Chakib Khelil, minister for energy and mines, has announced ambitious plans to increase Algeria’s phosphate production, generating valuable additional export revenue for the state, and creating up to 50,000 jobs.
Speaking at a mining conference in Algiers in December, Khelil told assembled guests Algeria was “open for business.”
“We have placed Algeria on the world map as a prominent player in the mining sector,” he added.
Algeria currently produces just less than 2 million tons of phosphates a year. Ferphos, the state phosphate mining company, has hopes to increase exports to 4 million tons by 2010, and eventually 30 million tons by 2020. This would see Algeria become the third largest phosphate producer in the world, after the US and China.
Phosphate production in Algeria has more than doubled in the past six years following a decline in the mid-1990s. Given the current high price of minerals in the market, investment in the sector is increasingly attractive. Should Ferphos meet its 2020 target, phosphate sales could generate $7-8 billion a year for the state.
In an interview with local press on October 22, Lakhdar Mebarki, CEO of the Ferphos Group, said early indicators for Algeria’s phosphate industry were encouraging.
“With the exports already carried out we confirmed that there is a good place for Algerian phosphate on the international market,” he said.
However, Mebarki added that it was difficult for Ferphos to establish an international presence, with competition becoming increasingly fierce.
Increasing capacity for higher output
Ferphos is already well on the way to answering Khelil’s call to boost output. With an estimated 2 billion tons of reserves, Algeria’s main limiting factor in output is currently infrastructure. To keep to its schedule of doubling output by 2010, the company has announced plans to build a new processing plant at Bouchegouf, 450 km east of Algiers, with the capacity to turn out between 2 million and 3 million tons of phosphates a year.
Further down the track, similar facilities will be established at Mdarouche, while a third plant, with an annual capacity of 12 million to 14 million tons to be built in Jijel, some 350 km east of the capital. All the processing facilities will be located close to the massive Djebel Onk mining complex, in the province of Tebessa.
A further challenge is transportation infrastructure. The existing rail lines serving the regions where Ferphos currently operates do not have the capacity to meet the company’s freighting needs. According to local press, Ferphos can only transport 1.2 million tons of phosphate by rail each year, and had to establish its own road freight subsidiary to haul the additional 800,000 tons it produces. The port of Annaba, through which Ferphos makes most of its exports, is also in need of an upgrade. The port’s facilities will be hard put to handle the 2 million tons of exports expected, let alone the 4 million tons projected in just two years’ time.
However, the announcement on December 15 that the government intends to spend $18 billion on upgrading the country’s rail network, including the opening of a new line in Tebessa, will go some way to easing Ferphos’s concerns about land haulage.
Even at full pelt, Algeria’s phosphate reserves should last another 65 years. However, to maximize value from this finite resource the government is also looking to diversify the industry vertically. The Bouchegouf facility will not only be used to extract raw mineral phosphates, but will also have the processing capacity to turn the material into fertilizers, adding value to export sales. Having received initial approval for the project by the Council of State Participation, Ferphos is now waiting for final clearance to create a joint venture with a foreign partner.
Phosphates have the potential to further improve Algeria’s trade balance. However, the government would do well to proceed with caution. As history has too often demonstrated, national wealth garnered from resource extraction — be it phosphates, oil, or even remittances from overseas nationals — can have a deleterious effect over time on a nation’s wider economic development. Signs of this “curse” can already be found in Algeria: the World Bank’s Doing Business 2008 ranking, published this month, sees the country dropping to 131st — the only Maghreb country to witness a slide. If Algeria wants to translate natural wealth into national wealth, it will have to work harder on reforming its economy.
