Phosphate Trade Patterns In The New World Order

Introduction An examination of statistics for the world phosphate fertilizer industry since 1980 reveals that there is an increasing tendency for fertilizer-manufacturing activity to concentrate in the areas of phosphate-rock mining. The economic justification for this resource-oriented strategy is clear. The choice between shipping phosphate rock, a comparatively low-value product, and shipping a more valuable finished fertilizer product will always, as long as cost considerations control the decision, be resolved in favor of the latter. The historical existence of substantial phosphate fertilizer-manufacturing capacity, which is oriented toward fertilizer-consuming activities and dependent on imported phosphate rock, shows that narrow cost considerations have not always determined the industry's location. One is entitled to ask what conditions have changed to precipitate the observed relocations, and how permanent are these changes. These questions are the subject of this investigation. Recent trends in world phosphate trade Since 1980, the changing pattern of world trade in phosphate materials reflects an increased interest in manufacturing phosphate fertilizer in rock-producing areas. This is shown by the decline in the total tonnage of phosphate rock being traded worldwide compared to world consumption of phosphate fertilizers (Fig. 1). This relative decline has continued since 1984, which is a longer period of time than could be explained by temporary cyclical market factors. Other evidence corroborates this conclusion. The world's phosphate-rock production is relatively concentrated geographically. In 1992, the top ten producing countries accounted for 92% of world production. Figure 2 shows that the share of world fertilizer production in the top ten rock producers has increased. Yet, further evidence of the direction of trade changes can be had by looking at the pattern of the world's sulfur trade. The first step in the manufacture of any of the widely used phosphate fertilizer products is the acidulation of phosphate rock with sulfuric acid. In most instances, phosphate fertilizer producers have found it economical to produce their own sulfuric acid by burning elemental sulfur, and such operations account for over 60% of all sulfur consumption in the world. 1 Therefore, a concentration of phosphate fertilizer production in rock-producing countries should produce a similar concentration of sulfur imports in the same countries. Figure 3 suggests that there has been a tendency since 1989 for sulfur exports to go increasingly to the rockproducing countries. World phosphate-location strategy is not limited to the alternatives of shipping rock and shipping finished fertilizers. A third alternative consists of producing phosphoric acid, the principal phosphate fertilizer intermediate, at the rock deposit, and then exporting it to market-oriented ammonium phosphate plants. This arrangement offers the importing country the advantages of shipping a more concentrated product while retaining the economic multiplier benefits of a domestic high-analysis fertilizer industry. India, and several other countries, imports merchant-grade phosphoric acid to use as input for the domestic value-added fertilizer industries. For various reasons, the trade in phosphoric acid has never quite lived up to the promise suggested by the foregoing discussion. Figure 4 shows no growth in this trade in the last ten years, either in absolute terms or in relation to the world's consumption of phosphoric acid. Most of the decline in the trade in phosphorous in rock form has been replaced with trade in finished fertilizers. The trade in superphosphoric acid was a growth activity in the late 1970s with the growth in US exports to the USSR, and this trade survived the Carter-era embargoes of US-Soviet trade. However, no additional sizable markets for superphosphoric acid developed, and other suppliers sought out the Soviet market. The problem with superphosphoric acid is that the cost of its incremental concentration is as great as the savings from shipping the more concentrated product. The Soviet market was a special case. The political breakup of the Soviet Union disrupted the superphosphoric acid trade after 1991 and led to a shutdown of the US export capacity.