OUTLOOK ’18: Bullish potash market’s slow recovery to continue

LONDON (ICIS)–While yet to reach the highs seen pre-2008, global muriate of potash (MOP) prices performed strongly in 2017, increasing in all regions at a slow, steady pace. Producers’ tight control on output ensured a steady – if restricted – supply across the world, although by the end of the year, silos were largely empty, and buyers left short.

This upward pressure will likely continue throughout 2018, and early indications point to considerable increases in several key contracts.

Market talk indicates the Indian contract price – a key bellwether for the industry as a whole – may see an increase in the region of $30-40/tonne, with some players ruling a hike as “almost inevitable”.

2017’s $240/tonne CFR (cost and freight) Indian contract price was settled at a $13/tonne increase over 2016.

“Indian demand has been stronger this year”, despite the price rise, according to a source at a key producer – a situation some feel is repeatable.

With India expected to import around 4.5m tonnes of MOP in calendar year 2018, there’s everything to play for – and as the Indian contract price usually indicates the general contract price movement for the world’s other key importer, China, players will be watching the upcoming negotiations with great interest.

Meanwhile, as Europe moves into the spring planting and application season in early Q1, supply to the region is likely to increase.

However, amid increasing demand, producers and buyers alike are expecting an eventual tightness in availability to put upward pressure on prices, as buyers return to refill their stores with each subsequent application.

In market moves, a number of new potash projects are moving closer to completion, but canny majors have prepared for this, and are reshuffling their own assets to compensate.

In Belarus, work is continuing on the country’s new 2m tonne/year Nezhinsky MOP mine, which is being built by Russian billionaire Mikhail Gutseriev’s company Slavkaliy, with assistance from 10 Belarusian firms.

Nezhinsky was described by Belarusian President Alexander Lukashenko as a keystone project in his ambition to make Belarus a “world leader in the production of potash fertilizers”.

In Germany, 2018 will see the continuation of K+S’ ‘Shaping 2030’ strategic plan, which began with two dramatic announcements in the space of a week – including the sudden closure of its Sigmundshall mine.

However, even as the sun sets on Sigmundhall, a new star rises – Bethune.

News of first deliveries from K+S’ Bethune MOP mine in Saskatchewan, Canada, was hailed as “an important milestone” by the company; but the newly-opened mine has now ostensibly been revealed as a keystone to Shaping 2030.

The mine’s location among the potash-rich wilds of Canada, combined with Saskatchewan’s well-established transport routes to the likes of the US, Southeast Asia, and Latin America, position the modern mine as a strong replacement for the ageing German facility.

However, despite widespread bullish sentiment, the potash market may yet suffer under the pressure of high road and sea shipping costs, which have increased exponentially of late – a challenge that looks set to continue throughout 2018.