Fertilizer: Morocco, soon to be a market maker
Food insecurity: this is the new phobia of world leaders since the beginning of the Ukrainian crisis. In a joint statement issued after a ministerial meeting on the sidelines of the UN General Assembly in New York, the US, the EU, the African Union, Colombia, Nigeria, and Indonesia affirmed their “commitment to act with urgency, at scale, and in concert to respond to the pressing global food crisis and avert extreme hunger for hundreds of millions of people around the world”.
Being extremely dependent on phosphate fertilizers, Europe and Africa fear a food crisis in addition to the energy crisis due to the war in Ukraine
To guarantee farmers’ access to chemical fertilizers, which are particularly lacking for producers in West Africa, the United Nations has signed a memorandum of understanding with the Russian Federation to supply the world market with agribusiness products and Russian fertilizers. “If the fertilizer market is not stabilized, we could experience a food crisis next year”, said Secretary General António Guterres. In short, “the world could run out of food”.
What about Morocco in all this? As one of the world’s largest exporters of fertilizers, the kingdom finds itself with an unprecedented opportunity. US ratings agency Fitch Ratings last week announced an upward price revision for fertilizer prices upwards due to the continuing supply constraints and the expected recovery in demand.
In its latest report, Fitch argues that the increased phosphate rock forecasts for 2022 and 2023 are due to OCP’s policy of limiting export to maintain a price premium. The OCP policy is especially effective as the group controls more than 70% of the world’s phosphate rock reserves found in Morocco, Fitch’s report added. As for the outlook of global demand for fertilizers, Fitch maintains that it would rise to above 2022-levels in 2023 before returning to pre-Ukraine war levels in the US and Europe, while prices would remain high up to 2026.
As a reminder, the Moroccan producer reported an exceptional increase in its revenues and its turnover compared to last year, in its last report on the results, detailing the performance of the phosphate giant until June 30, 2022. The rise in income was attributed in part to the global rise in fertilizer prices. With Russia and Ukraine being two of the largest fertilizer producers and exporters in the world, the war between them has disrupted traditional fertilizer markets and supply chains, while OCP has managed to increase production and exports while its international competitors have struggled to maintain production at pre-2022 levels. A reduction in exports from China has also pushed up prices, affecting affordability and allowing the Moroccan company to meet the growing demand.
Abdessamad NAIMI
