This podcast discusses how the global spread of the coronavirus is impacting the potash market and its connected infrastructure. Ewan Thomson, Argus editor - potash, discusses the broad impacts on supply, demand and prices.
In terms of supply, the vast majority of potash mines that were commercially viable shortly before coronavirus hit, they're still operating. So, there are no immediate supply shocks due to hit the market at present. Buyers do not report any difficulty in getting MOP generally, although transport delays are common in Europe at the moment, partly because of coronavirus and partly because it is also peak buying season for MOP now. Chinese producer Qinghai Potash resumed MOP production in late February after shutting down for winter maintenance on the 15th of January. Both of the major MOP producers in China, QHSL and Qinghai resumed output ahead of the spring planting festival and are reported to be operating at normal levels after a period of disruption to mining and logistics as a result of the initiatives to reduce the spread of coronavirus.
Only one MOP producer outside of China has reported a potash mine production cut or shutdown related to the impact of coronavirus outbreak. But other producers are taking precautions and have made changes to operations to reduce the virus's spread after potash producer ICL was forced to close its mines in Spain. Suppliers know that any mine shutdowns will be significant. ICL said the risk of stopping output at its potash plants in Israel were the most significant risk to its business in the near future. That said, most producers view the production and supply of potash as critical, both to maintain global food security during the pandemic and also to the pharmaceutical industry. And so do not expect any [inaudible 00:03:02] shutdowns. But a lack of staff because of illness at mines, topside operations or ports could cause widespread disruption, particularly as many regions are approaching peak demand periods. At this stage, it seems likely that governments will do as much as possible to maintain production at all key manufacturing plants, but this may not be in the government's power to do so if staffing levels cannot be maintained or if feed stock does not make it to factories or if product cannot leave the country as we saw in China during February.
Looking at demand, the key issues for farmers, suppliers, and distributors alike is projecting what will be needed where and when as always, but this time the outlook is much harder to predict. In some cases, demand is rising because of coronavirus and in others it's falling because of coronavirus. Europe has been buying a lot of MOP in the run up to the next application season, but this has been accelerated on concerns that European logistics will get worse and buyers won't let product in warehouse ahead of time in case of any delays. In South East Asia, demand has been hit but it will only become apparent how hard the impact is in the following months. Anecdotally though, we hear demand is down in Vietnam, Thailand, Indonesia, and Malaysia compared with this time last year. Import, export data for February is still coming in, but we expect to see a large drop in imports in key buying countries.
In terms of prices, granular SOP/FOB levels in East Asia have risen because of supply problems in China as well as peak buying season in the North of the region. MOP prices have fallen though, not as a result of coronavirus. They've been falling since the fourth quarter of 2018. But the impact of coronavirus means an uncertain period for prices going forward. Just one or two mine closures will completely alter the supply, demand balance causing prices to jump up. Equally, if all mines running smoothly now continue to do so given the slight demand, prices should continue to fall.
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