Mining firms enter fertiliser industry as profits soar

Farmers have accused fertiliser companies of raising prices far beyond the increases in production costs, to boost their profit margins to a massive 36% in 2022.

Farmers have accused fertiliser companies of raising prices far beyond the increases in production costs, to boost their profit margins to a massive 36% in 2022.

After profits at the world's big nine fertiliser companies soared to a total of €45bn last year, it is perhaps not so surprising that several of the largest mining companies have begun to expand into fertiliser production.

As a result, farmers can hope that prices will fall, due to an increased supply coming on the market. And in the longer term, they can also take heart from Norge Mining's announcement that it has found a huge phosphate deposit in Norway, which could satisfy worldwide demand for the next 100 years.

Up to now, the largest phosphate rock deposits were in Morocco, with more than 50% of the planet’s reserves. China, the US, Syria, Uzbekistan, South Africa, Jordan, Saudi Arabia and Russia each have sizeable deposits.

The large new discovery in a European country has lessened fears of political instability in some countries, or international sanctions, shrinking the phosphate supply.

However, many farmers believe they are up against profiteering by a global fertiliser cartel.

They are supported in this belief by international non-profit organisations such as IATP, which works to ensure fair and sustainable food, farm and trade systems, and GRAIN, which supports community-controlled and biodiversity-based food systems.

Earlier this year, they accused fertiliser companies of raising prices far beyond the increases in production costs, to boost their profit margins to a massive 36% in 2022.

As a result, farmers cut fertiliser use, and their reduced production led to an alarming rise in global food insecurity, according to GRAIN and IATP (the Institute for Agriculture and Trade Policy).

With many farmers saying they spent three times as much on fertilisers than a few years ago, they fell deeper into debt. The same happened in countries where fertilisers are heavily subsidised. India's central government expenditure on fertiliser subsidies last year was reported to surge from €9 bn to 15.7 bn.

The huge price rises in 2022 left a ready audience for allegations of fertiliser cartels and profiteering. With Russia and Belarus controlling a large share of the world supply, the finger was pointed at them also, when prices shot up.

But market forces turning in their favour are likely to be a better bet for farmers than expecting a global cartel investigation that finds fertiliser magnates guilty.

Increased supply and reduced prices looks likely for potash and phosphate, whatever about nitrogen, the third crucial element for crop growth.

For example, BHP, the world’s largest mining company, is beginning work on a multi-billion dollar potash mine in Canada.

When its products come on the market in 2026, in expected tonnages equivalent to 5% of projected global demand, prices could be expected to moderate.

Nearer home, Anglo American’s Woodsmith mine in northern England will produce a new potash-rich fertiliser, polyhalite, from 2027.

Miners globally say they are looking ahead to 2050, when more efficient food production from less arable land will be needed to feed 10 billion people. Analysts are telling them potash demand will grow 1% per year to 2030.

For those who opt to mine phosphate rock, there is also the electric vehicle battery market to supply. Production of lithium iron phosphate batteries for vehicles is expected to increase demand for phosphate rock 4% by 2030.

A bipartisan bill introduced in the US House of Representatives is also getting miners more interested in fertilisers. The bill would list phosphate and potash as critical minerals. It is being put forward by representatives warnng against dependence on Russian and Chinese minerals for crop fertilisers. Classification as critical minerals, paving the way for tax breaks and subsidies, could be good news for fertiliser miners.

Phosphorus has already been designated an EU critical raw material, with the vast majority needed for agriculture, but phosphorus also plays a big role in the green and digital transition, for semiconductors and electronic circuits.

So it is welcome news that Norge Mining's phosphorus ore body, previously estimated at only 300m deep, has been found during more recent drilling programmes to run 4,500m deep.

The deposit also contains two other EU critical raw materials, vanadium and titanium.

It is estimated at more than 70 billion tonnes of phosphate, which compares with only 71 billion tonnes of proven world reserves as evaluated by the US Geological Survey in 2021.

So Norway's high-grade phosphate rock find is the world’s largest, enough to satisfy world demand for 100 years, and hopefully to end the kind of price surges which occurred after Russia’s full-scale invasion of Ukraine last year.