Agrium moved to shore up its fading supplies of the major raw material for making phosphate fertilizers even as rival PotashCorp warned over weakened prospects for supplies of the mineral.
Canada-based Agrium revealed that it would from 2013 start importing phosphate rock from Moroccan giant OCP, returning to being an importer of the basis of phosphate nutrients after more than a decade of relying on its own mine.
However it highlighted that it had had to work "diligently" for a long-term phosphate rock deal, which lasts until 2020, and includes a complex pricing mechanism which shares some risk between itself and OCP.
"The agreement… offers downside protection to Agrium in periods of low phosphate prices, and also affords OCP an opportunity to benefit from the upside when phosphate prices are strong," Agrium said.
Mike Wilson, the Agrium chief executive, said that the deal "signifies the start of a significant partnership between Agrium and OCP, offering clear benefits to both parties".
Up the value chain
It also goes against the trend for state-run OCP, Morocco's biggest company, which is planning to exploit more of the country's rich phosphate rock reserves itself.
Moroccan exports of phosphate rock are poised to decline by more than 10% by 2015 as OCP converts more itself to diammonium phosphate (DAP) and monoammonium phosphate (MAP), the phosphate types found in fertilizers, Canada's PotashCorp cautioned.
"As OCP bring on additional granulation capacity, allowing increased conversion of raw materials into DAP and MAP, its exports of phosphate raw materials are expected to decline," PotashCorp said.
Meanwhile, OCP's exports of the processed phosphate products will soar by 70%.
This climb by Morocco up the value chain from phosphate rock will mean producers without their own mining facility "being pressured", with less raw material available.
Rich deposits
Morocco, the world's top phosphate rock exporter, has the world's largest reserves of the raw material that are economically viable to extract - three times as much as second-ranked China, according to broker Ambrian Capital.
Morocco's reserves are nine times as much as America's.
PotashCorp's comments come days after US-based Mosaic disappointed investors by revealing bills rising faster than product prices at its phosphate operations, although the higher costs referred to sulphur and ammonia rather than phosphate raw material.
Agrium relied on phosphate rock from Togo before opening its own mine, Kapuskasing, in Ontario which is expected to be "depleted" by late 2013.
"The mine provided an excellent return on investment over the past decade," Agrium said.
Shares in Agrium stood 3.6% higher at Can$77.73 in late deals in Toronto, on a strong day for global stocks. Shares in PotashCorp were 3.1% higher at Can$50.45