Global pressure on phosphates prices began in late 2021 when China, the world’s largest phosphate producer, implemented export restrictions to ensure local demand was met. This was followed in 2022 by a quota system further restricting its phosphate exports.
- Sanctions on Russia, also a major producer of phosphates and other key fertilizer ingredients, added to the global pressure on prices following its invasion of Ukraine in February 2022.
- For OCP, higher prices have been a major export opportunity. For instance, Diammonium phosphate, one of the most widely used fertilizers, sold for $954 per metric ton in April 2022, up from $421 per metric ton in early 2021, according to figures by the World Bank. By December 2022, prices had come down to $625 per metric ton.
- OCP’s international competitors have also benefited. US-based Mosaic reported a record turnover of $14.6 billion for the first nine months of 2022, a 71% increase compared to Jan-Sep of 2021. Over same period, Russia’s PhosAgro had a turnover of $6.5 billion, representing a 57% yearly rise, despite sanctions imposed on Russian firms after the start of the war in Ukraine.
- However, the conflict in Ukraine has also brought about some challenges for OCP. The company imports an annual 1.8 tons of ammonia — a key ingredient used in the production of fertilizers — from several suppliers which included Russia and Ukraine. But the start of the war in February 2022 reduced OCP’s annual ammonia supply by half. It was able to procure it by increasing imports from other countries — including Saudi Arabia, Egypt, Qatar and Trinidad and Tobago.
- In the short-term, OCP plans to procure ammonia from the United States in 2023, and will soon be able to rely on its own supply from Nigeria, where its $1.3 billion ammonia plant is set to start production in 2023.
- OCP is present in markets spanning North and South America and going as far as Asia. Among some its most recent quests is a plan to build a fertilizer plant in northeastern Brazil to supply the domestic market, and a deal to sell 1.7 million metric tons of phosphate-based fertilizer products to India. That said, most of OCP’s stronghold today lies in Africa where it is present in more than 16 countries.
- In 2019, the firm signed a deal with the Ethiopian government to run five fertilizer blending plants in the country; two had already began production in 2022. It is also building a $3.7 billion fertilizer complex in Dire Dawa, Ethiopia, with an annual capacity of 3.8 million tons.
- In Nigeria, OCP is planning to set-up three fertilizer blending plants, with the first brought online in the state of Kaduna at the end of 2022. Two more are currently being built in Nigeria in each of Sokoto and Ogun.
- OCP is also building a 100,000-ton capacity fertilizer blending plant in Tanzania, which is set to open in 2023 near Dar es-Salaam. Another 100,000-ton capacity plant is under construction in Rwanda, part of a partnership between OCP, the Rwandan government and Rwanda Fertilizers Company.
- But the group’s expansion is likely to put it in contact with other global phosphate players also looking to expand their footprint on the continent, especially in east Africa.
- Saudi Arabian Mining Company (Ma’aden) moved into fertilizer production in 2011, and has been strengthening its profile in the southern and eastern African markets. In 2019, it bought Africa fertilizer distributor Meridian Group, based out of Mauritius. Ma’aden also inaugurated a fertilizer terminal in Malawi in 2021 to ship its fertilizers across southeast Africa. As of 2022, the Saudi fertilizer producer reportedly had market shares of between 35% and 65% in Mozambique, Zimbabwe, Zambia and Malawi. In 2022, the Saudi phosphate producer announced it would open its regional headquarters in South Africa.
- Russian fertilizer producers PhosAgro, Eurochem and Uralchem have also been expanding their presence in Africa. While these producers had traditionally shipped their products to Africa, in 2019 Uralchem announced plans to build a $1.3 billion fertilizer plant in Angola, which is due for completion in 2023. PhosAgro opened its regional office in South Africa in 2020, and has been expanding its storage capacity in the southern eastern African countries. However, the war in Ukraine is likely to complicate these expansion plans for the foreseeable future.
Scenario 1: Prices for phosphates and fertilizers rise again over 2023-25. Chinese exports remain limited, as do supplies of fertilizer inputs from Russia and Ukraine.
For Morocco and OCP, the status quo continues: high export earnings, with phosphate and associated products remaining the kingdom’s top export segment. Political support for the sector, alongside the low chance of labor disruptions (in its Moroccan units), means that OCP continues to boost production (the firm is targeting a fertilizer output of 20 million tons by 2027 up from 12 million tons in 2021), benefit from price peaks, and pursue its expansion plans in Africa and other large-scale fertilizer markets such as India and Brazil.
Other phosphate firms such as Saudi-based Ma’aden use their own increased revenues to pursue their African expansion, competing with OCP, especially in southern African countries. But Russian phosphate producers remain limited by sanctions. Overall, higher prices will drive expansion of fertilizer companies in Africa, rising the competitive bar for OCP. However, the company’s localized production capacity and overall scale, allow it to remain a leader in the African market.
Scenario 2: Prices fall back to their pre-2021 levels over 2023-2024.
Morocco’s phosphate export earnings take a hit, losing the industry its leadership position as the country’s top exporter. Although turnover is reduced and some investment plans might be sidelined, OCP maintains its standing as a key player at home as well as in the global phosphate trade. Thanks to a diverse supply chain and growing production network, it will be easier for OCP to adapt supply to lower prices and retain its market share than for other manufacturers without an embedded presence in fertilizer markets, especially in Africa where OCP’s advantage is likely to grow under these circumstances. Lower prices could make it less appealing for producers such as Ma’aden and Phosagro to pursue aggressive expansion plans on the continent, especially in countries where OCP is well-established. But the Russian and Saudi competitors will continue to mount significant competition through exports into markets in east and south Africa, where OCP has less of a foothold. This scenario looks to be the least likely, as global demand for fertilizers will probably keep prices above 2020 levels in the short-term.
Prices of phosphates stabilize at lower levels over 2023-2024, but remain higher than their 2020 levels. This is driven by an increase of supply from additional manufacturing projects, and potentially, a return of Chinese exports to the market.
The arrival of new phosphate projects to market after 2024, namely in Brazil, Kazakhstan, Mexico and Russia, could drive prices down even further.
Export revenues for Moroccan phosphates and associated products fall below their 2022 levels. Still, phosphates remain a significant export earner, and a diplomatic tool for Morocco to strengthen political and commercial relations.
Thanks to its well-established and diverse network across Africa, OCP remains a key phosphates supplier on the continent. Lower export values will be partially offset by higher production volumes as more of its on-the-ground projects become operational. Although political or social risk can impact individual production subsidiaries across the region, the company’s diversified nature ensures overall stability for production objectives and turnover.
Francisco Serrano is a writer and analyst who focuses mainly on North Africa. He has been published in several outlets, including Foreign Policy, World Politics Review and the Middle East Institute. His second book, "As Ruínas da Década," about the past decade in the Middle East, was published in March 2022.
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