Investors were grilling BHP in regard to new supply coming...

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Freeman02

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31/10/21

14:26

Post #: 57211799
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Originally posted by CatalystDriven: ↑

While I'm not an expert on Baltic MOP price inputs, Argus are, and have stated as such for the next couple of decades. That is, as an independent investor, as far I can look to research MOP price plug ins for a European based supplier. I wont use prices around the globe in a market privy to proximity to the largest producers on the planet on their doorstep. To me that doesn't make much sense to do at all, since not one tonne will be sold in that market using that macro research.

I would intuitively say that the price difference is due to a couple of reasons, major European potash mines coming off line during that period, while simultaneously major NA potash mines coming ON line during that period - which would explain the discrepancy expected by potash experts into the future, that weren't historically drastic (decreasing supply in Europe at the same time as demand increases versus increasing supply in NA, increasing demand) and a higher focus on logistic emissions/local supply of bulk materials such as potash.

As these NA potash mines come online, they wont be selling to Europe, as shown below in BHPs presentation slide as the logistics costs are too high. So the supply in the NA markets increases without drastic demand increases.

I reinforce that im not a potash price expert - I simply follow the potash price experts in the field which are used by the biggest potash companys as scoping study inputs.

For baltic region, thats $412/t.

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Investors were grilling BHP in regard to new supply coming online the NA market. Experts confidently responded that by the time BHP begins production in 2027, demand would have already caught up with supply and Jansen's new supply would not change the pricing dynamics of the market. The Vancouver price forecast is not being depressed because of increases in supply, as BHP clearly stressed in its presentation demand would be there once production commences.

BHP assumed the global potash market would grow at an average 2% CAGR. So if you do not want to use prices around the globe, lets just look at SHPs plans to direct 80% of supply to Europe and 20% to Brazil.

Looking at the 2019 demand and supply forecasts:
- Demand in Europe (add Russia and Central Asia for conservatism) equates 10.7Mt. Lets us an aggressive CAGR of 4% by 2030, it will be 16.47Mt
- Demand in Brazil equates to 13Mt. At CAGR of 2%, by 2030, it will be 16.16 Mt (note Brazil is one of the main markets for Jansen)

- Supply in Europe (including Russia and Central Asia) stood at 27.4 Mt in 2019 with this number now likely to be higher.

So within the "local" region, still a significant amount of capacity (many of it idled and expected to come online once demand catches up). I do not know of any potash mines in Europe which will be going offline in the next decade. However, there is new supply which is going to come online in the next few years adding 2Mt (for most of these projects, this is just going to be the early stages):

Combined with the amount of supply coming out from SHP, if 80% is going to the Europen market, even with an aggressive CAGR assumption, I still doubt the $100 premium in Baltic sea prices is justified as there is still plenty of idled supply, and new supply. Hence I am still in the conservative position of taking the lowest end of price forecasts for potash in Europe

Last edited by Freeman02: 31/10/21

SHP Price at posting: 17.0¢ Sentiment: None Disclosure: Not Held
4 Upvote

0 Great analysis

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