Aloe private equity

 Phosphorus is a vital component of every cell in all living organisms. It functions as one of the major players in the process of photosynthesis, nutrient transport, and energy transfer. Phosphorus also supports the healthy reproduction of cells and living bodies. As a matter of fact, Phosphorus is the second most abundant mineral in the human body. Actually it’s pretty simple, without Phosphorus there is no life.

Along with Phosphorus, the other key elements in (plant) life are potassium and nitrogen. We have enough potassium to last several centuries (although BHP Billiton’s acquisition of Athabasca Potash for USD320 million in January 2010 and it’s recent USD39 billion bid for Potash Corp. highlight the already growing concern over long term potassium supply and speculations on potassium prices) and 78% of our atmosphere is nitrogen. Phosphorus on the other hand, is a much different story.

Some scientists place peak Phosphorus back in the late 1980s. Others have placed it towards the end of the century. There is no converging point as a lot of the differences depend on assumptions regarding future discovery of reserves. I believe a good average peak phosphorus hypothesis is the one portrayed in the curve below.

 What has been agreed though, is that future reserves will likely require more capital to mine than the ‘easy phosphorus’ accessible today. This bears a striking resemblance to the oil curve and as oil prices over the last 4 decades have shown, markets can tighten long before a given resource is anywhere near its end. What makes it more worrying is that despite the world’s dependence on oil, it is not essential to life. Moreover, Phosphorus reserves are even less evenly distributed than oil’s, raising additional supply concerns and emphasizing the geopolitical tensions the depleting resource could initiate and encourage. Indeed, the world’s largest Phosphorus producer is China, followed by the U.S. (although 65% of its production comes from a single source in Tampa, Florida, which may not last more than a few decades). Meanwhile, c. 40% of global reserves are controlled by one country, Morocco. These three players together control almost all of the world’s supply.

Although more Phosphorus reserves are likely to found, the cost of mining from lower grade deposits or less accessible locations will increase the resource’s value, thereby inflating crop prices and hence food prices. With an exponentially growing population (i.e. an exponentially growing demand for phosphorus) and a greater disequilibrium in the distribution of wealth, the depletion of Phosphorus is likely to have far reaching social consequences. Growing applications of Phosphorus such as Lithium Ion batteries and biofuels will add to the stress.

Phosphorus is mainly taken out of the ground through biomass (crops which ultimately serve to produce energy), erosion, and water flows (eventually finding its way into our oceans). Furthermore, the ‘food chain’ of Phosphorus is extremely long and fragmented. This poses a significant challenge in recuperating it. The good news is that Phosphorus being an element, if it is not light enough to escape our atmosphere and it is not decaying, it is always here. It should be possible to relocate it, regroup it, and bring it back to its elemental form in the aim of reusing it.

The real question is then: at what cost?