Recently released market study: Morocco Mining Report Q2 2013

For Q213 we are sticking with our existing forecasts for Morocco's mining sector. We expect growth to speed up in 2013 as a result of new phosphate fertiliser plants in the country, rising to 8.2% year-on-year (yo- y). We expect growth to average 3.6% y-o-y from 2012 to 2017, reaching US$1.61bn by the end of the period. For 2017 we forecast a conservative growth rate, as it remains to be seen how the effect of Saudi Arabia's large investments in phosphate production capacity and China's drive towards self-sufficiency in key raw material inputs will affect Morocco's mining prospects.

The vast majority of capacity additions in coming years will be coming from Saudi Arabia and Morocco. Ma'aden in Saudi Arabia began diammonium phosphate (DAP) production in 2011 and will reach the steady-state production rate of 3mnt (mn tonnes) DAP by 2013. The Office Cherifien des Phosphates (OCP) will also be adding significant new capacity to the market between 2013 and 2015. As producers from Saudi Arabia and Morocco generally sit on the left side of the cost curve, some high-cost capacity (typically Chinese producers) who do not have access to lower-cost rock, may be displaced.

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Bucking the trend in mined minerals and metals, the fertiliser market was strong in 2012 as food and agriculture remain key needs in the global economy. Despite the sharp downturn in Chinese demand for bulk and base metals, strong demand for fertilisers, delayed expansion projects and announced plant closures led to a strong year for phosphate producers. We do not expect this market tightness to continue though as additional supply from Saudi Arabia and Morocco ramp up to full capacity. Global phosphoric acid production is expected to reach 43mnt by 2015.

Business Environment

Morocco has a well-developed mining industry. However, most of the industry remains under state control, which acts as a major limitation on potential opportunities for foreign investors. In addition, an inefficient tax regime and under-developed labour infrastructure are constraints on growth, although the situation should see improvement through the expected introduction of a new mining code in 2013. Morocco currently ranks fourth from the bottom of our Business Environment Ratings for the African mining industry, with a score of 43.2 out of 100. Outside phosphate, where the state has a monopoly, the mining industry is virtually non-existent.

On the positive side, energy and transport infrastructure is improving, following recent investments. Furthermore, the state provides mining investors with a safe operating environment alongside security of investment. Also there are a number of incentives for mining companies. These include a 50% reduction in tax for miners that export their products. There are also exemptions on customs duties and some tax exemptions for imported equipment.

Key Players

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