Agrium (TSX:AGU,NYSE:AGU) saw its share price lose $0.40 by market close on Thursday (May 18) on news that a phosphate rock shipment from Morocco’s Office Cherifien de Phosphate (OCP) has been delayed.
According to Reuters, the 55,000-tonne shipment was aboard a Dutch charter ship called Ultra Innovation and was destined for the Port of Vancouver. But under a maritime court order instigated by Western Sahara’s Polisario independence movement, it was held in Panama on Wednesday night (May 17).
Western Sahara is disputed territory between Polisario and Morocco, but last year a European court ruled that Western Sahara should not be considered part of Morocco in EU and Moroccan deals. OCP mines phosphate in the Moroccan-held part of Western Sahara, and Polisario officials have claimed that its shipment to Agrium is illegal.
Agrium issued a statement saying that it is working with Ultrabulk, the owner of the charter ship, to resolve the situation. The company uses phosphate rock to produce fertilizer at a facility in Alberta, but does not anticipate any interruptions there.
Todd Coakwell, Agrium’s director of investor relations, also said that the company conducted an independent assessment in 2016, and determined that buying from OCP would not lead to negative human rights outcomes in Western Sahara. Coakwell added that it would be “difficult” to find a new supplier in a short-term period.
According to a 2016 report from Western Sahara Resource Watch, Canada’s Agrium and Potash Corporation of Saskatchewan (TSX:POT,NYSE:POT) are the dominant importers of phosphate from Western Sahara. Yara International (OTCMKTS:YARIY) and Mosaic (NYSE:MOS) have stopped importing phosphate from Western Sahara in recent years due to investor concerns.
US Geological Survey data shows that Canada is not a major producer of phosphate, but some firms see potential in the industry. For example, Arianne Phosphate (TSXV:DAN) has completed a feasibility study for its Lac a Paul project in Quebec and has gained government permits.
Wednesday’s disruption is not the first time a phosphate rock shipment from Morocco-controlled territory in Western Sahara has been delayed. The Marshall Islands-flagged Cherry Blossom ship was stopped at a port in South Africa earlier this month.The vessel was transporting 50,000 tonnes of phosphate rock to New Zealand for Ballance Agri-Nutrients. The company said at the time that it had been importing phosphate from OCP without a problem for 30 years.
Days after the Cherry Blossom vessel was detained in South Africa, one New Zealand-based phosphate firm was quick to make a pitch for buying local.
Chatham Rock Phosphate (TSXV:NZP) Chief Executive Chris Castle said, “New Zealand needs to use its own source of ethically-produced, environmentally-friendly phosphate rock rather than importing product from a disputed territory.” The company has a mining permit for a marine rock phosphate deposit called Chatham Rise. Castle said phosphate rock from Chatham Rise has among the lowest known levels of cadmium.
“To put it in a nutshell, Chatham offers a secure, ultra-low cadmium supply of rock phosphate — with no associated ethical baggage,” he said. Chatham Rock Phosphate’s share price was up 12.94 percent at market close on May 18.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.