Global Fertilizer Outlook - 3
Sanctions Could Affect World Potash Supply in 2022
OMAHA (DTN) -- The global potash (K) outlook features some major geopolitical issues. How quickly these matters can be solved, and if supply levels increase, will dictate if high fertilizer prices decline any in 2022.
Similar to the phosphorus outlook depending heavily on what happens in China, the K prospect in 2022 is very reliant on what happens with potash production in Belarus. In addition, the ongoing Russia and Ukraine dispute could affect this outlook.
MORE K DEMAND
According to the International Fertilizer Association (IFA) Public Summary Medium-Term Fertilizer Outlook 2021-2025 (https://www.fertilizer.org/…) released in August of 2021, global fertilizer use (N+P+K) was estimated at 198.2 million metric tons (mmt) in 2020-21, which was almost 10 mmt, or 5.2%, higher than in 2019-2020. This was the largest increase since 2010-11.
IFA estimates global potash production should exceed 70 mmt in 2020, a 6% increase from the 2019 output. Unlike the nitrogen and phosphorus markets, production increased universally across major producing regions.
Global Muriate of Potash (MOP) trade grew from 49 mmt in 2019 to more than 56 mmt in 2020. The growth in trade was led by improved demand in the United States, Brazil, India and China, according to the report.
World K consumption was estimated to be about 41 mmt in 2019, according to the U.S. Geological Survey's (USGS) 2021 Mineral Commodity Summary. (See it at https://pubs.usgs.gov/….) Asia and South America were the leading consuming regions of the world.
The rate of growth in all fertilizer demand is expected to slow to 0.9% in 2021-2022. IFA forecasts global fertilizer use to reach 199.9 mmt.
Potash demand rose by 6.2%, or 2.2 mmt, to 38.5 mmt in 2020-21.
IFA forecast potash consumption to grow faster than the other nutrients during 2021-22. Demand is expected to be 39.1 mmt, up 1.5%.
In addition, growth rates are also expected to be higher for K between 2020-21 and 2025-26. The forecast for 2025-26 is 41.2 mmt, which would be an increase of 1.6%.
IFA believes the Emerging Europe and Central Asia (EECA) region will see the most growth in 2020, with new mines started up in Russia and Belarus. These countries added 2.3 mmt on new capacity in 2020, up from 18.8 mmt in 2019.
Additional production was added in Canada, Israel and China. These expansions took global capacity to 62.3 mmt in 2020.
Russia has the largest number of individual projects in the IFA's capacity forecast, with three projects to start up from 2023 onward. These projects, along with smaller ones, are forecast to add 4.6 mmt of K between 2021 and 2025.
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BELARUS K SANCTIONS
Chris Lawson, head of fertilizers for London-based consultant CRU, told DTN global MOP production should see about a 1% increase from 2021 to 2022. This number is forecast to increase from just over 71 mmt to 71.7 mmt.
The major issue that will affect potash production in 2022 will be the various questions surrounding potash-producing giant Belarus, according to Lawson.
In June 2021, the European Union (EU) imposed sanctions on the nation, specifically on oil, tobacco and potash. Belarus was the world's third-largest potash producer in 2019, totaling about 12 million metric tons (mmt) of MOP.
This is about 20% of the global K trade, he said.
The U.S. also imposed its own sanctions against Belarus, both in August and December this year.
The sanctions in December involve state-owned potash producer Belaruskali. The U.S. sanctions are in relation to the migration crisis on the Poland-Belarus border.
Belarus also was the second-largest potash exporter in 2019 and put 10.3 mmt of MOP into the overseas markets, he said.
"They can still export K but not as much as they could before the sanctions," Lawson said.
More issues exist with Russia's intention to restrict navigation in parts of the Black Sea, he said. Many shipping routes to move potash out of the region have been cut off as Russia continues to escalate its campaign to destabilize Ukraine.
Josh Linville, director of fertilizers at StoneX Financial, said the unrest in Belarus, Russia and Ukraine has a huge impact on the K market, considering those three countries alone make up about 35% of the total K output on the planet. These geopolitical issues will have a large effect on K exports for most of the world, he said.
"Worst-case scenario could be some parts of the world would not be able to import potash," Linville said.
CANADA INCREASING K PRODUCTION?
In North America, the major K producer is Canada -- the largest K producer in the world, as it produced 20.9 mmt in 2019 and exported about 19.3 mmt in 2019.
Floods severely damaged railways in Western Canada, which could affect K movement. This is a short-term issue, however, as Canadian railroads have been busy repairing and replacing tracks in British Columbia, he said.
Samuel Taylor, farm input analyst for Rabobank, believes Canada will step up production in the first quarter of 2022. The question is how much of an increase we could see, he said.
Potash prices, much like nitrogen and phosphorus fertilizer prices, could finally being to level off or maybe even decline if more production is put into the supply chain or if these supply issues are eliminated. Taylor believes any drop in retail fertilizer prices will likely not happen until the second half of 2022.
Prices should continue to be volatile into the first quarter of 2022. "The risk of sanctions hovers over this entire market," Taylor said.
Much like phosphorus, the higher K prices may push some farmers to limit K applications on their fields. Taylor said some estimates put K application dropping anywhere from 10% to 15% in both North and South America in 2022.
Linville said there are some stories out of Brazil about producers cutting back on K application. There are also some tales of Brazilian farmers not having access to K fertilizers.
It is difficult to determine what exactly is true and what is not, but these stories show there are kinks in the supply chain all over the world, he said.
Taylor said he hopes that, in 2022, some normalcy will return to the fertilizer markets, especially on the supply side. However, at this point, nutrients continue to face many issues, he said.
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Editor's Note: This is the third and last story in our DTN's Global Fertilizer Outlook series. To see the first two, go to:
"Global Fertilizer Outlook - 1"
"Global Fertilizer Outlook - 2"
Russ Quinn can be reached at russ.quinn@dtn.com
Follow him on Twitter at @RussQuinnDTN
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