Viewpoint: Potash market more positive for 2021
Market participants expect demand for MOP in 2021 to outstrip levels this year, and for the reduction of Covid-19-related issues to boost deliveries and prices. But there are several potash projects that complete next year that will add supply to an already glutted market, potentially limiting price gains.
Covid-19 has only had a limited direct impact on fertilizer demand this year, but the effects have been more severe in industries that are heavy MOP users. Most operations linked to the potash industry have nevertheless been able to carry on uninterrupted, and demand in the US, India and in particular Brazil is well up on last year. For 2021, the market expects a continued level of insulation from the myriad effects of Covid-19, as governments continue to prioritise food security, assisting with the smooth running of fertilizer deliveries.
The market will start next year focussed on large contracts between suppliers and buyers in India and China. Contracts mainly expire at the end of 2020, and negotiations are likely to start in January. If contracts are concluded early next year, the new price will provide some clarity to other regions, which could stimulate further demand early on in the year, particularly if buyers expect prices to rise during the course of 2021. Argus expects China and India headline contract prices to rise by $5-15/t from $220/t cfr and $230/t cfr, respectively.
Argus forecastsMOP demand at 69.2mn t in 2021, up from projections of 66.9mn t for this year and 64.4mn t in 2019. This year's consumption, although up on 2019, was still lower than expected, as the restocking that many anticipated after a lacklustre year for demand in 2019 did not fully emerge. Instead, many buyers bought cautiously, preferring to have only quantities required in a period of uncertainty. But producers are confident that next year's demand levels will support the extra capacity due on stream next year, as well as the continued ramp-up of production from new potash producer Eurochem and German potash producer K+S' mine in Canada.
New projects for 2021 do not include Jordanian potash producer APC's 140,000 t/yr expansion at Safi, after it delayed the completion of the project from this year to 2022, with no detail given for the significant delay. But even without APC's expansion, around 3.2mn t/yr of new MOP capacity is due to come on line next year, more than Argus' projected demand increase of 2.3mn t to 66.9mn t in 2020 (see table).
Argus still expects prices to rise next year despite production capacity far outstripping demand growth. Suppliers try to balance their assets to match supply with demand, and so the extra capacity does not always equate to similar levels of production. Some projects earmarked for completion in 2021 may roll over into 2022. And projects that do complete next year will ramp up gradually, meaning only some of the 3.2mn t/yr of extra capacity will be produced.
The potash market could be hit by the impact of sanctions or changes to existing supply agreements with Belarusian producer Belaruskali. Norwegian fertilizer producer Yara recently said it has growing concerns on the treatment of Belaruskali's staff and expects its business partners to uphold ethical guidelines. The EU and US have also signalled further sanctions against Belarus, although the measures have yet to target potash production in the country.
A sudden drop in Belaruskali export arm BPC's sales could have an array of effects. Losing a significant buyer such as Yara could put pressure on BPC to offload large volumes to China and India, for example, which could incentivise BPC to settle at a lower contract price than it normally would. Equally, buyers unable to purchase from BPC would have to seek volumes elsewhere. Other suppliers could take advantage of a short-term supply shortage and lift prices. But the impact is ultimately dependent on the severity of the response, and it is still unclear if Belaruskali will see any impact, as so far it has maintained production with just a few days of interruptions in August, despite growing tensions in Belarus.
| New MOP capacity (firm and probable), 2020-24 | ||||
| Company | Location | Date | ± Capacity mn t/yr | Status |
| ICL | Suria, Spain | 2021 | 0.32 | Expansion at current Suria site. Construction under way |
| Uralkali | Solikamsk-3, Russia | 2021 | 0.60 | Capacity expansion at current mine underway |
| Belaruskali | Petrikov, Belarus | 2021 | 1.50 | Greenfield project. Works continue at the site |
| Sinoagri | Kammun, Laos | 2021 | 0.78 | Brownfield expansion project with work underway from May 2020. Around 250,000 t/yr achieved with efficiency-enhancing technological changes from current 220,000 t/yr, plus 750,000 t/yr with extra mining capacity |
| Total | 3.20 | |||
Related news posts
Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India’s Coromandel to build Kakinada fertilizer complex
India’s Coromandel to build Kakinada fertilizer complex
Singapore, 2 May (Argus) — Indian fertilizer producer Coromandel International will build a 650 t/d phosphoric acid-sulphuric acid complex facility in Kakinada, Andhra Pradesh with an investment of approximately 10bn rupees ($120mn). The project is expected to commission in two years' time, CIL's executive chairman Arun Alagappan said on 26 April. Phosphoric acid and sulphuric acid are used in the production of phosphate fertilizers like DAP and NPKs. CIL's new phosphoric acid facility aims to provide for its fertilizer manufacturing and to replace more than 50pc of the plant's import requirements. It also plans to build a 1,800 t/d sulphuric acid plant to supplement phosphoric acid production. By Deon Ngee Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New US rule may let some shippers swap railroads
New US rule may let some shippers swap railroads
Washington, 30 April (Argus) — US rail regulators today issued a final rule designed to help customers switch railroads in cases of poor rail service, but it is already drawing mixed reviews. Reciprocal switching, which allows freight shippers or receivers captive to a single railroad to access to an alternate carrier, has been allowed under US Surface Transportation Board (STB) rules. But shippers had not used existing STB rules to petition for reciprocal switching in 35 years, prompting regulators to revise rules to encourage shippers to pursue switching while helping resolve service problems. "The rule adopted today has broken new ground in the effort to provide competitive options in an extraordinarily consolidated rail industry," said outgoing STB chairman Martin Oberman. The five-person board unanimously approved a rule that would allow the board to order a reciprocal switching agreement if a facility's rail service falls below specified levels. Orders would be for 3-5 years. "Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," Oberman said today. STB commissioner Robert Primus voted to approve the rule, but also said it did not go far enough. The rule adopted today is "unlikely to accomplish what the board set out to do" since it does not cover freight moving under contract, he said. "I am voting for the final rule because something is better than nothing," Primus said. But he said the rule also does nothing to address competition in the rail industry. The Association of American Railroads (AAR) is reviewing the 154-page final rule, but carriers have been historically opposed to reciprocal switching proposals. "Railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention," AAR said. But the trade group was pleased that STB rejected "previous proposals that amounted to open access," which is a broad term for proposals that call for railroads to allow other carriers to operate over their tracks. The American Short Line and Regional Railroad Association declined to comment but has indicated it does not expect the rule to have an appreciable impact on shortline traffic, service or operations. Today's rule has drawn mixed reactions from some shipper groups. The National Industrial Transportation League (NITL), which filed its own reciprocal switching proposal in 2011, said it was encouraged by the collection of service metrics required under the rule. But "it is disheartened by its narrow scope as it does not appear to apply to the vast majority of freight rail traffic that moves under contracts or is subject to commodity exemptions," said NITL executive director Nancy O'Liddy, noting it was a departure from the group's original petition which sought switching as a way to facilitate railroad economic competitiveness. The Chlorine Institute said, in its initial analysis, that it does not "see significant benefit for our shipper members since it excludes contract traffic which covers the vast majority of chlorine and other relevant chemical shipments." By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more