World Fertilizer - 3

Potash Outlook Similar to Phosphorous Forecast

Russ Quinn
By  Russ Quinn , DTN Staff Reporter
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Global potash shipments are forecasted to increase out to the year 2022. Shipments look to increase about 3% per year from 2016 to 2022. (Graphic courtesy Josh Paula, Mosaic)

New Orleans (DTN) -- Similar to the phosphorus outlook, the global potash (K) outlook looks to be fairly balanced in the near future. Potash prices have trended upward since mid-2016, but remain below prior peaks with no severe supply/demand imbalance forecasted.

Josh Paula, market and strategic analysis manager for The Mosaic Company, said during the potash outlook presentation at the Fertilizer Outlook and Technology Conference in New Orleans in mid-November that global shipments of K have slowed in recent years. Despite this, potash demand is projected to grow 3% per year during the next five years.

GLOBAL SHIPMENTS DECREASING

Just over 60 million metric tons (mmt) of global K shipments were seen in 2016, which is down from around 61 mmt in 2015. This follows a surge of 9 mmt in 2014, jumping the total number from just under 55 mmt in 2013 to 62 mmt in 2014.

The oversupply situation in 2014/2015 pushed the potash price lower during that time, he said.

"Another important factor was key potash export currencies, particularly the Russian and Belarussian ruble, collapsed with the price of oil in 2015," Paula said.

However, global potash prices have trended higher since the middle of 2016 with decent demand growth and no immediate threat from new capacity, he said.

A couple of things are driving demand growth.

Paula said record harvests have removed a large amount of nutrients from soil across the world. In addition, plant nutrients remain affordable, so more farmers are willing to apply more fertilizers.

Paula estimated K global shipments for 2017 to be at 63.5 mmt, roughly 4% higher or 2.7 mmt more than the previous year. The forecast for 2018 shows shipments will increase again another 3%, or 1.7 mmt, to somewhere around 64 to 66 mmt.

Increased shipments are due to strong broad-based demand growth from across the globe, led by two countries in particular, Paula explained.

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Brazil has seen a steady rise of potash shipments in 2015 and 2016 and this is expected to continue into 2017 and 2018, he said. Brazilian shipments in 2015 were at just over 8.5 mmt and the estimate for 2017 is for 9.5 mmt, with the forecast for 2018 at just under 10 mmt.

Paula said potash imports in Brazil are up 14% from January to October in 2017 alone. Steady increases in soybean production and decent farm economics, despite the stronger real, have pushed potash demand upwards in Brazil.

The same is also true for China, which saw 14 mmt of potash shipments in 2016, with the estimate for 2017 at just under 16 mmt, and the 2018 forecast is right at this mark in 2018.

Several factors, such as record crop production year after year, efforts to improve its K balance, and a big import recovery in 2017 combined with gains in domestic production, have all come together to see demand grow in China, he said.

NA SHIPMENTS STEADY

Potash shipments to North America will be typically rangebound after a few volatile years driven by weather and fill program timing, Paula said.

Shipments in 2014 pushed to almost 10 mmt but fell back to 9.5 mmt in 2016. The estimate for 2017 and the forecast for 2018 shipment should remain in this area, he said.

"We aren't going to see much change with shipments staying stable at 9.2 to 9.4 (mmt) in 2017 and 2018," Paula said.

Meanwhile, India is having an interesting situation with potash shipments.

India's shipments have been slow to recover from a subsidy change in 2010 and 2011 that resulted in a near tripling of retail potash prices. In 2010, there were 6 mmt of potash shipments to India; by 2011, that number dropped to 5 mmt, and by 2012 shipments were only at 2.75 mmt.

Potash shipments into India recovered to just under 4 mmt in 2016 and the 2017 estimate is just under 4.5 mmt. The 2018 forecast at just over 4.5 mmt. A recovery has been slow with shipments still not back where they were, he said.

GLOBAL DEMAND TO GROW

Paula said longer-term global potash shipments should continue to grow as world demand continues to grow. Demand drivers are expected to remain positive; more rapid and consistent growth is expected, Paula said.

Global potash shipments increased 2.3% per year or 7.7 mmt from 2010 to 2016, from around 52 mmt in 2010 to just over 60 mmt in 2016. Shipments are estimated to increase about 3% per year, or 12 mmt, from 2016 to 2022 to roughly 72 to 74 mmt, he said.

Growth will be driven by increases in shipments, led mainly by India and China. India could see a 6.1% increase in potash shipments from 2016 to 2022, while China's growth could be around 4.1%.

Paula said strong demand outlook leads to a tighter supply and demand situation from 2019 forward.

Global operational capacity is projected to increase 12.8 mmt, from 69 mmt in 2016 to 81.8 mmt in 2022. The global operating rate is forecast to dip to 86% in 2018 before moving back to the 89% range by 2022.

"There are several factors to watch that affects the potash outlook," he said. "Agricultural commodity prices is a big wildcard in this."

Paula said other factors that could affect the outlook are the ramping up of new capacity, industry consolidation, demand in such countries as Africa, the former Soviet Union and India, key exchange rates and various government policies.

Russ Quinn can be reached at russ.quinn@dtn.com

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Russ Quinn