Global potash prices to continue steady recovery in 2018 – Bernstein

LONDON (ICIS)–Global muriate of potash (MOP) prices look set to continue increasing in 2018, thanks in part to tight producer discipline amid strong demand, chemical equity analysts at Bernstein Research said on Monday.

Bernstein expects demand growth of approximately 2.5% in 2018 – equating to roughly 1.6m tonnes, and in line with the historical average.

Demand grew faster than expected last year, according to the analysts, up by 4% year on year, equating to some 2.5m tonnes.

This was due to stabilised farmer net income in 2016, and “makes up for relatively weak demand growth” in previous years.

“We expect farmer net income in 2017 to be breakeven, suggesting normal demand growth in 2018,” Bernstein added.

With regards to the MOP market’s structural oversupply, Bernstein is optimistic: “We expect steady price appreciation as producers keep the market tight. Ramp-up of new capacity is slow, demand is strong, and the Canadian producers [Nutrien and Germany’s K+S] are idling capacity as needed.”

“If 2017 taught us anything, it is that ramping up a new mine is slow work,” the group adds.

According to its statistics, K+S’ 2m tonne/year mine at Bethune in Saskatchewan, Canada, came online in June, but only sold 300,000 tonnes of potash.

Meanwhile, the Garlyk mine in Turkmenistan – owned by state-controlled Turkmenhimiya and built with the assistance of Belarusian MOP major BPC – started up in March, and is yet to produce any notable output, according to Bernstein.

As for Russian chemical and fertilizer major EuroChem, the analysts do not expect to see “substantial production” from its Usolskiy and VolgaKaliy MOP mines until at least 2019.

With regards to producer discipline, Bernstein said that while Canada’s PotashCorp (PCS) – now part of global crop nutrient major Nutrien – started up its Rocanville mine, the producer also shut down part of an older mine.

In December, PCS idled two mines for eight and 10 weeks, taking a full 1m tonnes off its production quota.

Bernstein added that the two idled mines were “perfectly” profitable.

“Going into 2018, K+S has announced the closure of Sigmundshall, as well as a gradual ramp-up of Bethune – their most profitable mine – [while] running production [at] 400,000 tonnes less than what nameplate capacity would imply,” Bernstein added.

“If more curtailments are needed, we expect Nutrien [or US producer] Mosaic to do so.”

Bernstein’s year-end target for Brazilian granular MOP remains set at $330/tonne CFR (cost and freight) Brazil “as market balance allows suppliers to slowly increase prices”.

Pictured: K+S’ potash plant in Werra, Hessen
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