Grade deflation

In the late 1970s, the average phosphate rock grade was 33% P₂O₅. By 2024, the largest share of rock production fell under 29.5% P₂O₅. Phosphate rock grades have therefore been decreasing over time, an issue exacerbated by the recent fall in P₂O₅ levels in rock concentrate from China, the world’s largest phosphate rock producer.

Underlying the long-term grade decline has been a fall in the production of medium-grade rock globally. At the same time, high-grade rock production – which has fluctuated over time – remains limited.

More trade in lower-grade

The traded rock market tells a similar story. Lower-grade rock is far more available than it was 30 years ago, while the diminishing availability of higher-grade rock has been exacerbated by the withdrawal of Russian tonnes since 2022.

Medium-grade rock has seen the largest decline, with rock grading 31.4–33.4% P₂O₅ falling in availability by almost 80% compared to 2004 levels. At the same time, exports of rock with a P₂O₅ lower than 29.8% have undergone an almost threefold increase.

These changes in the grade mix have been a key driver of phosphate rock prices over the past four years.

Before 2022, price differentials between rock grades were largely stable over time. Since the price peaks of 2022-23, however, the premium attached to medium- and high-grade rock has remained elevated, despite falls in absolute prices. This is directly linked to changing availability.

Moroccan rock has retained the largest relative premium among all benchmarks, while lower-grade benchmarks like Egypt and Algeria have returned closer to historical trends. This also relates to OCP’s change in strategy: the Moroccan producer is capturing more of the inherent P₂O₅ value in its rock by prioritising downstream production over phosphate rock exports.

Sulphur and phosphate rock cost parity

In countries such as India, phosphate rock has historically accounted for the largest share of the cost of producing phosphate fertilizers. The recent rally in sulphur prices has brought the cost of both raw materials – sulphur and phosphate rock – close to parity, resulting in significantly higher phosphate production costs and decreasing margins.

The combination of higher sulphur prices and higher rock consumption, to account for decreasing P₂O₅ content, is proving extremely damaging for phosphate producers, especially in countries that purchase rock such as India. As a result, margins have been largely negative over the past five months.

Importantly, the decreasing P₂O₅ content of phosphate rock not only increases the amount of rock necessary to produce downstream fertilizers – it also increases the sulphur requirement. That is because the calcium content of rock tends to increase as P₂O₅ content drops, requiring higher sulphuric acid consumption.

Acid intensity – defined as the tonnes of sulphuric acid required to produce one tonne of diammonium phosphate (DAP), monoammonium phosphate (MAP) or triple superphosphate (TSP) – has trended upwards in recent years, rising from an estimated 3.7 tonnes in 2010 to 4.3 tonnes in 2025.

This increase has been driven largely by the acid consumption of China’s phosphate industry, which accounts for 38% of global demand, with the country’s acid intensity rising from 2.9 tonnes to 4.0 tonnes over the period 2010-2025.

Exports of lower-grade ore to rise

Should current trends persist, CRU estimates that sub- 31.5% P2O5 rock will account for more than 80% of global export supply by 2040, with rock grading below 29% P2O5 accounting for approximately half of this.

Over the coming decades, CRU expects this trend to drive greater sulphuric acid consumption and increase demand for phosphate rock in downstream fertilizer production. Acid intensity is also expectedto continue its upwards trend, with the global average forecast to reach 4.7 tonnes by 2030.

These market trends look set to place significant upwards pressure on acid intensity and input costs for non-integrated phosphate fertilizer producers in particular. Phosphate rock producers, meanwhile, are expected to retain higher-grade rock domestically as a hedge against future sulphur price volatility.

Exports of lower-grade ore to rise

Should current trends persist, CRU estimates that sub-31.5% P₂O₅ rock will account for more than 80% of global export supply by 2040, with rock grading below 29% P₂O₅ accounting for approximately half of this.

Over the coming decades, CRU expects this trend to drive greater sulphuric acid consumption and increase demand for phosphate rock in downstream fertilizer production. Acid intensity is also expected to continue its upwards trend, with the global average forecast to reach 4.7 tonnes by 2030.