News And Updates
King of Rock
Published By: Forbes.com
Most royals may have to be a bit thriftier this year as fortunes plummet, but it's not so for the King of Morocco, Mohammed VI, whose 12 palaces reportedly cost $1 million a day to operate. His net worth is up $1 billion this year to $2.5 billion, making him the only one of the world's 15 richest royals to have added to his fortune in the past year.
His savior is his country's near monopoly of the commodity Phosphate. A key component of fertilizer, phosphorous, mined in the form of phosphate rock, is essential to global food production. "You cannot survive without phosphate--every cell on your body depends on it," says Michael Lloyd, research director at the Florida Institute of Phosphate Research.
Morocco controls to nearly half the world's phosphate deposits. Last year, the North African nation mined 28 million metric tons of phosphate rock, making it the third-largest producer in the world, behind China and the U.S., and the single biggest supplier. Proceeds from phosphate mining make up roughly half the country's revenues.
It is a profitable business. The state-owned phosphate monopoly, Office Cherifien des Phosphates (OCP) raked in an estimated $2.8 billion in net profit last year, a ninefold increase from the prior year, thanks to a surge in phosphate prices, which hit an all-time high of $500 per ton in July 2008, five times the 2007 average and more than 12 times the 2006 average.
The king himself rarely talks about phosphates, preferring instead to focus on socially progressive issues like women's rights and standard of living. He created a new family law granting women more power and recently launched a $6 billion initiative to build housing for Morocco's urban poor. But he does get a portion of the profits and almost certainly has a hand in the OCP's business, particularly its admitted use of "dominance" in influencing phosphate's price spike.
"That's one thing you have to face: The Moroccan fertilizer industry is run by the government," says Lloyd. "In the 1970s you could get phosphate for $4. Then one day they just decided to raise the price to $20." Another analyst blamed last year's high prices on the OCP's maneuvers, though soaring agricultural demand and tightening supplies were certainly factors as well.
So far this year, recessionary pressures have pushed prices back below $200, but still enough for the King Mohammed VI to move up one notch to No. 7 among the world's richest royals. (See our full list of the top 15 here.)
The Moroccan monarch who took over from his late father Hassan II in 1999 and is only 45 years old could climb much higher in the ranks, thanks to the scarcity of his precious rocks.
Though phosphate occurs naturally in soil, the world's growing, hungry population requires more than Mother Nature provides. The U.S. expects to exhaust its reserves within the next 40 years. Already, two of the leading U.S. fertilizer firms, Mississippi Phosphates and Agrifos Fertilizer, procure their phosphate rock from OCP. Morocco's reserves, the most extensive in the world, will be tapped out within the next century.
There are also political threats. Although Morocco under King Mohammed VI is overall fairly peaceful and pro-Western, about one-sixth of its phosphate hails from the Western Sahara territory. Morocco annexed the 100,000-square-mile former Spanish colony in 1975 despite competing claims to the region by Mauritania and an Algerian-backed independence movement.
Ongoing guerrilla warfare between Moroccans and the pro-independence nationalists ended after a U.N.-brokered ceasefire in 1991, but the region is still considered an occupied territory. Morocco's plan to expand phosphate production in the region has come under fire from human rights activists and prompted nationalists' threats to breach the ceasefire.
And activists aren't the only ones who should be concerned about turmoil in the resource-rich region: No more phosphate means no more fertilizer, a dire problem for global food production. But unlike oil, which has substitutes like biodiesel or propane, "there is no alternative to phosphorous," says David Vaccari, an engineering professor at Stevens Institute of Technology.
He calls the impending phosphate shortage "the sleeper issue of our time."