For the second year in a row, Morocco has increased its phosphate exports, benefiting from the rising demand for fertilizers around the world. Morocco is the world’s second-largest producer of phosphate after China, and its reserves make up roughly 70 percent of the world’s total phosphate reserves. Considering these factors, Rabat developed a plan to increase the contribution of phosphate mining to the country’s budget to $1.7 billion by 2030.
Although Morocco depends on the phosphate industry to foster economic growth and develop the agricultural sector to ensure food security, it also has the ability to exploit the industry for geopolitical and diplomatic gains, so its benefits from it go beyond just economic ones.
A Trump Card
The mining and phosphate industry has long been seen as crucial to Morocco’s economic revival, which, like the rest of the world, has been impacted by Covid-19 and the conflict between Russia and Ukraine. However, given Moroccan efforts to use so-called “phosphate diplomacy” to advance its own interests in Africa, the current situation is about to drastically change in light of the following:
• A Catalyst for Economic Growth: With its 10 percent GDP contribution, 20 percent export share, and ability to generate around 40,000 direct and indirect jobs, Morocco’s mining industry is crucial to the country’s economy. Phosphate’s significance in the fertilizer industry, which is experiencing a supply-and-demand imbalance due to the rising global population without commensurate growth in agricultural land, and the high demand from India -one of the largest importers of the phosphate- i, makes it not only a crucial commodity from a macroeconomic standpoint, but also an essential element for the stability of food security. Additionally, the geopolitical tensions between Russia and Ukraine, which have cast a shadow over the fertilizer industry due to sanctions imposed on Moscow, have also increased the importance of phosphate. These sanctions have reduced Russian fertilizer exports by 38 percent from March to September 2022 compared to the same period in 2021, and have also restricted Chinese exports after the country ceased exporting urea and phosphate fertilizers abroad until June.
Morocco benefited from the supply-demand imbalance and the ensuing record price increases. In 2022, Morocco’s phosphate exports reached approximately MAD 78 billion ($7 billion), representing a 68 percent annual increase from 2021’s level of MAD 46.6 billion ($4.2 billion).
According to the Middle East Institute, Morocco will probably keep playing a significant role in fertilizer production in the years to come. The country’s fertilizer output is projected to rise by 10 percent by the end of the year, and by a further 58 percent between 2023 and 2026. Additionally, the Office Chérifien des Phosphates (OCP Group), a state-owned business that owns phosphate mines and produces fertilizer, will see an increase in sales from 10.8 million tons in 2021 to 11.9 million tons in 2022 and approximately 15 million tons by 2023.
A Soft Power Tool: By expanding its economic presence in several African countries and taking advantage of its enormous phosphate reserves, which it views as a transit ticket to Africa, Morocco hopes to play a bigger role in Africa while bolstering its position on the international stage and pressuring African nations to support its fundamental causes. Recently, Rabat revealed that it intends to provide 4 million tons of fertilizers to support food security in Africa, after granting about 500,000 tons to African countries for free or at reduced prices this year, capitalizing on the importance of the agricultural sector not only for African economies but also for African people, with agriculture being a major source of income for African citizens due to its contribution in creating jobs for approximately one-third of the working population.
With branches in 16 countries, including Ghana, Rwanda, Cameroon, Congo, and Ethiopia, the OCP Group dominates a share of 54 percent of the African market and is thus instrumental in assisting Morocco in realizing its ambitious plan for Africa. Nigeria, the most populous country in Africa, benefits the most from the partnership with Morocco as the OCP Group meets more than 90 percent of the country’s annual fertilizer demand. Strategically, Nigeria is important for Morocco because it has the continent’s largest reserves of natural gas, a vital ingredient in the production of fertilizers. Along with exporting fertilizers, the OCP Group made sizable investments in African countries to assist them in enhancing their fertilizer production capacities and as part of its initiatives to boost the yields of 44 million farmers across 35 countries, it offered training and capacity building programs for farmers.
As such, Morocco sees the fertilizer and phosphate industry as a “trump card for foreign diplomacy” that would allow it to increase its geopolitical significance at the regional and international levels, particularly in light of the economic transformations the world is currently experiencing. Additionally, Morocco wants to present itself to the world as a country that is dedicated to preserving the stability of food security for vulnerable African countries.
• Enhancing Cooperation: Morocco used the phosphate and fertilizer industry to expand its network of trade interdependence and to increase its political and economic sway, with many countries expressing interest in Moroccan phosphate. For instance, Japan declared its intention to import phosphate from Morocco in order to improve agricultural output for the upcoming fall season. Bangladesh also made the decision to import 40,000 tons of Moroccan fertilizers, and Peru revealed plans to rely on Morocco for fertilizer supplies. Brazil, meanwhile, plans to construct a phosphate processing plant in collaboration with Morocco in order to transfer technology and boost local phosphate production.
Establishing these new partnerships would strengthen Morocco’s position on the global map for the production and export of fertilizers, especially considering that the Russian-Ukrainian conflict has contributed to strengthening of international efforts to find substitutes for the most important Russian products whose supplies on international markets have declined as a result of Western sanctions imposed on Moscow. In times of global crisis, sanctions are a well-known economic tactic that encourages importing nations to look for alternatives, creating a window of opportunity for exporting nations to seize. In the case of phosphate, Morocco is a major exporting country.
Although Morocco is working hard to reap commercial and geopolitical benefits from the phosphate industry, the extraction of phosphate and the production of fertilizer are two resource-intensive processes that present environmental and economic challenges. These challenges can be detailed as below:
• Costly Production Inputs: Input costs for fertilizer production in Morocco have risen sharply over the course of the current year, posing a challenge to the country’s ambitious plans. Despite having the largest phosphate reserves in the world, Morocco imports a significant portion of its production inputs, such as natural gas and ammonia, as the country is ranked 94th in the world for its natural gas reserves. In the first ten months of 2022, OCP’s imports of ammonia increased by 234 percent to $1.65 billion, indicating that the prices of these global inputs will have a significant impact on production costs, thereby impeding the fertilizer industry’s hoped growth.
With the record high ammonia prices, Morocco is looking into its green ammonia production capabilities in an effort to lessen its reliance on gray ammonia imported from Russia, Trinidad, and Tobago. Rabat hopes to increase production to 18.300 tons by 2026.
• Water Stress: Since water stress and scarcity already plague Morocco, the fact that the phosphate and fertilizer industry uses about 7 percent of the country’s annual energy production and 1 percent of its water production acts as a further barrier to the sector’s development. Since 2015, Morocco has actually experienced a yearly deficit in precipitation, which has resulted in a drought that left the dams only partially filled this year (about 27 percent). According to the World Resources Institute, Morocco ranks twenty-second among the countries most at risk of water shortages, with a water per capita rate of only about 600 cubic meters per year, and is anticipated to reach the “absolute water scarcity” threshold of 500 cubic meters per person per year by 2030.
To maintain the sustainability of agriculture and ecosystems, Morocco unveiled its $40 billion National Water Plan 2020–2050, which is based on the construction of new dams and desalination facilities, and expanding irrigation networks.
Based on the above, we can conclude that Morocco’s influence on the global food security issue will improve if the country can better manage its energy and water resources.
• Exacerbation of Climate Change:
Phosphate extraction and production are two polluting processes that run counter to Morocco’s goal of lowering its greenhouse gas emissions by 45.5 percent by 2030 as part of its strategy to combat climate change. In order for Morocco to sustain its rapidly expanding phosphate extraction and fertilizer production without further damaging the environment, the country must embrace renewable energy sources.
In this regard, the OCP Group hopes to invest about MAD 130 billion ($12.3 billion) over the years 2023–2027 to increase fertilizer production using renewable energy and enter the green fertilizer market, pledging to become carbon neutral by the year 2040. It also plans to power its industrial facilities with clean energy by the same year.
In a nutshell, Morocco has benefited greatly across the board from the expansion of the phosphate industry. Economically, the country took advantage of the increased export of fertilizers, capitalizing on the rising prices and demand worldwide. Geopolitically, Rabat was able to take advantage of the decline in Russian and Chinese fertilizer supplies. Nevertheless, chances are never without risks, and for the phosphate industry in Morocco to keep growing, the country will need to figure out how to overcome the challenges that have arisen this year.