Because we do not plan to commence mining operations at Baitacun in the foreseeable future, we have not yet completed a study to determine if it has SEC Industry Guide 7 compliant reserves.

For additional information, see “Item 4. Information on the Company—D. Property, Plants and Equipment—Concessions and Mining Rights.”

Any inaccuracyor inaccuracies in our estimates related to our existing mineral reserves and non-reserves mineral depositsresource reserves could result in lower than expected sales and/or higher than expected costs.

costs and may have a material adverse effect on our business, financial condition and results of operations.

report, the building permits for the Salt Harvesting Project and the P-9 pumping station have been received and the construction work has commenced.

For more information about

which includes, among others, the construction of a special dredger that is designed to execute the salt harvesting. The dredger is expected to enter into service towards the end of 2019.

With respect to National Infrastructure 35A, which includes theinfrastructure companies for construction of the newP-9 pumping station, failurestation. The P-9 Pumping Station is expected to commence its operation during the year 2020.

operations.

In addition, any significant disruption in the array of transportation to the seaports and between various sites, primarily through trains and trucks, might materially and adversely affect the Company’s operations, its financial condition and results of operations.

assets.

ICL, DSW and Rotem filed a petition against the decision of the Electricity Authority contending that the decision suffers from significant flaws. On January 23, 2017, the Supreme Court sitting as the High Court of Justice issued a conditional order against the State of Israel with reference to the “retroactive” charges.plant in Sodom became operational. The State was required to submit its response affidavit in connection with the retroactive charges for 2013 and 2014.

In addition, thenew power plant is fueled by natural gas.

Constructionproject’s budget, may even jeopardize completion of the Station was expected to be completed inproject altogether, and could adversely and even materially affect the second half of 2015. In 2015, the executing contractor (the Spanish Company "Abengoa") experienced financial difficulties. In October 2016, the Spanish court approved a debt arrangement between the executing contractor andCompany’s business, its creditors which permitted continuation of its activities in the power station project. In light of that stated, the Company expects to complete the construction and to commence operation of the Station in the first half of 2017, with additional costs that are not material.

Delays in the completion of construction works are expected to continue having an adverse effect on our energy expenses and access to a reliable energy supply at the Sodom site, which may adversely affect our business, financial condition and results of operations.

In addition, in September 2016

A detailed agreement has been signed by Israel and Jordan, triggering the first stage of the Red Sea-Dead Sea Canal. The project includes construction of a desalination plant in Aqaba and transportation of the desalinated water to Jordan and to Israel. The brine will be pumped into the Dead Sea. Under the agreement, water exchanges will take place, and the Jordanians will be able to receive water from Israel. The facility will initially pump 200 million cubic meters a year from the Red Sea. 80 million cubic meters will be transformed into potable water and the remaining 120 million cubic meters will be pumped into the Dead Sea. About 100 million cubic meters of additional sea water will be extracted and discharged directly into the Dead Sea without desalination. The 180 km long pipeline will be laid in Jordanian territory. Based on the evaluation performed by the World Bank, pumping up to 400 million cubic meters into the Dead Sea will have no adverse environmental effects, as no layering effect will be caused, and the water will evaporate and/or mix with the water of the Dead Sea. For this reason it appears that pumpinginflow on such a scale will also create no significant damage to our plants, especially since only about 200 million cubic meters will be pumped in one pipeline in the first stage of the project (assuming they are not discharged nearby our pumping station), although the actual impacts may be different.

However, if the Red Sea-Dead Sea Canal results in a lower concentration of sodium chloride in the water in the Dead Sea, it could adversely and materially affect production at our plants, our results of operations financial position, and our business.

statements for information about our employee benefits liabilities and composition of plan assets. Changes in life expectancy, changes in the capital market or changes in other parameters by which undertakings to employees and retirees are calculated, as well as statutory amendments could increase our net liability for these arrangements.

For information about our employee benefits liabilities and composition of plan assets, see Note 18 to our Audited Financial Statements.

In addition, in August 2016, the Ethiopianbecame effective on January 1, 2018. The Tax Authority decidedAct is comprehensive and complex and may lead to reject the appeal filed by the subsidiary Allana Afar (hereinafter – “Allana”)future interpretations regarding the tax assessment from June 2016, in the amountmanner of $55 million. Allana contends the tax assessment is illegal and unjustified, and therefore declined to pay it, an action that triggers imposition of sanctions

according to Ethiopian law, including, foreclosure of property and revocation of the mining concession. In light of that stated above and in view of the Ethiopian government’s failure to provide the necessary infrastructures and regulatory framework for the project, in October 2016,its implementation, which may impact the Company’s Board of Directors instructed Management to take all necessary actions towards termination of the project.estimations and conclusions. For further details, see Note 1317 to our Audited Financial Statements.

In recent years weresults.

initiatives will not succeed, our financial situation and results of business and operations, as well as competitive position, could be materially and adversely affected.

Risk”.

Risk”.

Cyber-attacks and other intrusion, interruption, destruction or breakdown of our information technology systems and/or infrastructure also could require significant management attention and resources, negatively impact our reputation among our customers, business partners and the public, any of which could have a material adverse effect on our business, financial condition and results of operations.

The business environment may cause a decrease in and might adversely affect our sales which outweighs our ability to reduce our costs. If we are unable to achieve our efficiency targets within the expected timeframes, our results of operations would be adversely affected, andas well as our ability to realize other aspects of our strategystrategy. For example, in ICL Iberia in Spain we are consolidating all our sites into a single mine with a single processing plant, which is expected to lead to decreased cost per tonne and create the possibility of removing other bottlenecks and further expansion. The plan involves significant capital investments, as well as manpower reduction. The plan is subject to risks and uncertainties, and actual results may also be slowedmaterially differ from those planned or undermined.

Our short and long term liabilities have significantly increased over recent years. As a result, our principal and interest payment obligations have increased, as well as our costs relating to financing activities. The degree to which we arethe Company is leveraged could affect our ability to obtain additional financing for acquisitions, refinancing of existing debt, working capital or other purposes, could adversely affect our credit rating, and could make us more vulnerable to industry downturns and competitive pressures, as well as to interest rate and other refinancing risks. In addition, capital markets have been more volatile in recent years. Such volatility may adversely affect our ability to obtain financing on favorable terms at times in which we need to access the capital markets regularly.markets. Our ability to refinance existing debt and meet our debt service obligations will be dependent upon our future performance and access to capital markets, which will be subject to financial, business and other factors affecting our operations (including our long term unsecuredlong-term credit ratings), many of which are beyond our control. Our credit rating may be downgraded, among other things, due our future performance, the degree to which we are leveraged and the continued deterioration of the business environment.

In addition, the ongoing trade dispute between the United States and China may also affect the sales of some of the Company’s products through continued imposition of existing tariffs or increased tariffs or other trade barriers that may negatively affect our sales directly and\or indirectly by affecting our customers’ business and operations, which could materially and adversely affect our business, financial condition and results of operations.

In addition, a large portion of the Specialty Solutions segment’s products are used as inputs for end-products. For example, a significant portion of our flame retardants are added to plastic components in electronic devices, including personal computers and televisions. The slowdown of the global economy in recent years, as well as the increasing use of smartphones and tablets at the expense of personal computers, have led to a decline in the demand for personal computers, which in turn caused a decline in the demand for bromine-based flame retardants.

Furthermore, our fire safety product line is affected by weather conditions, such as dry weather, Hamseen or Santa Ana winds and similar weather conditions, long periods

The operations of thisPhosphate Solutions segment in the food industry is affected by legal provisions and licensing regulations relating to health. This area is characterized by stringent regulatory requirements that are updated from time to time by enforcement agencies. Adjustments of our operations to the changes in regulation, including the technological complexity and feasibility of such adjustments, may adversely affect the sales of our products, incidental to any specific prohibitions and/or adjustments required in order to meet regulatory requirements.

As an industrial chemicals company, we are exposed

As a chemical industry company, we are significantly affected by the legal provisions and licensing regime in the areas of environmental protection and safety. Recent years have been characterized by a substantial increase in the stringency and enforcement of legal provisions and regulatory requirements in these areas; the cost of adjustment to and compliance with such regulatory changes, including the technological complexity of such adjustment, as well as compliance with standardization, have all shown a significant upward trend.

Legislative changes around the world may prohibit or restrict use of our products, due to environmental protection, health or safety considerations. Standards adopted in the future may affect us and change our methods of operation. Furthermore, some of our licenses, including business licenses and mining licenses, are for fixed periods and must be renewed from time to time. Renewal of such permits is not certain and may be made contingent on additional conditions and significant costs. For example, following a demand by the Israeli Ministry of Environmental Protection, we have been compelled to make a provision of 62 million dollars for treatment of the existing (historic) solid waste stored at a special site on the plant grounds, in addition to treatment of the current waste generated by current production processes at the plant. See “Item 4. Information on the Company—Regulatory and Environmental, Health and Safety Matters.” 

intangible damages, etc.

In addition, it is possible that there are risks that we did not identify and are thus not covered by the insurance policies acquired by the Company.

of trade within Israel or between Israel and its trading partners could materially and adversely affect our business, financial condition and results of operations and could also make it more difficult for us to raise capital. Recent political uprisings, social unrest and violence in various countries in the Middle East and North Africa, including Israel’s neighbors Egypt and Syria, are affecting the political stability of those countries. This instability may lead to deterioration of the political relationships that exist between Israel and these countries and has raised concerns regarding security in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons.

shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions.

We have

We were

B. BUSINESS OVERVIEW

Company Overview

We are a leading global specialty minerals company that operates a unique, integrated business model. We extract raw materials and utilize sophisticated processing and product formulation technologies to add value to customers in three attractive end-markets: agriculture, food and engineered materials. Our operations are organized under two segments: the Essential Minerals Segment and the Specialty Solutions Segment. The Essential Minerals Segment includes the ICL Potash & Magnesium and ICL Phosphate business lines. The Specialty Solutions Segment includes four business lines: ICL Industrial Products, ICL Specialty Fertilizers, ICL Advanced Additives and ICL Food Specialties. Following recent management decision regarding the Company structure, ICL Specialty Fertilizers business line will be a part of the Essential Minerals segment, starting from January 2017.

Our principal assets include:

For the year ended December 31, 2016, we generated total sales of $5,363 million, operating loss of $3 million, adjusted operating income of $582 million, net loss attributable to the shareholders of the company of $122 million and adjusted net income attributable to the shareholders of the company of $451 million. The sales of ICL Essential Minerals amounted to $2,437 million and the operating income amounted to $343 million, the sales of ICL Specialty Solutions amounted to $3,148 million and the operating income amounted to $589 million.

For a breakdown of sales and a geographic market by segments for each of the last three fiscal years, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results”.

Our Industries

The majority of our businesses compete in the global fertilizer and specialty chemicals industries.

Fertilizers

Fertilizers serve an important role in global agriculture by providing vital nutrients that help increase both the yield and the quality of crops. Of the three nutrients that are required for plant growth – potassium, phosphorus and nitrogen – ICL supplies the first two. There are no artificial substitutes for potassium and phosphorous. Although these nutrients are naturally found in soil, they are depleted over time by farming, which could lead to declining crop yields and land productivity. To replenish these nutrients, farmers must apply fertilizers. The demand for fertilizers is volatile and seasonal. In the Company’s estimation, the policy of most countries is to ensure an orderly supply of high-quality food to their residents, including by encouraging agricultural production, which should preserve the long-term growth trend of fertilizer consumption.

Potashhelps regulate a plant’s physiological functions and improves plant resilience, providing crops with protection from drought, disease, parasites and cold weather. Unlike phosphate and nitrogen, potash does not require additional chemical conversion to be used as a nutrient fertilizer. Potash is mined either from underground mines or, less frequently, from solutions found in nature, such as the Company’s operations in the Dead Sea. According to estimates from the United States Geological Survey, six countries accounted for approximately 87% of the world’s aggregate potash production and the top nine producers (considering China as a single producer even though there are numerous producers in China) accounted for approximately 94% of the world’s production in 2016. Based on preliminary estimates of FertEcon Potash Outlook in December 2016, worldwide sales of potash in 2016 were lower than in 2015, mainly as a result of the late signing of supply contracts with China and India.

The average prices in 2016 were significantly lower than the prices in 2015, following the negative price trend that started in the second half of 2015 and continued in the first half of 2016.This trend came to a halt in the third quarter of 2016 and reversed in the fourth quarter wherein moderate price increases were recorded in the “SPOT” market. The main reasons for the decline in prices in the first half of the year were, as noted, the failure to sign contracts with China and India, a further decrease in the prices of agricultural commodities and a weakening of the currencies of the importing countries. The signing of supply contracts with Indian and Chinese customers in July 2016 and the significant volumes shipped to these countries as a result, led to tightening of the supply-demand balance, which was also supported by increased customer activity in the “SPOT” markets, mainly in Brazil. These developments supported the price stabilization and moderate recovery in the second half of the year and into 2017.

Imports of potash into China in 2016 totaled 6.8 million tonnes – a decrease of about 28% compared with imports of 9.4 million tonnes last year. The record quantities of potash imported into China in 2015 caused an accumulation of large inventories in the country. This fact enabled importers to postpone the signing of contracts to the first half of 2016 and gave them a stronger bargaining position in negotiations with reference to import prices in the new contract.

Imports of potash into India were lower in 2016 than in 2015. The slowdown stems mainly from the high inventory levels at the beginning of the year, as a result of low demand in 2015, and the delay in the contract signing for the 2016/17 fiscal year. As a result of signing of the new contract – at a significantly lower price – in the second half of the year the demand returned to normal levels. During 2016, India imported 3.8 million tonnes of potash, constituting a decrease of 4.3%, compared with 4 million tonnes imported in 2015.

Imports of potash into Brazil in 2016 increased significantly over 2015, but did not reach the record imports recorded in 2014. In 2016, potash imports into Brazil totaled 8.8 million tonnes, constituting an increase of 5.3%, compared with imports of 8.3 million tonnes in 2015. The improvement in demand in Brazil stems from an increase in the growing areas and higher profitability of the farmers.

According to the report of the IFA from June 2016, the aggregate global demand for potash for agricultural and other uses is projected to grow at an average annual rate of 2.6%, from 38.9 million tons of K₂O in 2016 up to 43.1 million tons of K₂O in 2020.

Polysulphate– during 2016, the Company decided to accelerate the transition from extracting and producing potash to producing polysulphate at its ICL UK mine. ICL Potash and Magnesium will act to expand the polysulphate market by means of, among other things, development of a wide range of innovative polysulphate products.

Magnesium– global demand for metal magnesium continues to be constrained by lower economic activity in China, Brazil and Europe as well as year-end destocking. In the United States, supply dynamics are impacted by pure magnesium imports from Russia, Kazakhstan and Turkey. Additionally, consumption is being displaced as key sectors, such as primary aluminum and titanium production, have shifted production to other markets, including Asia and Canada. Recently a number of decisions were made, that encouraged vehicle weight reduction mainly due to environmental protection requirements. As a result, a positive development has led to an increase in the demand for products based on magnesium alloys. A new Turkish manufacturer of magnesium (ESAN) has started to supply magnesium to the markets in the US and Brazil, for the purpose of making a quality check. It was expected that this supplier would expand the market supply by about 5 thousand tonnes in 2016 and about 15 thousand tonnes in 2017. Currently, it seems that this new manufacturer is not progressing as planned. Pure magnesium prices in the US and Brazilian markets remained under pressure as a consequence of the aforementioned change in supply dynamics. At the end of 2016, Chinese pure magnesium traded in the range of $2,460 - $2,480 per ton (FOB Chinese port), an increase of about 30% compared to 2015.

Phosphate is essential for plant root development and is required for photosynthesis, seed germination and efficient usage of water. Phosphate fertilizers are produced from phosphate rock and sulfuric acid and occasionally also include ammonia. The principal phosphate fertilizer producing regions have plentiful reserves of high quality, phosphate rock that can be mined at a low cost. In 2016, the vast majority of the world’s phosphate rock production was in China, the United States, Morocco and Russia. According to an IFA report from June 2016, the global demand for phosphoric acid (which constitutes a raw material for the main phosphate fertilizers) is forecast to grow at an annual rate of 2.4%, from 44.5 million tonnes of phosphorous pentoxide (P₂O₅) in 2016 to 48.9 million tonnes of phosphorous pentoxide up to 2020.

In 2016, the decrease in the prices of phosphate fertilizers that started in 2015 continued. These price decreases stemmed from a combination of supply and demand factors. On the demand side, imports into India (the main importer of DAP) were low due to high inventories and an erratic monsoon season. On the other hand, expansion of the growing areas in Brazil gave rise to a significant increase in the demand for fertilizers, in general, and phosphate fertilizers, in particular. In 2016, imports of phosphate fertilizers (DAP, MAP, TSP and SSP) into Brazil reached 4.9 million tonnes, constituting an increase of 17%, compared with imports of 4.2 million tonnes in the prior year. The demand in the US was low mainly as a result of a decline in the prices of agricultural commodities. The US demand picked up towards the end of 2016 and minor increases were reported in certain inland destinations, indicating a certain recovery in the US market. On the supply side, the decline in the global demand intensified the competition in the fertilizer market. The two main competitors in the export market, the Moroccan phosphate company, OCP, and the Saudi Arabian producer, Ma’aden, reduced their sale prices in order to maintain their market shares, which were unfavorably impacted in 2015 by a massive penetration of Chinese products. The price decline had a negative effect on the profit margins of most the Chinese manufacturers, who were forced to reduce the quantities produced. As a result, DAP exports from China, which increased by 52% and 42% in 2014 and 2015, respectively, decreased by 15% in 2016 to about 6.8 million tonnes. Based on the forecasts of market analysts, there is significant excess production capacity in China, and in the past few months production in the industry is running at 50%–60% of capacity, which brought some

stability in phosphate prices in China and the world towards the end of 2016. Towards the end of 2016, the Chinese government cancelled the $14/tonne export tax on DAP. This is expected to help local exporters, but may hamper attempts to increase global prices. Nevertheless, to the best of the Company’s knowledge, the Chinese phosphate producers are planning to reduce production in 2017 to a level of 15 million tonnes compared to production of approximately 17 million tonnes in 2016 and compared to an operational capacity of 22 million tonnes. 

In 2016, there was a drop in the demand for phosphate rock in the two major markets – India and China. The decline in India stemmed from an increase in imports of phosphoric acid that acted to reduce the demand for phosphate rock, despite the increase in fertilizer production. In China, the demand fell due to a decrease in production of downstream products. The decline in demand along with the decline in fertilizer prices caused a drop in the prices of phosphate rock of 5%–10%. This trend, in addition to other trends, had a negative effect on the results of ICL's joint venture in China, as described in “Item 5.A – Operating Results – Trends Affecting ICL Phosphate”.

The barriers facing entry of new competitors into the potash market are significant, and include a long lead time and an investment of billions of dollars of capital per operation. For example, economically recoverable potash deposits are scarce, typically deep in the earth and geographically concentrated. Nonetheless, two large fertilizer companies are carrying on new (“Green Field”) projects, which are scheduled to enter into production in 2017. The German potash producer, K+S, is developing the “Legacy” project in Canada, having a planned production capacity of about 2 million tons per year. In Russia, EuroChem is developing two new mines, each having a planned annual production capacity of 2.3 million tons.

In the phosphate market, the need for access to competitive sources of multiple raw material feedstocks (phosphate rock, sulfuric acid and ammonia) combined with the complexity of developing an economically feasible downstream value chain also acts as a significant entry barrier with respect to new competitors.

The specialty fertilizers market is growing faster than the conventional fertilizers market. Specialty fertilizers are generally used for specialty crops (such as greenhouses and horticulture) but are also expanding into usage for larger specialty field crops. Farmers use fertilizers that are customized to meet the needs of specific crops, soil types and climates, in order to maximize yield and quality. The specialty fertilizers allow more precise application of the critical foundations for development of the plant (phosphorus acid, potassium and nitrogen) and micro-nutrients. In addition to reduction of the environmental impacts, the specialty fertilizers permit efficient and effective fertilization of different types of produce (fruits, vegetables, etc.). Increase in the demand for healthier food is expected to give rise to an increase in the use of specialty fertilizers. These fertilizers include, among others, “enhanced efficiency fertilizers” which permit greater fertilizing efficiency and which include, controlled release fertilizers (CRF) (which allow for precision release of nutrients over time) and delayed/slow release fertilizers (SRF) (which allow for a very slow release of nutrients) (nitrogen and potassium only), liquid fertilizers integrated in irrigation systems and in herbicides and fully water soluble fertilizers (which are most commonly used for fertilization by means of drip irrigation systems and foliar spraying).

Specialty Phosphates

Phosphate-based specialty products deliver additional value to ICL beyond the commodity phosphates with two main applications: for the food industry, as additives for improved texture, stability and shelf-life of processed foods in the markets for meat, bakery, dairy products and soft-drinks as well as in various industrial applications, including, road surfaces, oil and paint additives, forest-fire retardants and fire extinguishing products. Additionally phosphate is also used in a broad range of downstream products in the electronics, energy and construction industries. Demand for phosphate-based products is driven by global economic and population growth and improved living standards, which promote the adoption of more sophisticated food products and improved industrial products and production technologies. While most of the global demand for Specialty Phosphates is constant during the year, the Fire Safety product line shows seasonal peaks in Q2 and Q3 based on increased wildfire activity in North America during the hot and dry periods in the spring and summer. The Company also manufactures products based on phosphate additives for a wide range of uses in the food industry. In addition, the Company produces integrated solutions based on phosphate additives and dairy proteins. The Company manufactures these specialty phosphate downstream products with higher added value, based on phosphate rock as the main raw material. In this respect the business tailors the products to the customers’ needs by exploiting synergies between food phosphates and proteins.

Bromine

The largest commercial use of bromine is in the area of bromine-based flame retardants, which accounts for approximately 40% of the demand for bromine. To meet fire-safety requirements, flame retardants are used as inputs in manufacturing processes and end products, such as, plastic enclosures for consumer electronics, printed circuit boards, insulation materials for construction, furniture, automobiles, and textiles. Additional commercial uses of bromine are in the following industries: rubber production, oil and gas drilling, water purification, intermediate materials for production of medicines and pesticides, and others. The flame retardant market, after facing contraction mainly in printed circuit board applications over the last few years, has stabilized with the growth in automotive electronics offsetting the decline in consumer electronic applications, ICL and its competitors are continuing to develop new products and uses on an ongoing basis.

Bromine is found naturally in seawater, underground brine deposits and other water reservoirs, such as the Dead Sea. The Dead Sea is the world’s premier source of bromine, with concentration levels significantly higher than in regular seawater, and it accounts for about half of the global supply. Because it has the highest concentration of bromine, the Dead Sea is the most economical supply source as the least amount of water must be extracted and evaporated to produce bromine.

The bromine industry is highly concentrated, with three companies accounting for approximately 80% of the worldwide capacity in 2016 (ICL, Albemarle and Chemtura). Lack of access to a low-cost source of supply, such as the Dead Sea, constitutes a significant barrier to entry for aspiring competitors, as well as the requirement for a logistical supply system and specialized transport vehicles (isotanks). The Company estimates that approximately 70% of the global elemental bromine production is consumed internally by the bromine manufacturers, since there is a very small market for elemental bromine. To increase the global use of elemental bromine, development of complex production facilities for downstream products is required.

Markets

ICL’s revenues are derived from three core end-markets: agriculture, food and engineered materials. ICL focuses on markets and products which we can add value through its integrated value chain all the way from the minerals into the downstream product.

Agriculture

Global fertilizer demand is driven mainly by the supply/demand balance with respect grains and other agriculture products, which is reflected in their prices. Supply of agriculture products is influenced by weather, planted areas and input usage, while price is primarily influenced by population growth and dietary changes in the developing world:

Population and Income Growth per Capita.Historically, growth in world fertilizer consumption has been closely correlated with growth in the world’s population, which is expected to increase by over 2.0 billion and to reach 9.4 billion by 2050, according to the U.S. Census Bureau. Currently, developed countries use fertilizers more intensively than developing countries and, therefore, produce crops at much higher yields. Economic growth in emerging markets supports food demand and thus fertilizer use. In addition, growth in income per capita in developing markets results in a shift to more protein-rich diets through higher meat consumption, which requires larger quantities of grain for their growth, thus leading to an increased demand for seeds used in animal feed. According to the IMF (International Monetary Fund), income per capita in developing countries is expected to grow by an average rate of 5.9% annually from 2016 to 2021.

Declining Arable Land per Capita. As the world’s population grows, mainly in cities, farmland per capita decreases and more food production is required from each acre of farmland. This, in turn, requires increased yield per planted area. According to data from the FAO, the

amount of arable land per capita is expected to decrease from 0.218 hectares per person to 0.197 hectares per person between 2012 and 2030. Effectively, new arable land is available only in limited quantities, and is concentrated mainly in Brazil. Therefore, the only viable path to increase crop production is through a yield increase in existing farms in developing countries, mainly in China, India, Russia, Africa and Central America, by optimizing the use of fertilizers (especially improving the balance in the use of potash and phosphates versus the use of nitrogen fertilizers), together with water availability and better seeds.

Grain Stock-to-Use Ratio. The pressure on food demand and unfavorable weather in the main growing areas has resulted in low levels of the grain stock-to-use ratio (a metric index of the level of carryover stock) since the beginning of the 21^st century and up to the 2012/13 agriculture season, as illustrated by the chart below. Since then, several years of favorable weather resulted in an increase in this ratio from 20% in 2012/13 to a projected 24.3% in 2016/17 agriculture year, according to the USDA report dated February 9, 2017. This level is still lower than the level of 30.4% for the 2000/2001 season and the levels recorded during the 1990s. An increase in the grain stock-to-use ratios generally indicates that grain prices may decline (due to higher grain supply) and during 2016, corn and wheat prices decreased by 5% and 13%, respectively while soybean prices increased by 14%. Lower grain prices reduce the incentive of farmers to make intensive fertilizer application. Nevertheless, the February 2017 USDA projection of the stock-to-use ratio for the 2016/17 agriculture season is, after three consecutive years of increases, down by 0.5% compared to the 2015/16 season, as the global ending stocks of corn, soybean and wheat all decreased, mostly due to increased consumption and despite a slight increase of global corn production. As of the publication date, wheat, corn and soybean prices increased by about 8%, 5% and 3% respectively.

The ongoing improvements in  agricultural technology have given rise to a high increase in the rate of use of drip irrigation (more than 10% per year) and an increase in demand for specialty fertilizers (liquid and water soluble fertilizers). In addition, the decrease in arable land per capita, along with the growing population, supports the use of more sophisticated fertilizers that will enable higher yields.

Increased environmental awareness is also contributing to the use of specialty fertilizers (since they result in higher nutrient efficiency), and the increasing pursuit of an improved quality of life is leading to a higher consumption of fruits and vegetables, which are considered specialty crops.

All of the above is expected to contribute to a higher long-term demand for specialty fertilizer solutions.

Food

Consumer demand for different food products has changed dramatically over the last several decades, driven by a number of trends and processes, including, increased per capita incomes, demographic shifts and lifestyle changes. Longer working hours, changing family structures, increased awareness of nutrition and health issues and access to a broader variety of food products result in growing demand for more sophisticated, protein-enriched, unprocessed (“clean label”) and non-allergenic (“free from”) food products with longer shelf lives.

This changing demand includes greater demand for more sophisticated food products and processed food products with enhanced nutritional value and balance and improved flavor, texture and appearance. An increasingly longer supply chain and consumer awareness of food waste also drives the demand for longer shelf-life and food stability. These trends act as long-term drivers of demand for food additives, such as, phosphate derivatives, phosphate and protein containing formulations and hygiene products for the processed meat, bakery, dairy and beverages industries.

Engineered Materials

Demand for the engineered materials that ICL manufactures, which include solutions based on bromine and phosphorus, is driven by population growth, increased standards of living, higher environmental awareness and increased focus on cost effective production. These trends drive demand for more environmentally friendly and safer industrial products as well as efficient and reliable service suppliers. ICL’s products serve a diverse number of industries, such as, construction, electronics, energy (including renewable energy), water and pharmaceutical. Phosphoric acid is incorporated as a raw material into industrial grade product solutions that serve the needs of the water, cleaning, paints and coatings, and metal treatment industries.  Phosphorous Penta Sulphide (p₂s₅) is manufactured to serve the lubricating oil additives and insecticide markets. Increased regulation and environmental awareness also result in greater demand for flame retardants including polymeric and reactive flame retardants, mercury emission control solutions, forest fire retardants, bromine-based biocides for water treatment, bromine, magnesia and potassium chloride-based intermediates for the pharmaceutical industry and oil additive solutions.

Our Competitive Strengths

ICL attributes its business strength to the following competitive advantages:

Access to these assets provides ICL with a consistent, reliable supply of raw materials, allowing it to produce its products on a large scale and supporting its integrated value chain into specialty, value added products.

Dead Sea in Israel: ICL’s potash and bromine production facilities at the Dead Sea enjoy lower production costs compared to mining potash from underground deposits or extracting bromine from less concentrated sources, due to the high concentration and virtually unlimited supply of minerals in the Dead Sea and due to the unique solar evaporation production process which is less energy intensive. Furthermore, the Dead Sea’s hot and dry climate allows ICL to store outdoors very large amounts of potash (exceeding one full year of production) at a low cost. This advantage enables ICL to operate its potash facilities at full production capacity despite periodic fluctuations in demand and to react faster when demand returns. In addition, ICL benefits from the geographic proximity of its facilities in Israel to seaports and from Israel’s geographic positioning vis-à-vis its main geographical markets (especially the fast-growing markets of India, China and Brazil), reducing transportation, logistics costs and time-to-market. While ICL benefits from these advantages, it expects to incur infrastructure-related costs to harvest salt from Pond 5 at its Dead Sea complex, which is its central evaporation pond, to avoid the need to continue to raise the water level in the pond. In addition, while the supply in the Dead Sea is virtually unlimited, ICL’s access to this supply of potash and bromine pursuant to the concession is subject to the need to construct a new pumping station. Moreover, ICL is scheduled to pay taxes in the future at a higher rate following passage of the Law for Taxation of Profits from Natural Resources which entered into effect on January 1, 2016, except with respect to potash sales from ICL Dead Sea where the effective date is January 1, 2017. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business”.

United Kingdom and Spain mineral assets: In addition to its operations in Israel, ICL mines potash in the United Kingdom and Spain. The geographical proximity to Europe, the primary market of these assets, provides ICL with logistical advantages reflected in lower transportation costs, faster time-to-market and higher net-back prices. In Spain, ICL is progressing with its project to move from operating two mines and processing facilities into concentrating them into one location with better ore grade and vast reserves which will contribute to lower costs. In the UK we are increasing the production of Polysulphate, a unique mineral containing four nutrients (potassium, sulphur, calcium and magnesium) which can be used as a natural fertilizer and provides a very cost effective solution, as its production does not require chemical processing.

Integrated phosphate value chain: Due to ICL’s access to phosphate rock in the Negev Desert and in China, it is the only sizeable downstream, fully backward integrated phosphate player. ICL mines and processes phosphate rock from three open-pit mines in the Negev Desert under mining concessions with the State of Israel and from one open-pit mine in Haikou (China), using conventional methods, under phosphate mining license that was issued in July 2015 by the Division of Land and Resources of the Yunnan district in China. Approximately three-quarters of the phosphate rock produced are used internally to manufacture phosphate fertilizers and phosphoric acid, with the balance being sold to external producers. ICL’s phosphate assets are the base for its vast and diversified specialty phosphates product portfolio used in food and industrial application. These business lines add additional value on top of the commodity business and reduce ICL’s exposure to the

volatility in the commodity markets. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business. The mining operations are dependent on concessions, licenses and permits granted by the respective governments in the countries wherein they are located.”

Most of ICL’s businesses rely on natural resources that are scarce and concentrated in the hands of a few market participants. ICL’s exclusive concessions, intellectual property (unique knowledge, technologies and patents for various products and applications), world-wide marketing and distribution network and high industry start-up costs for new market entrants add further significant barriers to entry.

balance between three interacting pillars – drive of ICL’s long-term value creation through investments in its growth and reduction of its debt level, while still providing solid dividend yield. In the beginning of 2016 ICL updated its dividend policy for 2016-2017 to a payout ratio of up to 50% of adjusted net income (compared to up to 70% of net income previously). During 2016, ICL declared dividends of $222 million, of which $162 million was paid during 2016 and the balance was paid in January 2017, reflecting a dividend yield of 4.3%, compared to a yield of 4.4% in 2015 (based on the average share price for the year). See “Item 8- Dividend policy.”

Our Strategy

ICL’s integrated business model is based on its unique access to essential minerals that support specialty downstream activities focusing on our three core markets – Agriculture, Food and Engineered Materials. Our strategy going forward is to reach cost leadership in the Essential Mineral chains and expanding the downstream activities by developing backward-integrated value-added solutions for our Essential Minerals chain. Over the years, we have developed a balanced portfolio, which supports long-term stability and growth. Our integrated business model generates significant operational synergies attributable to the combination of our attractive assets and value-added solutions

Our corporate strategy is to fulfill the essential needs of our customers in our three core markets – Agriculture, Food and Engineered Materials. We have developed a strategic plan based on three value-creating pillars: (1) Efficiency: continued streamlining of the existing operations; (2) Growth: organic and high-synergy driven external expansion of our value chain, from the Specialty Minerals market to the Agriculture, Food and Engineered Materials markets; and (3) Enablers: creating one global ICL, strengthening innovation, providing an empowering environment for our employees and aligning management with our external and internal stakeholders to support our growth and efficiency goals.

Our key strategic initiatives include:

To continuously improve the cost base and initiate G&A cost efficiency initiatives.We have successfully implemented cost reduction initiatives in our potash, bromine and phosphate operations. These efforts will continue to improve our competitiveness and profitability.

ICL has established an Operational Excellence initiative for implementation of the most advanced practices in the industry. The ICL Operational Excellence implementation plan covers transformation of all our operations within 3 years. Our major potash, bromine and phosphate sites have been implementing the transformation plan since 2014. In addition, ICL has already initiated a plan to reduce its G&A costs. ICL is continuing to assess and identify additional potential areas of savings and expects to continue to do so during 2017.

To base our future expansions on our existing Essential Minerals reserves. ICL has already expanded its production capacity at the Dead Sea to about 4 million tonnes per annum. Furthermore, ICL has the potential to further expand the production capacity at the Dead Sea and its reserves at ICL Iberia. At ICL Iberia in Spain, we are consolidating our sites into one mine with one processing facility, which will reduce the cost per tonne and create opportunities for additional debottlenecking and further expansion.

At ICL UK, we are shifting from production of Potash to Polysulphate (reaching capacity of 1 million tonnes in 2020), and extending the mining area to provide additional resources.

In October 2016, we decided to discontinue the investment in the Allana project in Ethiopia, in view of the Ethiopian government's failure to provide the necessary infrastructures and regulatory framework for the Project. We intend to focus our growth on our key existing operating assets.

With respect to our phosphate reserves, in the beginning of 2016, a National Outline Plan, which includes Barir field (which is located in southern part of the South Zohar field), was submitted for comments by the various committees, which provided their comments and recommendations toward the end of 2016. In February 2017, a hearing was held by the Committee for Principle Planning Matters, whereat decisions were made with respect to the continued advancement of mining in the South Zohar field. For further information in that respect see “Item 4. Information on the Company—D. Property, Plants and Equipment—Mineral Extraction and Mining Operations”.

It should be noted that the residents of Arad are continuing to object to advancement of the mining plan and even to test mining. If mining approval is not received for the Barir field, this will significantly impact the Group’s future mining reserves in the medium and long term. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business". Our mining operations are dependent on concessions, licenses and permits granted to us by the respective governments in the countries where they are located.

In October 2015, we completed formation of a joint venture company (“YPH JV”) with Yunnan Phosphate Chemicals Group Corporation Ltd. (“YPC”), a Chinese phosphate producer, with 50% stake – a step that we expect will nearly double our global phosphate market share. YPH JV is expected to have phosphate operations in China with annual production capacity of nearly 1 million tonnes of fertilizers and other downstream products, with backward integration into phosphate rock mines. Our key effort is to implement cost-cutting initiatives and capacity optimization and transform the operations from commodity-focused to a better balance between the commodity and specialty operations, where we see unique market potential going forward for our Specialty Phosphate activities.

To expand our value-added specialty downstream activities.As part of our growth strategy we intend to further expand our specialty and value-added products organically and through selected synergy-driven acquisitions. This will allow us to create growth in our businesses and continue to evolve from a product-based to a market-focused organization.

In Specialty Fertilizers, the Company announced it is examining development of a potassium nitrate production plant with a capacity of about 200Kt to enable ICL to increase its production of soluble fertilizers. In addition, we developed a unique coating technology that enables controlled release of nutrients in a more effective way.

In Food, we are continuing to expand our existing phosphate-based texture and stability solutions to Western and Emerging markets. In addition, we are constantly collaborating with our customers in order to develop new formulations. The next phase of our strategy is to leverage our expertise and technology in enhanced texture and stability solutions beyond additives based solely on phosphates, including through acquisitions, strategic partnerships and joint ventures.

In 2015, we set a key milestone in ICL’s Food strategy with the acquisition of Prolactal – a leading European producer of dairy proteins for the food and beverage industries. This acquisition has increased ICL’s ability to service its existing customers by offering them a broader selection of texture and stability ingredients, in order to better meet the growing consumer demand for food and beverages with higher protein levels. Our deep understanding of the interaction of phosphates with proteins enables us to develop new products that, in part, fulfil unmet needs of our customers in the beverage and dairy markets and to support formulation of meatless products that are experiencing strong growth trends for vegetarians as well as flexitarians.

Finally, in Engineered Materials, we intend to utilize our expertise and technology to develop bromine and phosphorous/phosphate-based solutions for industrial applications. Furthermore, as part of development of the phosphate-based salt activities, we are considering expanding the White Acid production facility.

To further develop and enhance our “One ICL” culture and empower our employees.In order to realize our strategy, we believe we must continue enabling our employees to thrive within our organization through implementation of our “One ICL” strategy.

As part of the “One ICL” culture, we are optimizing our internal processes in order to share best practices across our Company in order to ensure that we provide the best services in our end markets. In addition, we are strengthening our innovation platform and rewarding and empowering our employees.

In September 2016, we decided to discontinue the Harmonization project, following identification of substantial risks related to the system’s suitability, complexity, and readiness which significantly impacted its timeline and budget. We aim to achieve some of the Harmonization project’s expected objectives by upgrading ICL's large existing ERP systems according to the organization’s needs and managerial priorities. In addition, we are examining utilization of some of the project’s elements, while transitioning gradually to global processes. This will enable us to focus more of our resources and attention on our core business activities. 

The manner of implementation of the strategic plan and the expected timing thereof and its impact may be different, possibly even significantly different, than anticipated. It may be difficult to reduce costs due to various factors, including the situation prevailing in the market, competition, labor relations and strikes, regulation and the risk factors characterizing our activities.

Our History

ICL was established in 1968 as a government company in Israel and operate today as a limited liability company under the laws of Israel. In 1975, the shares of various developmentcertain companies (including, among others, ICL Dead Sea, the companies today consolidated ascompanies ICL Rotem, the bromine companies and Tami) were transferred to us.ICL. In 1992, following a decision byof the Israeli government to privatize our Company, IsraelICL, the State published its tender prospectus, 20% of the Company's shares were sold to the public and its shares were registered for trading on the Tel-AvivTel‑Aviv Stock Exchange. Prior to our public share issuance, a Special State Share in our Company and our main Israeli subsidiaries was issued to the State of Israel.Israel (for additional details regarding the terms of the Special State Share, see “Item 10 - Additional Information— B. Memorandum, Articles of Association and Special State Share”). In 1995, the State of Israel sold its controlling interest in usthe Company (representing approximately 24.9% of our shares) to Israel Corporation Ltd., a public traded Company on the TASE (ILCO), which was controlled at that time by the Eisenberg family. A majority of the ordinary shares held by the state of Israel were sold during the following years. In 2000, the State of Israel ceased to be a stakeholder in terms of holding any of our ordinary shares, in us, but it retained the Special State Share. In 1999, the Ofer Group acquired the Eisenberg family’s shares in Israel Corporation. In September 2014, we listed our shares on the New York Stock Exchange, and they are currently traded in Tel Aviv and in New York.

but also functions as ICL's innovative arm, focusing on R&D and digital innovation. ICL aims to achieve leadership position in specialty fertilizers through portfolio enhancement and geographic expansion, potentially including bolt-on M&A.

At the end of the second quarter of 2018, the Company ceased the production of potash in the ICL Boulby mine in the UK and shifted to sole production of Polysulphate™. The Polysulphate™ is produced in an underground mine at ICL Boulby in the UK, and is the basis for a significant part of the Company's FertilizerpluS product line. The segment also includes magnesium activities under which it produces, markets and sells pure magnesium and magnesium alloys, and also produces related by-products, including chlorine and sylvinite. In 2016,addition, the Potash segment sells salt that produced in its underground mines in Spain and UK.

ICL sells potash for direct application as a fertilizer and to compound fertilizer manufacturers.

ICL

Extraction of potash from underground mineshot leach. Potash production in Spain and the United Kingdom is carried out by miningin underground mines extracting sylvinite, (aa mixture of potash (KCl) and salt (NaCl) with varying potash concentrations)concentrations. The potash is separated from the salt by a flotation process in the production plants situated near the mines.

ICL Potash’sSpain.

In light of the present market conditions, ICL

During 2016,market and to develop new, specialized products based on the Company decided to acceleratemain raw materials of the transition from extractingsegment by utilizing the existing production facilities and producing potash to producing polysulphate at its ICL UK mine. ICL will act to expandsales and logistics array. Under this framework, the polysulphate market by means of, among other things, development of a wide range of innovative polysulphate products. following actions were taken:

$10 million. For additional information, see “Item 4 – Mineral Extraction and Mining Operations – United Kingdom”, and “Reserves – United Kingdom.”

ICL Potash completed a plan in 2015 for an increase of approximately 500 thousand tonnes per year in potash production capacity at the Sodom facilities. This investment has

effectively created surplus production capacity at our production plants in relation to the production capacity of raw materials at our evaporation ponds, thereby adding flexibilityNote 20 to our production process and optimizing the timing of production and sales over time and already at the present time it permits production of the material that was accumulated in the ponds during the strike that took place in 2015. As a result, it is expected that the production of ICL Dead Sea will be 3.8 million tonnes in 2017.

Audited Financial Statements.

It is anticipatedestimates that implementation of the first stage of the planthese actions will reduce expenses and contribute to streamlining, which will reduce potash production costs and contribute to conformityalignment of the production activities with the environmental standards.

The first stage includes establishing a production plant for

2020. 

On October 2016, the Company decidedtransition process from potash to terminate Allana investment project in Ethiopia (originally aimed to develop Potash operation in Ethiopia), in light of the Ethiopian government’s failure to provide the necessary infrastructures and regulatory framework for the Project.Polysulphate. For additional information, please see “Item 3. Key Information—4 - Information on the Company— D. Risk Factors”Property, Plant and Equipment— Mineral Extraction and Mining Operations” and “Reserves”.

The significant competitors of ICL Potash in the international trade in the potash sector are PotashCorp of Saskatchewan (Canada), Belaruskali (Belarus), Mosaic (Canada), Uralkali (Russia), K+S (Germany), Agrium (Canada), APC (Jordan) and SQM (Chile). See below regarding the PotashCorp and Agrium merger.

At the end of 2016, the Canadian companies, PotashCorp and Agrium, gave notice of merger of the companies. The merger was approved by the Board of Directors of both companies andyear) ramp-up is expected to be executeddelayed from 2020 to 2022. Belaruskali's Petrikov project (expected nameplate capacity of 1.5 million tonnes per year in mid-2017. The Company does2022) ramp-up is expected in 2020. 

Although thereadjacent Solikamsk 1 mine. Lao Kaiyuan is currently excess production capacity inexpected to expand the industry, a number of companies are continuing to develop new mines and other companies are expanding the

productionnameplate capacity of existing plants. There is uncertaintyits Khammouans site in respect of realization of these plans and the time required for their achievement. In addition, a number of companies have announced that they are examining the possibility of entering into the potash industry. An increase in the actual production capacity or an expectation for such an increase may result in pressure on the existing players in the market, in such a way that could leadLaos from 0.5 to an increase in the competition. Despite that stated, during 2016, several potash producers reduced their production in order to manage the inventories against the background of declining prices. PotashCorp curtailed its potash production at two Saskatchewan mines. There was a four-week maintenance shutdown at the Allan and Lanigan mines, beginning on March 20, 2016, resulting in an estimated 400,000 tonne reduction in the 2016 MOP production. This followed the January 19, 2016 announcement of PotashCorp regarding an indefinite suspension of production at its newly constructed Piccadilly mine in New Brunswick)Canada), removing 2 million tonnes of nameplate capacity. In the second half of 2016, Mosaic temporarily halted production at its Colonsay mine, which has an estimated production capacity of 2.51.5 million tonnes per year. Inyear until 2021. It should be mentioned that nameplate capacities are in accordance with Informa (Fertecon) Potash Outlook Report - December 2018. Other information is in accordance with CRU Fertilizer Week.