After years of being a powerhouse producer of phosphate rock, production is slowing down to the point where the question is being asked: will it swing to being an importer?
At the turn of this century, China produced 20.2 million tonnes of phosphate rock, exporting 3.5 million tonnes of it according to CRU Group.
By 2015, it was producing 92.8Mt.
Given China’s large population, the rationale for keeping most of its phosphate makes sense.
Phosphate rock can be a key ingredient in fertilizer, and with China keen to feed its burgeoning middle class, more fertilizer was required.
But since the heady days of China’s phosphate rock production apex in 2015, production is estimated to have plunged 8 percent year on year to 79Mt.
The reduction in production is thought to be down to the increasing cost of production, largely thanks to environmental regulations in the country, and the lower quality of rock being dug up.
It’s now to the point where the cost of production in China, historically low, is now roughly the cost of production overseas.
This market dynamic could open the door to emerging players, for the first time, to access the Chinese market.
Companies such as Centrex Metals (ASX:CXM) could be well-placed to take advantage.
Phosphate rock from its Ardmore project in Northern Queensland has a high average grade of 34-35 percent of P2O5 — giving it a competitive advantage over rivals.
Typically speaking, phosphate rock has grades of between 27 per cent and 34 per cent depending on the end use.
At full production the project will produce 800,000 wet tonnes each year for an initial 10 years — with a startup plant due to roar into life this year — making it well-placed to meet market shortfalls over the next few years.
This content is produced by Star Investing in commercial partnership with Centrex Metals. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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