Resource-Based Industries
Israel's reputation as a country bereft
of natural resources, surrounded by a sea of oil, is not
entirely true. The Dead
Sea contains rich deposits of minerals and there are
major reserves of phosphates in the Negev desert. Together
with local technological expertise and innovative industrial
processes, these resources are the basis for a large and
sophisticated chemicals industry.
Since the 1980s, this industry has rapidly
developed its ability to extract minerals
and create high-value end-user products such
as fertilizers and pesticides, petrochemicals
and plastics. With a small domestic market,
most of the products are sold overseas; indeed,
many of the companies in the chemicals and
petrochemicals sectors are large corporations
with an increasingly global reach. In the
past five years, some $1.3 billion has been
spent acquiring foreign companies, principally
in Europe and Latin America, strengthening
the industry's marketing capacity.
In 1999, resource-based industrial exports
reached nearly $3 billion. Sales of chemicals
have tripled over the last decade, amounting
to $8 billion – some 14% of the country's
total industrial production.
Herzl's Vision
While the considerable income generated from Israel's minerals
could not possibly have been foreseen a century ago, Theodor
Herzl, the founder of modern political
Zionism, did envisage a flourishing industry based on
the mineral riches of the Dead Sea. This vision was primarily
based on the data collected by a U.S. Navy captain, W.F.
Lynch, who carried out a geological survey of the Dead Sea
region in 1848. Lynch reported that the basin - which at
400 meters below sea level is the lowest point on earth -
was rich in phosphates, potash and bromine.
However, the region's searing heat and isolation discouraged
entrepreneurs from exploiting its resources until 1931, when
Moses Novomeysky, a Russian-born industrial pioneer, persuaded
the British Mandatory authorities to grant him a license
to extract minerals from the Dead Sea. A year later, Novomeysky
opened a factory at its northern end, and in 1934 a second
plant was opened near the biblical site of Sodom. Prior to
Israel's independence in 1948, the factory was mining 8,000
tons of potash and bromine per year and employed 2,000 workers.
However, the endeavor failed even to cover its costs, and
after Israel lost control of the northern part of the Dead
Sea during the War
of Independence, the southern plant became even more
isolated.
In 1948, Israel's first prime minister, David
Ben-Gurion, decided to nationalize the operation and
to keep it running as a symbolic presence at the Dead Sea.
In the early years, the Dead Sea Works failed to show a profit,
but continued to operate until new technologies caused a
remarkable turnaround in the company's fortunes.
Dead Sea Treasures
Dead Sea Works Ltd. (DSW) is now a major
subsidiary of Israel Chemical Industries Ltd.
(ICL), a highly integrated and diversified
multinational corporation with sales of close
to two billion dollars annually, of which
75% is exported. ICL was privatized in 1994
(the government retains a 2% interest) and
is part owned by the Israel Corporation (52%),
with the rest of the shares traded on the
Tel Aviv Stock Exchange or owned by Canada's
Potash Corporation of Saskatchewan.
Situated on the site of the original plant
near Sodom, DSW has an exclusive license to
mine a range of minerals from the Dead Sea,
and manufactures a broad selection of products
for commercial use. The change in DSW's fortunes
began in the early 1980s when a new method
of increasing the concentration of potash
extracted from the Dead Sea was developed.
Potash (potassium chloride - KCl), along with
nitrogen and phosphorous, is essential for
plant growth and is thus the basic ingredient
in a range of fertilizers. By pouring extra
brine into production basins containing the
already highly salty water, the concentration
of potash in the water was raised from 2%
to 23%. In addition, the revolutionary cold
crystallization process, developed and implemented
in the 1980s, made it possible to extract
potash at moderate instead of hot temperatures,
thereby cutting energy costs. Further savings
in DSW's energy bills was achieved by the
generation of electricity from the steam given
off by a by-product of the potassium. At the
same time, computerization of manufacturing
functions, such as a conveyor belt that shifts
the potash through the mountains to a railway
line, have also reduced costs. Together, these
innovations have enhanced the natural advantage
that DSW has over its worldwide competitors,
who extract potash from under the ground.
In 1998, DSW produced a record 2.8 million
tons of potash, as well as an additional 800,000
tons of granulated potash, compacted for subsequent
bulk blending with other fertilizers. This
is achieved by a workforce of 2,200, just
10% more than it took to produce 8,000 tons
50 years ago. About 7% of the potash is exported
directly; most of the remaining amount is
sold to local fertilizer manufacturers, who
then export their products. In 1998, DSW enjoyed
profits of $50 million, of which 71% were
derived from potash. DSW's investment program
is geared to increase production capacity
in the coming years to 3.2 million tons annually.
The Dead Sea also contains magnesium salts,
which can be mined - using a unique technology
introduced by immigrant scientists from Russia
- and cast into metal (karnelite). This process
is carried out by Dead Sea Magnesium (DSM),
65% of which is owned by DSW and 35% by the
German automobile manufacturer Volkswagen.
The DSM site near Sodom, established in 1996,
is the largest industrial project in Israel.
DSM produced about 25,000 tons of magnesium
metal in 1998, the company's first full year
of operations. Magnesium is half the weight
of aluminum, far more durable, and capable
of resisting temperatures of up to 1,800°C.
Global magnesium metal consumption reached
350,000 tons in 1998, and demand for the lightweight
metal by the automobile and aerospace industry
is expected to increase rapidly in the first
decade of the 21st century.
DSW also manufactures magnesium chloride
flakes and pellets, mainly for use in de-icing,
and anhydrous aluminum chloride for use as
a catalyst in organic production processes.
In addition, DSW produces a range of cosmetic
products through its subsidiary Dead Sea Laboratories,
which is marketed under the name Ahava, as
well as chlorine-based products for water
purification. DSW also mines 100,000 tons
of table salt each year. The Dead Sea is also
rich in lithium, which could have future potential
use in the nuclear energy industry. DSW's
total sales are about $500 million annually.
Dead Sea Periclase (DSP), an additional subsidiary
of Israel Chemicals, extracts magnesium salts
from the Dead Sea for the manufacture of magnesium
oxide (magnesia or periclase), used by the
refractory industry for manufacturing steel
able to withstand the very high temperatures
and harsh conditions in furnaces over long
periods. The magnesia is extracted from the
extremely saline water of the Dead Sea (120
times saltier than regular sea water), through
a unique decomposition process developed by
local scientists. By this method, DSP produces
100,000 tons of magnesia each year, resulting
in company sales of $50 million, more than
80% of which is exported. The product is purer
than the magnesia produced elsewhere in the
world, because no external substances are
used in its manufacture. Typical purity levels
exceed 99.4% with very low contamination levels
of boron and silica. Due to this unique chemical
purity, low porosity, high mechanical strength,
high density and large crystal size, DSP's
magnesia outperforms ordinary products, and
is applied in the most severe wear zones of
furnaces, as well as in slide-gates and tap-hole
blocks.
Another major mineral extracted from the
Dead Sea by ICL is bromine. Through its subsidiary
Dead Sea Bromine Group Ltd. (DSBG), ICL produces
over 200,000 tons of bromine compounds per
year. The company's production plants near
the Dead Sea and in the Netherlands supply
33% of the world's consumption of bromine
compounds, which are used in plastics as a
flame retardant, and as organic intermediates
and monomers for specialty polymers. Bromine
compounds are also used as chemicals in water
treatment, oil drilling, the photo industry,
cosmetics, air conditioners and pesticides.
DSBG, whose annual sales exceed $500 million,
is aware of the environmental damage that
its products can cause. The company is therefore
a signatory to the Montreal Protocol of the
United Nations, conducts research to prevent
possible damage of the ozone layer and allocates
major resources to quality control.
Phosphates, Fertilizers
and Agrochemicals
Phosphate rock is mined from three sites in the Negev,
south and east of Be'er
Sheva, by Rotem Amfert Negev Ltd., another company in
the ICL Group. The company extracts minerals and manufactures
them into end products. The phosphate is mined and washed
making it suitable for the manufacture of phosphoric acid,
super-phosphates and complex fertilizers. Upgraded mining
equipment and new technologies introduced in recent years
have resulted in finer materials and increased recovery rates
for the raw phosphate. When combined with potash mined from
the Dead Sea and added to other chemicals (mainly nitrogen),
phosphates produce high-quality fertilizers. The company
manufactures P, PK, NPK and MKP fertilizers as well as NPK
fully soluble fertilizers. Rotem Amfert Negev's annual sales
of both raw materials and phosphate rock, as well as downstream
derivatives including phosphoric acid, specialty chemicals,
phosphate salts and fertilizers, amount to $720 million per
year, of which 95% is exported.
Fertilizers & Chemicals Ltd., a Haifa-based
subsidiary of ICL, manufactures a range of single and compounded
fertilizers, both as liquids and granules, earning the company
$100 million per year. It has developed over 100 products
and over 800 product formulations, which provide farmers
with a comprehensive package of fertilizers. These fertilizers
cover the full range of nitrogen, phosphorous and potassium
formulations and the company's professionals advise farmers
in their correct use. Innovative fertilizers include fully
soluble, low-nitrate and chlorine-free formulations for use
in drip irrigation systems, and a slow-release NPK fertilizer
that is released into the ground over three months.
Other major players in the field of fertilizers
include Haifa Chemicals Ltd. and Makhteshim-Agan
(MA) Industries Ltd. Owned by the U.S.-based
Trans Resources Inc., Haifa Chemicals is the
world's largest manufacturer of potassium
nitrate (KNO3). KNO3 fertilizers are completely
absorbed by plants, leaving no harmful residues
like chloride or sodium. Haifa Chemicals also
markets "fertigation" systems -
irrigation networks into which fertilizers
can be introduced. In addition, Haifa Chemicals
manufactures technical-grade potassium nitrate
for industry. These products are used in the
manufacture of glass, TV tubes, ceramics,
pyrotechnics and heat treatment salts, as
well as sodium tripolyphosphate (STPP), used
in the detergents industry. Food-grade products
are used for retaining moisture in processed
meat, preventing discoloration in processed
potatoes and ensuring the "meltability"
and "spreadibility" of cheese.
MA Industries is the world's largest manufacturers
of generic pesticides and herbicides. Created
by a merger of Makhteshim Chemicals Works
Ltd. and Agan Chemical Manufacturers Ltd.
in 1997, both owned by Koor Industries, MA
Industries has combined sales of over one
billion dollars, over 90% of which is exported.
Its shares are traded on the Tel Aviv Stock
Exchange. The company is ranked 10th globally
in agro-chemical sales, and exports a broad
range of insecticides, fungicides, herbicides,
and plant growth regulators to over 100 countries.
In recent years, MA Industries has acquired
companies in Latin America and has become
a leading player in the Brazilian agro-chemicals
market, one of the largest in the world.
Ready-to-use formulations in various concentrations
and combinations are available to suit differing
geographic and climatic conditions worldwide,
and technical-grade materials are supplied
for formulation by overseas manufacturers.
Leading insecticides include azinphos, carbaryl,
chlorpyrifos, endosulfan, monocrotophos and
methidathion. Fungicides include captan, folpet
and captafol. MA Industries is also a global
leader in the production of synthetic aroma
products for the detergent and cosmetics industries,
and manufactures fine chemicals, printing
and photography chemicals, polyester resins,
various industrial chemicals and natural antioxidants
for the fast growing nutraceuticals market.
Petroleum and Plastics
Although it has established substantial overseas
sales, Israel's oil refinery and petrochemicals
industry is not first and foremost export-oriented.
Oil Refineries Ltd. (ORL), a government-private
sector joint venture, was established to supply
the local energy market. ORL manufactures
the full range of petroleum products used
locally, including gasoline, diesel, naphtha,
kerosene, residual fuel oil (for industry),
lubrication oils and bitumen. These are produced
at its refineries in the Haifa Bay and Ashdod,
while subsidiaries produce the main raw materials
for the plastics industry. As a result of
the company's sophisticated and efficient
processes, ORL generates more than 25% of
its $2 billion in revenues from exports. ORL's
refineries have an annual capacity of 13 million
tons of crude oil. Emphasis is now being placed
on refining more environmentally friendly
products, improving the quality of gasoline
and reducing the sulfur content of unleaded
gasoline from 0.08% to 0.05%. ORL's main export
products include vacuum gas oil, which is
produced from high- quality distillates at
the company's new hydrocracker unit.
ORL's subsidiary Gadiv Petrochemicals manufactures
a range of petrochemical products (90% of
which is exported) including aromatics and
aliphatic solvents. Another ORL subsidiary,
Carmel Olefins Ltd., manufactures a range
of monomers and polymers for both the local
and overseas plastics raw materials markets.
These include ethylene, low-density polyethylene,
polypropylene and expandable polystyrene (EPS).
Israel Petrochemical Industries, also owned
by ORL, manufactures similar products including
ethylene, polyethylene, polypropylene and
polystyrene. These plastics are used in the
full range of contemporary applications used
in daily life, from greenhouses to films,
packaging to pipes, and in household utensils,
toys, furniture, fibers, threads and ropes.
Other major manufacturers produce organic
products such as PVC, EDC and VCM and inorganic
products including chlorine, caustic soda,
caustic potash, hydrochloric acid, raw materials
and intermediates for the detergent industry,
thermosetting, melamine and urea-molding compounds,
resins and adhesives, and inorganic pigments,
water-based and synthetic paints, polyurethane,
epoxies, varnishes, textured coatings and
primers.
Gift of the Nile
No oil, but it looks like there is a lot
of natural gas under Israel's Mediterranean
waters. Israeli and multinational companies
have been drilling and have come up with early
indications of huge natural gas reserves that
could power local electricity generating plants
and industry. Natural gas may sound less exciting
than oil, but as a fuel it is cleaner and
certainly no more expensive. Conveniently,
Israel discovered its first substantial reserves
just as the country was gearing up for its
first large-scale imports of gas.
While it is premature to say how much gas
there is until more exploratory wells have
been drilled, there is good reason to suspect
that it is plentiful - because neighboring
Egypt itself has huge reserves. The Nile River
contains organic matter - the basis for gas
- which is carried north through Egypt and
deposited in the Mediterranean Sea in an area
called the Nile Cone. The organic matter,
which drifts further north to Israel's coast,
is trapped by sand and pebbles, creating gas
reserves there as well.
Sources: Israeli Ministry of Foreign Affairs |