A lot of talk about SOP here, just some info.
In over-built potash sector, tiny segment commands premium
Thomson Reuters
By Rod Nickel
TORONTO, March 4 (Reuters) - Excess production capacity
over-hangs the price of potash, but its premium form may offer
upside that investors have yet to cash in on.
Sulfate of potash (SOP) is a chloride-free fertilizer suited
to sensitive crops such as fruits and nuts. Standard SOP traded
over five years to mid-2013 in northwestern Europe for 20
percent more than granular muriate of potash (MOP), but that
premium averaged 50 percent in 2014 as supplies became short and
MOP prices fell, said Paul Burnside, manager of fertilizer
analysis at consultancy CRU.
"Demand has proved to be very sticky and consumers have
accepted that SOP prices aren't going to fall," Burnside said.
Global SOP production is 5 million tonnes annually, but
demand may be 10-12 million, according to Potash Ridge Corp
, a company developing a 645,000-ton Utah mine.
"You can take all the SOP projects on the drawing board and
it won't make a dent in that demand-supply deficit," said Chief
Executive Guy Bentinck during the Prospectors & Developers
Association of Canada convention.
Norwegian nitrogen producer Yara International owns
a 17 percent stake in IC Potash, which plans a $1
billion SOP mine in New Mexico.
"We see strong growth for SOP and an underlying weakness in
supply," said Yara's Bernhard Mauritz Stormyr.
Yara and Allana Potash are also gearing up their
own potential SOP production.
Major producers include Compass Minerals International
, which produces SOP from salt water ponds in Utah and
Belgium's Tessenderlo Chemie NV, which combines
sulfuric acid with MOP to make SOP.
New production could force out higher-cost supplies and, if
the premium falls enough, expand demand as consumers switch to
SOP from MOP, Burnside said.
Investors aren't excited about SOP yet.
Shares of IC Potash and Potash Ridge have plunged 28 percent
and 68 percent since mid-2014. Potash Ridge cut jobs and
management salaries.
"Juniors have not received much attention from investors
given general market apathy, particularly for those with capex
in the billion-plus range," said analyst Spencer Churchill of
Paradigm Capital.
Compass is expanding production to match U.S. demand, but
further volumes could dramatically change market dynamics, said
Keith Espelien, senior vice-president of plant nutrition.
The biggest fertilizer company, Potash Corp, isn't convinced
about SOP.
"Right now the premium is there," said Chief Executive
Jochen Tilk in late January. "Will it be there down the road? We
really don't know."
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