From today’s Lloyds List, another pawn:
WITH CHINA’s help, Algeria is seeking to turn its economy in a new direction. Faced with declining revenues from hydrocarbons, the North African country is turning to its phosphate mining sector and developing the infrastructure needed to support the new venture.
Phosphates are at the heart of a new, $6bn agreement signed by Abdelmoumen Ould Kaddour, chief executive officer of Sonatrach, Algeria’s national oil and gas company, and Chen Xiaojia, chairman of China’s CITIC Construction.
The agreement, which envisions exports rising to more than 10 million tonnes per annum in 2020 from the current 1.5mtpa, builds on earlier plans of the North African country to develop its road, rail and port facilities to support the increased throughput.
Officials said the project’s funding will be focused on four main areas of the country, including El-Hadba ($1.2bn), Souk Ahras province ($2.2bn), Skikda province ($2.5bn), and the port of Annaba ($200m) [See Map].
In accord with Algerian investment law, the project will see Sonatrach and state-run fertilizer manufacturer Semidal-Manal, taking a 51% stake in the project, while CITIC and phosphate mining giant Wengfu Group Co Ltd take an estimated 49% stake.
Representatives of the consortia are scheduled to meet again in December to complete a shareholder agreement, state media reported.
The Algeria deal “is exactly in line with China’s shifting strategy on trade,” said Even Pay, a senior agriculture analyst with Beijing-based advisory firm China Policy. “China will be happy to have more of these fertilizers on the global market. China wants to move up the global value chain, that is, providing the capital, technology and expertise to produce phosphate fertilizer elsewhere,” she added.
Meanwhile, the new focus on increased exports of phosphates follows from the widespread recognition that Algeria’s oil and gas export revenues are on the decline, while its mining sector, especially of phosphates, is on the rise.
“Algeria’s status as a major hydrocarbons exporter will face mounting pressure over the coming decade as maturing fields, insufficient investment in exploration activities and continuously increasing domestic oil and gas demand weighs on export volumes,” Fitch Solutions said in its Algeria Petrochemicals Report, Q1 2019 .
By contrast, Algeria’s mining sector — especially its phosphate mining — is seen as an alternative to the declining revenues of hydrocarbons. More to the point, phosphate mining can boost Algeria into the league of top world exporters.
“Iron ore and phosphate rock are currently the only minerals that are being produced in the country on a large scale,” the Oxford Business Group said. “New projects in the pipeline or under consideration should see output of both increase dramatically in the future,” OBG said. “The country is set to become one of the leading international producers of phosphate by 2021,” it said.
Algerians are well aware of the trends — down in hydrocarbons and up in phosphate mining. Indeed, at the signing of the agreement with China this week, Mr Kaddour said: “The sharp fall of oil prices forced Algeria to adopt a new strategy that is based on diversifying its oil-dependent economy, and this mega phosphate project is a big step towards reinforcing this strategy.”
But Algeria’s strategy also includes transportation, according to OBG.
“In addition to development on the production side, efforts are under way to enhance the logistical environment for miners,” OBG said. “A number of major rail infrastructure projects are under construction or consideration around the country as part of efforts to facilitate the development of the sector,” it said.
As early as March this year, the Algerian government allocated $438m for phase one of a project to upgrade the railway between Bir Ater and the port of Annaba. The railway will have the capacity to transfer 10mtpa of phosphate from the Djebel Onk and El Habda mines near Bir Ater to processing plants near Souk Ahras and Skikda.
In June, the government also announced plans for new or upgraded railways and ring roads to be built in connection with the port centre of El-Hamdania, 70 km west of Algiers [See Map].
Describing the new port as having a 20-metre draft, officials said it would serve as a transshipment centre, able to handle 6.5m teu a year and 25.7m tonnes a year of general cargo. Development of the port project is scheduled to begin this year, with completion expected by 2025.
When operational El-Hamdania [below] could compete for transshipment traffic with Tanger Med port in Morocco as well as with southern European ports, such as Spain’s Algeciras and Italy’s Gioia Tauro.
A related project involves upgrading a highway to Algeria’s southern border from El-Hamdania that would also enable the port to compete with ports in West Africa by taking containers more quickly to landlocked countries in the sub-region such as Mali, Niger and Chad.
Implementation of the El-Hamdania port project is to be undertaken by a 51%-49% partnership between Algeria’s Public Port Services Group along with China State Construction Corporation and China Harbor Engineering Company. Officials said the $3.3bn port project would be financed under a long-term Chinese credit.