Algeria to build $6 billion phosphate plant with China

Sonatrach will hold a 51% share of the project while the Chinese partners have a 49% stake.
Sunday 09/12/2018
Sonatrach’s CEO Abdelmoumen Ould Kaddour speaks during an international forum in Algiers, October 29. (Reuters)
Reaching out. Sonatrach’s CEO Abdelmoumen Ould Kaddour speaks during an international forum in Algiers, October 29. (Reuters)

TUNIS - Algeria struck a $6 billion phosphate joint-venture deal with China to build a phosphate plant in Tebessa province in eastern Algeria.

“We are witnessing the biggest economic project that Algeria has seen in more than a decade,” Algerian Prime Minister Ahmed Ouyahia said at the signing ceremony in Ouglat-Ahmed, 500km east of Algiers.

“The plant will come online in 2022, and it will create 3,000 jobs,” Abdelmoumen Ould Kaddour, CEO of state energy firm Sonatrach, said.

The project plans to expand the output of the Bled El-Hadba phosphate mine in the eastern region of Tebessa from 1 million tonnes annually to 10 million tonnes.

The deal brings together Sonatrach, Algeria’s Manal and Asmidal groups and a Chinese state-owned consortium CITIC Group Corporation Limited, which is China’s biggest conglomerate with the largest pools of foreign assets in the world.

Sonatrach will hold a 51% share of the project while the Chinese partners have a 49% stake.

“The embedded project aims at greatly upgrading the valorisation of the phosphate as a natural resource through the production of fertilisers, ammonia and several other by-products,” said Industry Minister Yousef Yousfi. He added that he expected a 4 million-tonne output of fertiliser and a 1.2 million-tonne output of ammonia per year.

Algeria, which has the third largest phosphate reserves in the world, is looking to increase phosphate production from 2 million tonnes per year to 15 million tonnes per year by 2020 and to 30 million tonnes by 2030. That would make it one of the world’s top phosphate and fertiliser exporters.

“If the project succeeds in controlling the costs and deadlines as well as quality, it will allow Algeria to have a genuine mining industry, which will be expanded gradually,” said Ould Kaddour, who is spearheading the project.

Ouyahia said the government was eyeing similar projects to tap the country’s phosphate potential. It’s one of the ways Algiers is diversifying the economy away from oil and gas, which account for 97% of total exports and 60% of the state budget.

If Algeria meets target outputs, the Maghreb would have the potential to supply the world with more than 35 million tonnes of phosphate per year by 2020. Morocco’s phosphate production capacity per year is 12 million tonnes and Tunisia produces up to 8 million tonnes annually.

More than 80% of the world’s rock phosphate reserves is in the Maghreb, with an estimated 50 billion tonnes in Morocco and more than 5 billion tonnes in the disputed Western Sahara.

Estimates by the US Geological Survey (USGS) for phosphate reserves found Morocco has approximately 75% of the world’s reserves followed by China with a share of 6%. Algeria has the third-largest phosphate reserves in the world with 3 billion tonnes, the World Atlas stated.

Under French colonial rule, Algeria was the world’s second-largest exporter of phosphate in the early 1900s when it sold abroad around 2.5 million tonnes versus the United States 3.2 million tonnes.

After independence, Algerian leaders neglected the development of the mining industry, focusing on expanding the gas and oil sector.

Global demand for phosphate has been growing steadily to meet population growth and economic and social development, which cause high demand for food. Demand for phosphate is projected to rise 2% annually and reach 49 million tonnes by the end of this decade, estimates from the UN Food and Agriculture Organisation and USGS state.

The Algerian phosphate development project was in talks for years when China stepped in, as initial deals with foreign investments. “The deal signing highlights the level of the strategic cooperation between Algeria and China,” said Ouyahia.

China has emerged as Algeria’s main import market, sending $8.3 billion worth of goods to the country in 2017, outranking Algeria’s trade with traditional partners in Europe. France saw its sales to Algeria drop 10% to $4.3 billion in 2017, while Italian and Spanish exports to Algeria fell 19.2% and 12.3%, respectively.

Algeria’s trade data for the first 10 months of this year put China as the leading exporter to Algeria with $6.4 billion, followed by France with $3.8 billion, Italy with $3.1 billion and Spain with $2.9 billion.