Fertilizer companies as well as phosphate ore miners in the Middle East have posted record profits and are increasing output amid a sharp increase in global fertilizer prices.
The Middle East is not only known as the arid desert with the highest demand for food imports in the world, but also a region rich in mineral resources with important raw materials for fertilizer production. fertilizer. The recent growth of the fertilizer industry in the region represents part of the massive shift taking place in the global economy.
In 2021, the Middle East has accounted for 19% of phosphate fertilizer export market share, 35% urea export market share, 19% ammonium nitrate export market share and 10% potassium fertilizer export market share in the international fertilizer export market. North Africa is also an important supplier of phosphate fertilizers (25% market share) and nitrogen compounds in the world.
The trend of increasing fertilizer prices
Fertilizer prices have more than doubled in 2021 as the COVID-19 pandemic subsides and the fertilizer industry faces major challenges due to supply chain disruptions. Many factors have supported the upward trend of fertilizer prices: storms hindered production in the US, China banned the export of phosphate fertilizers, and high natural gas prices forced many fertilizer factories in Europe to have to close the door.
The Russo-Ukrainian war has given new impetus to the upward trend in fertilizer prices, as supplies from Russia – the world’s largest fertilizer exporter – have been congested by Western sanctions and operations. hostilities with Ukraine.
Although international sanctions have been partially relaxed to allow fertilizer purchases from Russia, many fertilizer companies are still shunning Russian supplies due to fears of violating other regulations. The Russian government itself has threatened to cut off shipping routes.
Opportunities for Middle Eastern fertilizer manufacturers
In the context of such supply disturbances, the Middle East has had a great opportunity to improve its image as a reliable fertilizer supplier to major markets.
A number of governments and companies in countries around the world have already captured those signs. In May 2022, the Brazilian Minister of Agriculture began a visit called “fertilizer diplomacy” to Jordan, Egypt and Morocco. The recent upward trend in fertilizer prices is especially worrisome for Brazil – a major agricultural producer and a leading fertilizer importer in the world. Brazil relies heavily on fertilizer supplies from Russia and has seen this supply drop sharply. In April 2022, Russia exported only 300,000 tons of fertilizer to Brazil, down nearly half compared to the usual amount of deliveries in the same period every year.
Reduced fertilizer consumption means lower yields, and shortages in fertilizer supplies have led to warnings of a possible global food crisis. The Middle East countries are no exception. Some Middle Eastern countries such as Egypt and Tunisia, which are struggling to buy wheat at an already high price, are now even higher due to the Russo-Ukrainian war.
However, geopolitical tensions and supply chain bottlenecks have benefited several other countries in the Middle East.
According to the president of Abu Quir Fertilizers, Egypt’s largest fertilizer producer, 2021 has turned out to be a great year for fertilizer companies around the world, including those in the Middle East. Egypt is particularly well positioned because it has much lower energy and logistics costs than Europe, so fertilizer prices are also much more competitive.
The increase in fertilizer prices has strongly increased the profit of Abu Quir Fertilizers Company. In the first quarter of 2022, the company achieved a profit of 376 million USD, nearly tripled compared to 131 million USD in the same period last year.
This is a common trend across the region. Saudi Arabia’s Ma’aden Mining Company reported a net profit of $772 million in the first quarter of 2022, up 246% year-on-year. Meanwhile, the profit of Morocco’s OCP Phosphate Fertilizer Company increased by 272%, while the profit of the Jordanian Phosphate Ore Mining Company increased even more strongly, 1,000% higher than the same period last year.
Besides phosphate fertilizer production, resource-poor Jordan has now become the sole producer of potash fertilizer in the Arab region. In 2021, Jordan will account for about 4% of the world’s potash export market share and become the 6th largest supplier of potash fertilizers globally.
In the global potash fertilizer market, Jordan holds a small share compared to Russia and Belarus – two countries that account for 40% of the world’s potash exports. But Belarus’ potash production has been sanctioned since 2021, after the government was accused of suppressing the opposition. Since the outbreak of the Russo-Ukrainian war, Belarus and Russia have been subjected to more sanctions.
Expand production
The president of Arab Potash Company (APC) in Jordan said that the company’s production activity has increased sharply since Belarus was subject to sanctions.
Souce : Chemical Industry Newsletter No. 5