From rock to ration: how a feed phosphate price is formed

A feed phosphate is the last link of an industrial chain that starts in a mine and passes through two acids. At each step there is a market, a contract and a type of producer. Understanding the chain is understanding why the European price moves, and when.

A chain in five steps

The rock. The world produces about 220 million tonnes of phosphate rock a year; China mines close to 40 % of it but holds less than 5 % of the reserves, while Morocco holds about 70 % of world reserves. Not every rock suits feed: sedimentary rock carries cadmium, igneous rock carries fluorine.

Sulphur. A co-product of oil and gas refining, sulphur is consumed at 50 to 60 % by the phosphate industry. It comes from the Gulf, Russia, Kazakhstan and North America. It takes 0.33 tonne of sulphur to make one tonne of sulphuric acid.

Phosphoric acid. In the wet process, which accounts for more than 80 % of production, 3.5 to 3.6 tonnes of rock and 2.8 tonnes of sulphuric acid give one tonne of P₂O₅. That is about 0.9 tonne of sulphur per tonne of P₂O₅, the figure to remember. Merchant acid carries 54 % P₂O₅; for feed it must still be stripped of cadmium and fluorine.

The salt. MCP and MDCP are made by reacting phosphoric acid with calcium carbonate; DCP is also made from rock and hydrochloric acid, a process developed in Belgium in the 1930s to use the hydrochloric acid left over from potassium sulphate production. MCP contains 50 to 52 % P₂O₅: a 600-dollar rise per tonne of acid translates into about 300 dollars per tonne of MCP.

The ration. In France the inclusion rate of phosphates in compound feed fell from 0.53 % in 2006 to 0.37 % in 2009, then 0.29 % in 2020; consumption dropped 58 % in twenty years. Phytases did most of the work. Ruminants, on the other hand, get their phosphorus through mineral feeds, with no substitute.

Three producer profiles

Integrated producers own the mine, the acid and the salt: OCP, PhosAgro, Mosaic, partly Yara. Semi-integrated producers buy rock and make their own acid. Non-integrated producers, most European ones, buy phosphoric acid and turn it into salt. For them the production cost comes down to an acid price, a calcium price, energy and logistics.

Feed takes only 5 to 6 % of the rock mined. For a fertiliser group it is a convenient sideline: demand is stable from month to month, it smooths fertiliser seasonality, it needs no ammonia and it earns more per unit of phosphorus. That is also why feed phosphate capacity follows fertiliser investment, not feed demand.

How the price forms

The world acid price is set every quarter in the CFR India contract between OCP and Indian fertiliser producers. It is the reference for the whole chain. Acid imported into Europe by non-integrated producers normally costs 20 to 30 % above that contract: smaller lots, freight, credit, feed quality.

Sulphur is the second variable. Between March 2020 and April 2022 its FOB Qatar price rose tenfold, to 433 dollars a tonne, close to 100 dollars more per tonne of acid. In the second quarter of 2022 the average MCP contract price delivered North-West Europe went from 1,010 to 1,550 euros a tonne.

The third variable is Chinese import parity, which caps the European price when China exports. The production cost of European plants sets the floor.

What the buyer can do

Follow the Indian contract and sulphur as leading indicators; negotiate indexed formulas rather than blind fixed prices; keep the freedom to switch grade when the MCP/DCP gap opens; and compare origins per kilogram of phosphorus delivered to the plant. That is the reading grid of the weekly edition: acid contract, sulphur, Chinese parity and plant costs, side by side every Monday.