US MOP demand should rebound in early 2023 as buyers replenish inventories ahead of spring planting, supported by tight inventory management last fall that diminished supplies in key growing regions.
A spike in fertilizer prices early in the year, after Russia's invasion of Ukraine jeopardized US imports, pressured overall fertilizer affordability for US farmers in much of 2022. This ultimately drove reduced MOP application rates in the fall throughout key domestic growing regions as buyers sought to minimize costs and forward price risk. But tight inventory management and hand-to-mouth buying that characterized the fall should support demand ahead of the spring as industry participants estimate buyers throughout the US are low on supply, while declining MOP values incentivize purchases.
Potash sales from North American producers in the first nine months of 2022 declined sharply year over year as higher prices and ample carryover inventories from the spring pressured demand. MOP imports to the US dropped in July through early December to an estimated 564,000 metric tonnes (t), down by 37pc from the same period last year, Argus data show.
Even though prices fell through the fourth quarter, buyers have largely remained on the sidelines as prices remain elevated compared to historical norms. North American producer Mosaic curtailed production at its Colonsay, Saskatchewan, mine early this month in response to slowed demand in the second half of the year, anticipating the company's existing inventory would be able to satisfy near-term demand. The company had been ramping up output from the mine — which was running at a rate of 1.3mn t/year before the curtailment — to a targeted 1.8mn-2mn t/year by late 2023 after restarting its second mill.
But lower values at New Orleans and a price reset for first-quarter tonnage from Mosaic has drawn some buyers back into the market to layer in tons for the spring application period. There is slim-to-no expectation for higher values in the near term as domestic supply availability vastly outpaces nearby demand, but favorable crop values and the resulting incentives for US growers to maximize yields should buoy potash demand, a trend Mosaic expects will enable the restart of both Colonsay mills in early 2023.
Falling fertilizer prices have improved farmer purchasing power as well for key macronutrients. Argus' US fertilizer affordability index, established in January 2019, is up sharply from the levels in the spring and a year earlier. The index measures the weekly spot value of Nola urea, DAP and MOP against front-month corn, soybean and wheat futures.
Nola MOP barge prices have steadily declined since reaching a record high of $830-835/short ton (st) fob in late March. Values averaged about $666/st fob Nola in July-September and $539/st in the first 10 weeks of the fourth quarter. That is also down from about $684/st fob Nola in the final three months of 2021. Prices on 8 December dropped below $500/st fob for the first time since July 2021.
Phosphate and nitrogen prices have also declined, but similar to MOP barge values, they remain elevated compared to historical norms. From 2016-2020, MOP barge prices averaged about $229/st fob Nola.
Domestic producer Nutrien last month forecast global potash shipments will rise to 64mn-67mn t in 2023 as buyers in North America and Brazil seek to replenish inventories. That is up from a projected 60mn-62mn t in 2022. While Belarusian MOP typically accounted for about one-third of offshore US imports prior to the disruption this year, shipments from other overseas suppliers, including Russia and Israel, are expected to continue to fill the gap.
