consumption of SOP has increased 181% IC Potash aims to produce SOP, which has a premium price and a robust demand growth trajectory.
SOP is a premium fertilizer that contains no chloride (build-up of chloride in soils causes low quality crops).
It is used to enhance yield and quality of high value crops including many fruits, vegetables and tobacco.
Crops that use MOP can use SOP but crops that require SOP usually do not tolerate MOP.
ICP will be producing a granular grade of product that sells for $30 more per metric ton than standard Northwest Europe SOP.
SOP represents about a tenth of the overall potash market (~6 million tonnes versus the overall market of around 60 million tonnes) and has historically achieved a price premium in the range of 35% to 50% over the more standard potash product MOP.
Total global SOP production capacity is approximately 11.5m tons.
China holds the largest share at 43.0% followed by the United States at 16.0% and the Ukraine with a
14.8% market share. Germany is fourth at 12.9%.
Together, these four countries represent 86.7% of total global SOP production capacity.
Total global SOP production capacity has the potential to reach roughly 15.9m tons by 2016.
China will account for the majority of this growth and the additional fertilizer is expected to be consumed domestically.
This figure would comprise roughly 10.6m tons of SOP and 5.3m tons of SOPM.
Growth in China’s production capacity will not impact global prices in our view since it is expected to stay in country.
The SOP price deck gradually ramps up to a peak SOP price of US$915/tonne in 2022, and settles to a long-term price of US$817/tonne in 2025,
Which is conservative considering peak SOP price of US$1,260/tonne, which was reached in 2008.
SOP supply/demand in the rest of the world is estimated by IFDC, and Fertecon to remain quite tight.
Demand for SOP fertilizers has risen on the back of increasing production of specialty crops.
In the last 30 years, worldwide consumption of SOP increased 181%. The 30-year CAGR for global
SOP consumption is 3.5%.
In 2012 global SOP demand is forecasted to reach approximately 7.5m tonnes.
According to Fertecon, world demand is expected to hit 9.3m tonnes by 2016 and 10.3m tonnes by 2020.
Due to the tightness of SOP supply and demand, ICP’s production should be readily and easily absorbed by the market.
Due to unwavering demand for SOP, ICP should not have to undercut competitors on price.
CRU Group indicated that global consumption of SOP will increase by 35% over the next 15 years, providing a significant opportunity for ICP to enter intoand expand its position in the SOP market.