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World potash market stabilizes

Release time: 2023-09-12

      Recently, Fertecon, a unit of S&P Global Commodity Insight, predicted that although world potash supply remains constrained, prices have fallen from historic highs in 2022 and are expected to remain relatively stable for the rest of 2023 and early 2024。7月,This is despite continued trade sanctions by the European Union and the United States against Russia and Belarus, the world's second - and third-largest potash exporters,The price of standard grade potassium chloride is 239~300 US dollars/ton (FOB Baltic Sea,下同),Lower than the average price of $329 / ton in the second quarter of 2023,That's well below the $853 / ton in Q2 2022,Has recovered to levels seen in early 2021。

      Demand for potash, a key ingredient in fertilisers, is global but production is relatively concentrated。As a result, potash pricing is highly sensitive to trade flows and is largely influenced by just three countries that account for about three-quarters of international trading volume: Canada, Russia and Belarus。In 2021, Canada will produce 35 per cent of global potash demand, Russia 20 per cent and Belarus 19 per cent。

      In the years leading up to 2020, potash prices were stable, with prices for standard grade potassium chloride fluctuating between $200 and $300 per ton。However, in the second half of 2021, the European Union, the United States, the United Kingdom and Canada imposed sanctions on Belarusian individuals and business entities, including the Belarusian Potash Corporation (BPC) and its export arm。Subsequently, Lithuanian Railways announced the termination of its contract with BPC from February 1, 2022, effectively banning BPC cargo from entering the port of Klaipeda。In addition, Yara International also announced that it will stop purchasing potash from BPC as of April 1, 2022。

      Since then, international potash prices have soared。After the European and American sanctions against Belarus were finalized, the price jumped from an average of $288 per ton in the second quarter of 2021 to $497 per ton in the third quarter and to $599 per ton in the fourth quarter。Although the rally weakened at the start of 2022, with prices averaging $600 per tonne in January and $620 per tonne in February, potash prices began to rise rapidly with the outbreak of the Russia-Ukraine conflict on February 24。

      The European Union and the United States have imposed new sanctions on Russia in the wake of the conflict with Ukraine。Because potash is related to food security, the United States issued a license exception, that is, Russian agricultural products and fertilizers are not affected by sanctions, but the European Union set a quota for imports of potassium chloride from Russia and expanded sanctions against Belarus to include all grades of potassium chloride, further blocking Russian and Belarusian potash exports。In addition to being unable to use the terminal at Klaipeda, BPC was also unable to access the proposed alternative port of Nikolayev due to the conflict, resulting in BPC having to declare force majeure。Spurred by this uncertainty, potash prices jumped to an average of $796 per tonne in March 2022 and continued to surge to $881 per tonne in May, up 228% from $268 per tonne in the same period in 2021。

      Then, as trade flows changed and stabilized, potash prices began to fall。As the supply chain realigns from the second half of 2022 onwards, potash pricing has loosened, falling to an average of $474 per tonne in December。Among them, BPC has increased its use of Russian ports and started exporting to China by rail。Trade data show that Belarusian potassium chloride exports to China increased by 9. 9% in 2022.2%。According to Fertecon, due to lower exports from Belarus and Russia and price-driven demand disruption, potash trade totaled 30.3 million tons in 2022, down 18 percent from 2021。

      For the future period of the potash market, Fertecon said in the "Potash Outlook" report that since the beginning of 2023, due to demand destruction and high inventories, potash prices have continued to decline。In the first quarter of this year, all benchmark prices fell by about 20%, and the average price of standard grade potassium chloride was $430 / ton。Prices continued to fall in the second quarter, averaging $329 / ton。At the same time, BPC continues to develop alternative export routes, including the use of the port of St. Petersburg。The Fertecon report states: "Using the port of St. Petersburg, the main logistical constraint for BPC is the number of rail wagons they can use。Since the distance to transport products to St. Petersburg is almost twice the distance of the original export route, sufficient capacity is not expected until 2025 or longer。”

      Fertecon expects global potash trade to rebound this year as supply chains rebuild。"Despite the slowdown in demand in the first half of 2023, overall potassium chloride exports in 2023 are expected to exceed last year, with both Belarusian exports and Chinese imports expected to improve," the report said。Taking into account the price reduction and Chinese price settlement factors, it is expected that potash demand will start to pick up in the second half of 2023。”

      Fertecon data show that at the end of the second quarter, potash prices began to stabilize, the average price of standard grade potassium chloride in May $325 / ton, June average price of $294 / ton。Fertecon expects potash export prices to stabilize below $280 / ton in the coming period, with a slight downward trend by the end of 2024。Fertecon said: "While structural supply shortfalls remain a risk to potash prices and the expected improvement in demand should ease the downward pressure on prices, potash prices are not expected to return to early 2023 levels.。”

      (Source: China Chemical Industry News)