World's biggest phosphate exporter considering quotas

Phosphate is a key ingredient used in fertiliser production. Without phosphate fertilisers, crop yields worldwide would be unable to keep up with agricultural demand.

To put it bluntly, global food supply chains need phosphate.

And China is moving quickly to curtail the supply of phosphate as an export product - with potentially far reaching consequences. The following Reuters article details how China makes up ~30% of global exports, and the move could have significant implications for the world's agriculture industry.

Read the full article here.

Below are our key takeaways:

• China is expected to implement a quota system to limit exports of phosphates, a key fertiliser ingredient, in the second half of this year.
• The quotas aim to reduce domestic food prices and protect food security while global fertiliser prices are hovering near record highs.
• China is the world's biggest phosphate exporter, shipping 10 million tonnes/annum (~30% of global supply). Fertiliser analyst Gavin Ju (CRU Group) said the quotas were for ~3 million tonnes of phosphate in the second half of the year. That would mark a 45% drop from China's shipments of 5.5 million tonnes in the same period a year ago.
• Analysts said that export restrictions would support high global prices, even as they weigh on demand and send buyers looking for alternative sources.

Our view is that with the world's biggest exporter of phosphate fertiliser products cutting back on exports, the need to diversify supply chains and seek alternate supply sources will become much more important.

China currently accounts for ~30% of global supply, so any reduction in exports will make the market even tighter than it already is and will increase prices.

The fallout from this is a potential global food security crisis.

We think the markets will eventually catch onto this, and capital will pour into potential new supply sources.

Our food security and green hydrogen/ammonia investment Minbos Resources (ASX: MNB) is developing its phosphate (fertiliser) project in Angola, alongside a green hydrogen/ammonia plant.

To see all of the key reasons we are Invested in MNB, what we want to see the company achieve in 2022, and the key risks to our Investment thesis, check out our 2022 MNB Investment Memo here.