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The Coming Global Shortage of Phosphorus and How You Can Invest In It

What you need to understand about investing in a commodity that is facing a possible shortage in the coming future.

 

The 15th element of the Periodic Table, Phosphorus, is unlike other commodities such as oil, gold and silver. It is a non-renewable commodity with limited supply in the world. It’s a wonder that the element doesn’t get the limelight it deserves despite being essential for all living things.  With some researchers estimating the production of Phosphorus to hit maximum level as soon as 2035 and for all Earth’s reserves to be depleted in as soon as 50-100 years, should you be worrying about an impending great Phosphorus shortage?

 What Has Phosphate Got To Do With Me  

According to scientists, Phosphate deposits were formed from skeletons and decomposition from sea creatures living in the seas during the Miocene age, more than 20 million years ago. As the seas retreated, this prehistoric muck transformed over time to become phosphate rock. The minerals extracted from these rocks are Phosphorus.

Phosphorous is an element critical to life. Without Phosphorous, there would be no life.

As an essential mineral used to produce fertilisers, Phosphorus is required for the production of food. It ensures the soils are fertile and crop yields are high.

Phosphorus is also the backbone of DNA and the genetic blueprint contained in every living cell. It plays a vital role in the way living matter provides energy in cells.

Yet, it is non-renewable and has no synthetic substitute.  It cannot be replaced by another element.

phosphorus-diet-png

Source: FCA, www.gbminerals.com

Moreover, as a consequence of economic progress, arable land expansion is superseded by population growth. The only option left, is to increase agricultural production yields in the available farmlands. This in turn raises the demand for fertilizers and Phosphorous.

With a rising demand and a finite supply of phosphorus concentrated in a few key areas, phosphorus is fast becoming scarce and expensive.

Investing In Phosphorous

Given what we know now about Phosphorous, let’s find out how we can invest and profit from the rising global demand.

10 Year Price Chart of Phosphate Rock

phosphorus-rock-phosphate-monthly-price

Source: indexmundi.com

The Moroccan phosphate rock concentrate is typically used as the benchmark for worldwide phosphate pricing

There may be fears over the shortage of Phosphate globally. However, one could hardly recognize this fear from the above 10-year price chart. Prices hit a high of above $420/Ton in 2008, due largely to higher oil prices, increased demand for fertilizer and biofuels and a short-term lack of available phosphate rock. Another round of price surge occurred from 2010 – 2011, due to disruptions in the phosphate production caused by the Arab Springs. Currently, prices are at around $110/ Ton with the next support coming at around $84/Ton. Such depressed levels might be unsustainable going forward, especially when global demand is expected to rise.

A noteworthy point about the trading price of phosphate rocks is that it is less exposed to financial  speculation and therefore, tends to be more stable.

 Stock Play

As retail investors, we can invest in the Phosphate theme through stocks. For investors looking at the US market, you may be interested in these companies in the agriculture business such as Potash Corporation (ticker: POT), Mosaic (ticker: MOS) and Agrium (ticker: AUM). Though none of these companies specializes solely in Phosphate, each supply it as part of their overall product line-up.

In our local context, AsiaPhos (ticker: 5WV) is the only company listed in the SGX-ST, that specializes solely on exploring and mining Phosphate in China.  Owned and managed by Singaporeans, AsiaPhos also has the integrated ability to manufacture and produce phosphate-based chemical products.

Listed in 2013 with an IPO price of 25 cents, price has fallen 60% to its current trading price of 10.2 cents. A period where Phosphate had seen sustained depressed price levels.

According to a NRA capital research report released in 15 Nov 16, AsiaPhos has a fair value target of $0.195, which represents an upside potential of 90% from current prices. The report has given a positive rating on the stock with a classification of average-return / moderate risk.

We advise our discerning readers to exercise their due diligence before making any investments.

asiaphos

Global shortage or not, Phosphorus is a vital component in our food supply and with its commercial and industrial applications expected to increase, everyone’s active participation is needed either though sustainable efforts to reduce or recycle their individual use of Phosphorus and to invest on a rising global demand.

 

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