China's reserves of phosphate rock are large but contain low concentrations of phosphorus on average. While China has vast total reserves, its high-grade deposits suitable for profitable extraction are relatively small and will run out sooner than expected based on current consumption rates. The Chinese government recognizes phosphorus as strategically important and will likely intervene to help mining companies transition to exploiting lower grade deposits, such as by further restricting phosphate rock exports, incentivizing extraction of low-grade deposits through tax policy, and increasing support for technologies to improve processing of lower grade resources.

1. 14 FARM CHEMICALS INTERNATIONAL May 2015
Peak Phosphorus:
How Will China Cope?
By Dominic Morgan
CCM
W
ith 18.8 billion tonnes of prov-
en reserves of phosphorite, the
second-largest in the world
after Morocco, it may seem strange to
discuss phosphorus depletion in China.
However, a variety of problems means
that only a small percentage of these re-
serves can be extracted for high profits
with current technology:
■ The average PO content of phospho-
rite in China is just 17% PO, well below
the global average of 30% PO, and only
1.7 billion tonnes of high-grade (≥30%
PO) phosphate rock remains.
■ Over 90% of the country’s phosphate
rock deposits contain high levels of MgO,
which can damage the yield and quality of
downstream products.
■ Most of China’s easily exploitable
deposits have already been exhausted.
Only 40% of its mines are now opencast,
and many of the remaining surface mines
are on awkward, sloping terrain that
makes extraction difficult.
As a result, although China’s total phos-
phorus reserves are vast, the country’s
high-quality deposits are relatively small
and will run out sooner rather than later.
At the current rate of consumption, for
example, China’s reserves of high-grade
phosphate rock will be exhausted by 2030.
Rising extraction costs
China’s phosphorus supply chain is
therefore faced with the prospect of dra-
matic rises in exploitation costs unless
technology can be improved.
Switching from opencast to under-
ground mining inevitably leads to in-
creased transport and labor costs, but it
is the decline in quality of China’s phos-
phate rock reserves that will hit hardest.
According to CCM’s research, a differ-
ence of just 5% in the PO content of phos-
phate rock can double exploitation costs
– for example, 28% PO phosphate rock
costs $31/t on average to exploit, while
exploitation costs for 23% PO phosphate
rock are as high as $73/t.
The beneficiation process – which is
done to improve PO content – typically
used by Chinese companies is the flota-
tion process. China has made great strides
in refining flotation techniques in the last
decade, but the process still adds an aver-
age of $28/t to the exploitation costs of
23% PO phosphate rock, for example.
The potential consequences…
and how to avoid them
The projected rises in costs associated
with switching from high-grade to low-
grade phosphate rock will hurt mining
companies badly, and much of the in-
creased costs will have to be passed on to
downstream industries.
This in turn will further undermine the
competitiveness of China’s phosphate fertil-
izers industry, which is already struggling in
the international market due to severe com-
petition from Morocco and Saudi Arabia.
The Chinese government sees phospho-
rus as a strategically important resource,
so it is likely that it will intervene strongly
over the next few years to help mining
companies manage the transition from
high- to low-grade phosphate rock.
First, the government is likely to further
restrict China’s phosphate rock exports
in an effort to slow down the depletion of
the country’s high-grade reserves. It has
already succeeded in reducing annual
phosphate rock exports from 1.8 million
tonnes in 2008 to 350,000 tonnes in 2013
through the introduction of large export
tariffs and an exports quota, but even
tougher measures may be implemented,
possibly even a ban on exports.
Moreover, the government will almost
certainly move to force the mining com-
panies to begin adapting early to an era of
scarce high-grade phosphorite. A policy
to restrict mining rights in the provinces
of Hubei, Hunan, Sichuan, Guizhou, and
Yunnan – where 75% of the country’s
phosphorus reserves are located – has
already been implemented, and this policy
is very likely to be expanded. Mining
quotas and mining zones may also be
introduced to control the exploitation of
high-grade deposits.
On the other hand, measures to incen-
tivize the exploitation of low-grade phos-
phate rock will also be crucial. The gov-
ernment is already trialing one potential
solution in Hubei – a new progressive tax
on phosphate rock mining that takes into
account the PO content of the rocks be-
ing mined. Taxes on low-grade phosphate
rock have been almost halved. However,
the difference still does not make up for
the increased exploitation costs associated
with using low-grade phosphorus, so other
incentives may also have to be used.
One effective tool could be support for
RD in the mining industry, particularly
for research into improving beneficiation
techniques. Other important areas for
research include new methods to reduce
electricity consumption in the yellow
phosphorus production process (currently
electricity use increases 400 kWh for ev-
ery 1% drop in PO content), and mining
technology to extract phosphorite from ar-
eas that are currently difficult to access. •
Editor’s note: CCM is the leading mar-
ket research and consulting solutions
provider for China’s agrochemicals
market. E: econtact@cnchemicals.com
/ T: +86-20-37616606 / www.cnchemi-
cals.com
China Report FERTILIZER
China’s high-grade
phosphate rock reserves
could be exhausted
within 15 years at current
consumption rates.
Here is what to expect.