Electric cars will drastically reduce the supply of phosphate fertilizers, says one of the world’s leading manufacturers of the crop input.
Joc O’Rourke, president of The Mosaic Company, said phosphoric acid, which is the building block of phosphate fertilizer, is starting to find its way into other industrial products, in particular the lithium iron phosphate (LFP) batteries that are increasingly being used in electric cars.
That will result in a long-term reduction in the production of a key crop input.
“What we see is declining production over time and probably a restriction of availability into the phosphate fertilizer market,” he told investment analysts listening to a conference call about the company’s third quarter 2021 financial results.
In particular, he forecasts a reduction in shipments out of China, which is the world’s leading exporter of the product.
Jenny Wang, vice-president of global strategic marketing with Mosaic, said the increasing demand for LFP batteries is one of the drivers behind China’s rapidly changing phosphate industry.
This year alone, 300,000 tonnes of purified phosphoric acid has shifted out of agricultural fertilizer production and into the LFP market. That equates to about 500,000 tonnes of lost diammonium phosphate (DAP) fertilizer production.
She said this is just the start of a lasting trend that will “profoundly change” China’s phosphate industry but will also have reverberations around the globe, especially in the United States.
Tesla recently announced that it is in the process of switching all of its standard range vehicles to LFP batteries globally. The company is working with other parties to build LFP factories in the U.S.
O’Rourke said that has prompted Mosaic to conduct research on how it too can create purified phosphoric acid for that emerging market in the U.S.
StoneX fertilizer analyst Josh Linville said the situation deserves careful monitoring.
“It’s going to become a battle and let’s face it, fertilizer manufacturing isn’t exactly sexy. Lithium is,” he said.
But he is currently more concerned about China blocking phosphate exports through June 2022 in an effort to ensure its own farmers have access to the input.
China is responsible for one-third of the world’s exports of DAP and MAP phosphate products, amounting to 4.6 million tonnes per year. That is a lot of phosphate that is suddenly out of the market.
“It’s a very, very big deal,” he said.
Linville has also read reports that India’s phosphate stocks have plummeted to 2.1 million tonnes, down from 6.6 million tonnes two years ago.
“There are videos of farmers who are raiding retail locations and there are reports of Indian farmers committing suicide because they cannot get the phosphate,” he said.
The other big news in the market is that U.S. farm groups have asked the U.S. Court of International Trade to overturn a decision by the International Trade Commission to impose a 19 percent tariff on imported phosphate from Morocco.
“Farmers are feeling the pain from these tariffs,” National Corn Growers Association president Chris Edgington said in a news release.
Mosaic is the company that lobbied for the duties on imported product from Morocco and Russia.
The NCGA says Mosaic’s control of the U.S. phosphate market has grown to more than 80 percent and the company is gaining “near-monopoly” control of the market.
“Farmers pay the price when input companies monopolize a market,” said Edgington.
“To get our job done and keep prices reasonable, we need quick access to fertilizers from multiple companies, including those outside the U.S.”
