MENA Phosphates Hold Promise as Global Demand Rises

MENA Outlook Quarterly
MENA Phosphates Hold Promise as Global Demand Rises

Our quarterly regional theme analyses the performance of the phosphate industry in the MENA region and its growth potential in different countries.

  • Parts of MENA are brimming with phosphate reserves that the world needs -- enough that the idea of a cartel has even been floated in the past -- but as is common across the region, politics get in the way of development.

    • Cartel-like groups have been formed previously but have failed, in part because they drove prices too high.
    • It is unlikely that the region will form an OPEC for phosphates, but this does not mean there is not some price-setting power nor plenty of scope for dominating the sector.
  • North Africa boasts the world’s richest reserves, most of which are located in Morocco, but Algeria and Tunisia have significant untapped potential.
  • In the Levant, Jordan has been ranked as the world’s fifth largest producer and the second largest exporter of phosphates. Its reserves stand at an estimated 1 billion metric tonnes (BMT).
  • In the GCC, Saudi Arabia holds several undeveloped phosphate rock deposits, located in the northern part of the country.
  • Despite barriers, MENA producers have considerable growth opportunities.
    • Global demand is expected to rise to 50.5 million metric tonnes (MMT) MMT by 2022 from 47 MMT in 2018, according to the US Geological Survey, which says there is sustained supply (dismissing talk of “peak” phosphate).
    • Saudi Arabia could become a more influential player in the global phosphate market not just by boosting production, but by taking advantage of higher fertiliser demand and expanding in the value-chain to boost market share in key growth markets in sub-Saharan Africa.

In its April 2019 Regional Economic Outlook, the IMF revised down its 2019 growth forecast for MENA to 1.3% from 2.5% estimated in October. This would be slower than 2018’s 1.4%.

  • Oil exporters are expected to bear the brunt of the slowdown, but the overall outlook for MENA is in line with wider global trends that include risks from slower trade disputes.
  • While the IMF expects oil prices to average around USD 59 pb in 2019 and 2020, down from its October projections of above USD 65 pb, our view is that the price will remain closer to USD 65 pb.
    • Oil exporters would naturally be the worst hit if the IMF lower forecast were met.
    • Note that the IMF report was compiled before the recent rise in US-Iran tensions that has boosted oil prices mid-year.
  • While most MENA economies are still growing, a few are sliding further into recession, notably Iran.
    • The Iranian economy is forecast to shrink 6% this year versus a 3.6% contraction predicted in October 2018, as US sanctions bite. This would be its worst performance since it shrank by 7.7% in 2012. Continued fractious relations with the US, regional geopolitical tensions, and vulnerability to oil price swings are other downside risks to Iran’s outlook.
  • Political unrest is flaring in Algeria, fuelled by election delay, potentially taking a toll on the country’s growth.
    • The key variable will be the protest movement and how savvily
      it challenges any political deals that the interim government
      might offer.

But the probability of a mistake by the army or the opposition
is greater than it is of them agreeing on a good roadmap.

 

Florence Eid-Oakden, Ph.D, Chief Economist
Charlene Rahall, Robin Mills, Roa Ibrahim & Mingqiao Zhao, Analysts

 

The MENA Outlook publication presents Arabia Monitor’s insights on global markets, outlines and analyses regional future trends and defining themes, and then focuses on individual country macroeconomic views. Each publication is laid out in a concise bullet point format and features a Special Feature interview with regional leaders including central bank governors, ministers and executives.

To access the full report, please click here.

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