The increase rate of China? phosphorite production has outrun that of phosphorus for many
years, illustrated by their rate of 10% vs. ?7.5% in 2008. Despite this, phosphorite supply has
been strained for quite some years and is predicted to remain so in the future.
China? phosphorite reserve is about 16 ~ 17 billion tons, but only 25% of which can be mined.
The average phosphorite grade is as low as 17%. There are only 100 million MT of high-grade
phosphorite (above 30%). Phosphorite is listed by the government as one of the 20 minerals short
of demand in China after 2010. Calculating at the present consumption level, phosphorite reserve
is estimated to be depleted before 2020.
75% of phosphorite reserve is located in Yunnan, Guizhou, Hubei, Sichuan and Hunan. Of the
nation? reserve of high-grade phosphorite, 35.86% are located in Yunnan, 45.52% in Guizhou,
9.87% in Hubei, 6.82% in Sichuan and 1.91% in Hunan. Phosphorite fit for direct phosphorus
production, about 100 million MT for mining, is mainly located in Kaiyang Mine and Wongfu Mine,
both in Guizhou.
The government? closedown of small phosphorite mines in an attempt to promote concentration
of phosphorite production, has subdued phosphorite production growth. Yunnan closed down in
2008 mines each capable of less than 150,000 MT/year and plans to close down all mines each
capable of less than 500,000 MT/year before 2010. Hubei has closed down 139 small phosphorite
mines over the last few years.
The cost of phosphorite production is expected to keep growing, because of the adoption of the
system of paid-use of resources, the raise of VAT from 13% to 17%, the growing proportion of
low-grade phosphorite, etc. The upslope international phosphorite price suggests a substantial
room for phosphorite price to move up in the domestic market.
Phosphorite shipment out of the Southwest is restricted by the railway bottleneck, particularly the
shipment of phosphorite out of Guizhou where the bulk of high-grade phosphorite is produced.
The slim railway capacity is hard to be eased in the next couple of years. Though the government
sets a preferential railway transportation rate for phosphorite, the railway system seems rather
reluctant to follow the requirement.
Beijing Orient Agribusiness Consultant Limited Jan. 15 2009
Independent ? Objective ? Forward Looking Page 3 of 11
Phosphorite exports are subject to quota control in 2009 and the quota is 1.5 million MT. Therefore,
phosphorite exports may drop noticeably in 2009 from the previous year. Due to closedown of
small phosphorite mines and concentration of phosphorite production, the reduction of exports is
expected to contribute little to domestic supply.
