Key fact

Jordan is investing $120m to develop a logistics hub at Aqaba port

Source: MEED

Jordan has limited natural resources. The country is water-poor and most of its energy requirements are met by imports. Its major competitive advantage is the production of agricultural fertilisers.

The long-term outlook for the sector is positive despite a recent dip in consumption on the back of the global financial crisis. Demand is expected to rise steadily driven by population growth and reduced harvests caused by climatic change.

This is good news for Jordan Phosphate Mines Company (JPMC) and Arab Potash Company (APC), the two leading fertiliser producers in Jordan. The sale of fertiliser is intrinsically linked to food production and in 2009, sales dropped 1.6 per cent as a result of the slowdown in the world economy. The exact drop in volumes is unknown, but it is estimated the consumption of potash fell by around 35 per cent in 2009.

Infrastructure investment in Jordan

Until now Jordan’s port infrastructure has put limits on the growth of the country’s fertiliser industry. More than 78 per cent of all exports from Jordan and 65 per cent of the total imports are sent and received via Aqaba port. As Jordan’s fertiliser companies prepare to boost production, the port’s facilities will come under strain to manage the increasing volumes.

Jordanian Phosphate Mines Company (JPMC) financial indicators (JD thousands)
  2008 2009
Net sales 846,892 458,246
Net profit  238,622 92,878
Source: JPMC

JPMC and APC are addressing the issue by rehabilitating the existing industrial jetty and adding a new berth. Through a joint venture, called Jordan Industrial Ports Company, JPMC and APC have committed an equal contribution to develop and operate the logistics hub. The project is estimated to be worth $120m.

In addition, JPMC is investing $220m to build a new phosphate port.

“The upgraded terminal will cater to JPMC’s increase in fertiliser production and future production of their affiliates and subsidiaries,” says Walid Kurdi, chairman and chief executive of JPMC.   

Global demand for potash (million tonnes)
Country 2007 2008 2009
Asia 23 22 11.5
North America 10 8 2
Europe 9 7 3.5
Latin America 10 8 3.5
Middle East and Africa 1 1 0.5
CIS 2 2.5 3
Source: APC

JPMC operates in three mining locations across the central and southern parts of Jordan. The company produces up to 7 million tonnes a year of phosphate rock, making it the world’s sixth largest producer and the second largest exporter.

The firm cut production by 15.7 per cent to 5.3 million tonnes of phosphate in 2009 in response to the slowdown in consumption. Its mine at Al-Hassa saw the biggest drop in output to 492,000 tonnes in 2009, from 1.2 million tonnes in 2008.

Revenues decline in Jordan’s fertiliser sector

“The [global economic] crisis created a sense of uncertainty for farmers across the world especially in fertiliser-consuming countries due to the lack of confidence in the market and the limited access to credit. As a result, the demand for fertilisers fell sharply during 2009,” says Kurdi.

JPMC’s revenues dropped 50 per cent from $1.2bn in 2008 to $646m and net profit fell from $337m to $131m.

Local consumption of phosphates was affected only slightly by the economic downturn, but JPMC’s exports fell by 728,000 tonnes in 2009 from 3.9 million tonnes the year before. 

For 2010, JPMC expects business to rebound. New exploration studies in the company’s Al-Hassa and Al-Abiad mines are showing promise and exploration works are intensifying in these areas to determine the quality and quantity of ore present.

Earlier this year, a joint venture company was set up between JPMC and Indonesia’s Petrokimia Gresik to produce 200,000 tonnes of phosphoric acid a year, for which JPMC will supply the required rock phosphate. Construction of the plant is set to begin in Indonesia in the second half of 2010.

During the same period, the joint Jordan Al-Abyad Fertilisers & Chemicals Company project with Bahraini investors to produce potassium sulphate and phosphate fertilisers in Al-Wadi al-Abeid is expected to come on line.

“With the world population growing at a rate of about 2 per cent a year, the decrease in arable land, along with other factors such as changes in food diets in countries like China all contribute to the increased demand for fertilisers,” says Kurdi. “We definitely will experience strong growth in the sector, especially in the coming three years to a similar percentage as the population growth.”

Potash market buoyant

APC is also laying the foundations to support its future growth. The company extracts potash from the Dead Sea, which is used to produce plant fertilisers. Through its partnership with JPMC on the Aqaba port expansion project, APC’s share of the investment will provide it with two extra berths and the opportunity to expand to a third.

APC also suffered some setback in light of the economic downturn. Production fell to 1.2 million tonnes in 2009 from 2 million tonnes in 2008. The only significant growth market for the company was India, where sales hit its second highest level to date. Sales to Jordan, Indonesia, Malaysia and China in 2009 were down on 2008 figures. Egypt also witnessed a significant drop in demand for fertilisers, with volumes falling to 28,000 tonnes in 2009 from 59,000 tonnes in 2008.

In total, this translated into an almost 50 per cent drop in revenues for APC in 2009, falling to $497m from $853m in 2008.

Despite the affects of the global downturn on the international potash market, world demand for potash has been growing 2-3 per cent a year over the past 30 years and APC expects the trend to continue.

APC is expanding its potash storage facilities and improving its operational costs through a project worth $300m. The infrastructure investment will enable its production capacity to increase by 500,000 tonnes, taking the company’s annual capacity to 2.5 million tonnes of potash by the end of 2010.

“This year is looking better,” says Jafar Salem, deputy general manager for APC. “Commodity prices are lower and 2011 is anybody’s guess, but business is improving and demand is returning. We hope the new plant will be operational by September.

“The expansion will add 25 per cent to APC’s revenues, but only if it can sell its extra capacity. We don’t expect to sell all of our extra capacity this year.”

Geographical advantage

In terms of growth markets, APC has a distinct geographical advantage. “Our primary focus is India, Asia and China. These are stronger markets than Europe and the US, so we should be OK, but at the moment we do not see great potential for growth,” says Salem

APC hopes to break into the African market in the long term. “Agriculture in Africa is very backward, but a lot of companies are spending money there. We are members of the International Plant Nutritionist Institute to promote the use of fertiliser and potash. Hopefully this exposure will work for us over the next few years.”

Jordan’s fertiliser industry was hit hard by the global recession, but its geographical position meant it was less affected than other countries, with its export focus on the Middle East, North Africa and Asia Pacific regions.

The long-term outlook for the fertiliser sector is positive and key players in Jordan are investing now to position themselves for the anticipated rebound in demand and predicted future growth of the industry.