Potash supply at risk, more price hikes expected
New concerns at major producer in Russia could push fertilizer prices up again
By Dave Hannon -- Purchasing, 7/14/2008 9:33:00 AM
With demand booming and more supply expected to become restricted, potash prices are rising yet again.
In Russia, a vital rail line at one of the world’s largest potash mines could be closed soon, due to a rapidly expanding sinkhole, and put the mine down for at least several weeks until a new rail line is completed.
"We will do everything we can to build the new rail line before the old one is closed," Sergei Testov, one of the lead engineers in the rail link construction program at Silvinit, told Reuters this week from Russia. According to Reuters, Silvinit accounts for 10% of the global potash supply. The hole was about 100 yards from the replacement rail link completed this year, and that it was spreading toward it. When it gets to within 75 yards, local safety officials would shut it down, they said.
Silvinit had the same problem late last year, which led to a rash of potash price hikes around the world.
The supply disruption comes as demand for potash is booming for use in fertilizers in developing economies. And at least one producer in the Canadian market says potash prices may almost double to $900/metric ton excluding freight costs over the next two to three years amid limited supplies of the soil nutrient. “There are no new mines in the pipeline in the next five years,'' Paul Matysek, CEO of Potash One, a Canadian exploration company, said at an industry conference in Shanghai according to a Bloomberg report.
In fact, with Canadian potash miners planning to double exports in the next decade, there is a plan to use an underused western port to try to avoid congestion in the country's main Pacific Coast rail route, an official with export consortium Canpotex said in a recent Reuters report. Canpotex plans to add about 11 million metric tons of shipping capacity by 2012, almost doubling its current capacity, with half coming from a brand new terminal at Prince Rupert, British Columbia, north of Vancouver.
Earlier this year, Purchasing.com reported that Canadian miners had negotiated massive potash price increases with buyers in Asia. Most market analysts say potash and fertilizer prices will continue to rise in the near-term. Goldman Sachs analyst Edlain Rodriguez said potash prices are rising, reflecting global demand and limited availability, according to an Associated Press report. In Canada, Canaccord Adams analyst Keith Carpenter agrees that the fertilizer market (specifically potash and phosphate) will be robust for years into the future as people in developing countries change their dietary habits. "Supply will not be able to meet the growth in demand over the next five years," he wrote in notes to clients.
In late June, a K+S spokesman told Reuters average standard potash prices will increase to around $838/metric ton, almost double its price in the first half. He also said new contracts will now run for three months, compared with six months previously.
Potash supply in South America could be expanding soon, as news came this week that Canada’s Atacama Minerals Corp. has acquired a large land package in a major new potash region in northeastern Brazil that it plans to mine.
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