Resource extraction in potash and phosphate supports the Jordanian economy

As the seventh-largest producer of potash in the world, Jordan is producing around 2m tonnes per annum of this vital fertiliser ingredient. The country is also home to one of the world’s largest phosphate rock sectors, making minerals extraction one of the country’s top industrial sectors and a major support for the Jordanian economy.

Global competition has increased in the past decade, with the kingdom’s potash and phosphate miners obliged to find new ways to boost efficiency and gain new markets. The sector is also getting sharper at utilising its existing resources and leveraging Jordan’s strong positioning in global supply chains.

Long Pedigree

Jordan is home to more than 20 non-metallic minerals and four main metallic deposits within its 89,566-sq-km territory. Copper and iron mining has been conducted in the area now known as Jordan since the Bronze Age, although recent mining activity began in earnest in 1949, with the establishment of the Jordan Phosphate Mines Company (JPMC). The main mineral extraction industries in the kingdom have since been dominated by phosphates and potash, but also include salt, calcium carbonate, treated zeolite, treated silica and travertine.

After JPMC began operations, the Arab Potash Company (APC) was formed in 1956 and awarded a 100-year concession to exploit minerals derived from the Dead Sea region. APC in turn has a number of key subsidiaries and affiliates. The subsidiaries are the Jordan Magnesia Company, Arab Fertilisers and Chemicals Industries (KEMAPCO), the Numeira Mixed Salts and Mud Company, and the Jordan Dead Sea Industries Company. The affiliates are: the Jordan Bromine Company (JBC); the Nippon-Jordan Fertilisers Company (NJFC), which produces and markets products in Japan in partnership with JPMC and Mitsubishi; and the Jordan Industrial Ports Company (JIPC), which works with JPMC and the Aqaba Development Corporation in the expansion of export facilities at Aqaba.

APC, as the name suggests, has a multinational structure, with members of its board not only from the Jordanian government (in the form of the Ministry of Finance and the Social Security Corporation) but also the Iraqi government and the Libyan and Kuwaiti state investment authorities. The Jeddah-based Islamic Development Bank also holds a seat.

Facts & Figures

In 2014 Jordan produced a total of 2.1m tonnes of potash, according to the APC 2014 annual report. This was up from 1.7m tonnes in 2013 and 1.8m tonnes in 2012. The lead producing countries in 2014 included Canada, with 17.1m tonnes; Russia, with 12.1m tonnes; and Belarus, with 10.1m tonnes. Global production was 59.9m tonnes, up around 10%. This made Jordan the seventh-largest global producer with around 4% of the world market. Total global deliveries, meanwhile, were 59.7m tonnes in 2014, up from 53.5m tonnes in 2013.

Prices have also undergone major changes, falling dramatically since the global potash industry underwent a major convulsion in 2013. Up until then, global prices in the $20bn global potash market had largely been set by a duopoly: Belarusian Potash Company (BPC) and Capote, a conglomerate that exported product from the Canadian Potash Company and US-based Agrium Incorporated and Mosaic. In 2013, however, Russia’s Uralkali, which had previously exported through BPC, decided to exit its partnership with the Belarusians – one that had controlled some 40% of the global market. This opened potash to a price war, with Belarusian extractor Belaruskali increasing production and undercutting competitors’ prices in February 2015. In such an environment, costs are key, with depreciation of both the Russian rouble and the Canadian dollar against the US dollar meaning both groups have been able to reduce their export costs while Jordan’s potash sector has faced an increasingly cost-conscious, low-price global marketplace.

Competitive Growth

APC has clearly achieved some remarkable successes in this competitive field. In 2014, it grew its sales by 26% on 2013, up from 1.77m tonnes to 2.24m tonnes, with China more than doubling its previous year’s take and African sales up 37% by volume. China and India are the world’s biggest markets for potash, with APC’s sales to India also increasing by 46%. APC has several natural advantages to leverage. First, potash is quite close to the surface in Jordan, making the cost of extraction low. The country is also near major markets such as India and Europe, with easy access to an important emerging market, Africa. The port of Aqaba is central here, with APC working with JIPC on the construction of a new jetty. Contractors were chosen in September 2014 and completion is expected in 2016.

At the same time, APC – along with many Jordanian industries – has to contend with relatively high energy costs. While some competitors have benefitted from falling oil prices over the last year, in Jordan electricity has gone up in price, as the government has progressively phased out fuel subsides. However, according to Sheldon Fink, CEO of PBI Aqaba, energy issues can be overplayed. “The cost of energy in Jordan is not a major problem, especially when compared to energy costs of other countries with highly developed industry sectors, such as Israel and Turkey,” he told OBG The appreciation of the US dollar has also had an effect – the Jordanian dinar is pegged to the dollar, so prices of Jordanian potash have risen with it, further undercutting price advantages.

APC has taken substantial measures to ward off the negative effects of energy price hikes, however. In February 2014, the company signed a $771m deal with US company Nobel Energy to provide 2bn cu metres of natural gas from its concessions in Israel’s offshore Tamar gas field. The 15-year deal should reduce the cost of a tonne of Jordanian potash by about $15. A pipeline will deliver the gas, with provision in the deal and design for volumes to be expanded in the future. At the same time, APC has been looking into solar energy to also cut costs, while undertaking strict cost management practices in its day-to-day activities.

Phosphate Production

JPMC has been exploiting what are the world’s fifth-largest reserves of phosphate, at 3.7bn tonnes – 1.25bn tonnes of which are within the company’s concessions. With an annual production capacity of over 7m tonnes, JPMC is the second-largest exporter and sixth-largest producer of phosphates worldwide. With total capital of JD75m ($105.5m), the company has a diverse group of shareholders, including the Jordan Investment Corporation (65.66%), the Social Security Corporation (16%) and the government of Kuwait (9.3%). It also has a number of subsidiaries and affiliates, including the Jordan India Fertilisers Company, the Indo-Jordan Chemicals Company, and its stake in NJFC and JIPC. The company also has a joint venture with Indonesia’s PT Petrokimia Gresik, known as PT Petro Jordan Abad, which manufactures phosphoric and sulphuric acids and gypsum.

Phosphates have long been mined at Russaifa and Al Hassa in southern Jordan, with JPMC currently operating additional mines at Eshidiya and Wadi Al Abiad. Trains then carry much of the phosphate to Aqaba. In 2014, the company’s annual report revealed that it had produced 7.1m tonnes, up 31.5% on 2013, with 4.6m tonnes exported – 42.2% up on the total for 2013. Local consumption also increased, from 1.8m to 2.7m tonnes. A new project to build a railway line connecting Aqaba to the Eshidiya (also known as Al Shidiya) phosphate mine is also under way , with construction on the first phase of the project already started as of early 2015 (see Transport chapter).

Other Products

JBC also extracts bromine at Ghur Al Safi from the Dead Sea. Other mineral extraction industries feed the local construction sector, with limestone deposits distributed from Irbid to Maan, chalk in the Azraq basin, and travertine – a volcanic product deposited on the eastern Dead Sea rift valley – exploited by the Travertine Company. There are also large reserves of silica sand in southern Jordan and clay – both bentonite and kaolin.

Facing The Competition

The phosphate and potash sectors are crucial export earners for Jordan, with the extractive industries becoming even more central to the kingdom’s economy in the years to come thanks to shale oil. This new sector will be able to benefit from the considerable expertise already built up by the country’s miners. Going forward, cost control will likely continue to be the sector’s main concern. This will be particularly challenging, although with subsidies being reduced and gas on the way from the Mediterranean, the sector’s prospects look brighter.

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The Report: Jordan 2015

Industry & Retail chapter from The Report: Jordan 2015

The Report: Jordan 2015

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