Post by
retiredcf on Apr 18, 2022 9:56am
CIBC
How Short Is The Potash Market?
With Brazil potash spot prices at a record $1,170/t, we revisit the impact of Western sanctions to Russia/Belarus potash supply.
Latest industry forecasts indicate that Russia and Belarus potash exports will be down by ~13Mt in 2022 (~54% Y/Y decline to just 10.9Mt) and down by ~10Mt-11Mt in 2023 vs. 2021 levels. Without the lifting of restrictions and access to EU ports, supply from this region is unlikely to return to pre-2022 levels before 2026. Also, anecdotal evidence suggests new mine/expansion projects in the region have halted with equipment being sent to other regions in the world.
In terms of a supply response to this decline, we estimate only around 4.0 Mt/y of remaining idled or unused capacity in Canada (in addition NTR’s ~1Mt increase announced this year), insufficient to fully cover the shortfall in output from Russia and Belarus. The rest of the world (Israel, Germany and Jordan) has a very limited ability to bring on new production.
As a result, if sanctions remain in place, the potash market will be incrementally short for the next few years. Historically, potash demand grows ~2-3%/year, and there should eventually be a heightened need to replenish the soil for this nutrient as supply becomes available. This is particularly significant in Brazil, where the growth in acres is tied to potash availability.
Three Of Five Belaruskali Mines Believed To Be Shut Down: We understand Belaruskali has halted production at least three of its five operational mines (Soligorsk 1, Soligorsk 2 and Petrikov). Without access to EU ports, BPC’s only remaining outlet for bulk shipments is via Russia (but spare terminal capacity is already limited). CRU projects Belarusian MOP (potash) production to decline by 63% Y/Y in 2022 to 4.7 Mt, with exports down by over 70% Y/Y to 3.6 Mt.
The Decline In Russian MOP Output Should Not Be As Severe, Bust Still Substantial: CRU projects Russian production to decline by 35% Y/Y to 9.7 Mt in 2022, with exports down to 7.3 Mt, a fall of 37% Y/Y. The continuation of MOP sales from Russia indicates the West’s door is not yet as closed to Russian MOP as it is to that from Belarus. Russia typically consumes ~3Mt/year of potash domestically and has cross-border rail capacity to ship up to 3Mt/year to China.
How Much Capacity Can Canada/Others Bring On In 2022/2023/2024?: Producers outside Canada are largely unable to raise production much further. Israel, Germany and Jordan have already been operating close to capacity over the past two years. Since 2020NTR has reactivated about 2Mt/year of capacity and MOS restarted its 1.5Mt/year Colonsay mine. Currently we estimate around 4.0 Mt/year of idled or unused capacity in Canada, of which NTR controls more than three-quarters. While this would be unlikely to fully cover the shortfall in output from Russia and Belarus this year, it would certainly lessen the impact.
Comment by
koolkat on Apr 18, 2022 1:17pm
This is a great breakdown of foreseeable potash supply!