Its perfect time for MNB to shine As the fertiliser bottleneck...

Its perfect time for MNB to shine

As the fertiliser bottleneck hits food supplies,
these ASX small caps are racing into production

The bottleneck on global phosphate and potash fertiliser supplies – brought about by a combination of sanctions on Russian fertilisers, existing Chinese export bans, supply chain disruptions and gas price rises – has sent prices soaring and is impacting on food production.

Fertiliser prices remain at historically high levels despite the basket of fertiliser prices measured by CRU’s fertiliser index slipping more than 50 points since its record high of 390 in March.

And just to add salt into the wound, a huge consignment of potash fertiliser was lost recently after atrain derailment in Alberta, Canada.

Further underscoring how valuable fertiliser has become, some people are resorting to theft in order to get their hands on the material withpolice in Western Australia investigating the theftof some 36,000 litres of liquid fertiliser from a rural property near Toodyay.

So how is the current geopolitical situation impacting on supplies and prices of phosphate and potash fertilisers?

Fertilisers and geography

There are three principal types of fertilisers; namely nitrogen, phosphorus and potassium.

Production of the first – in the form of ammonia and urea – typically involves converting natural gas. While prices have gone up due to the gas crisis in Europe, plants producing nitrogen fertilisers are found throughout the world.

However, both phosphorus and potassium fertilisers are more constrained by the tyranny of geography and geology as they are sourced from minerals that are only found in certain regions.

Phosphorus fertilisers, which are linked to a plant’s ability to use and store energy, including the process of photosynthesis, are produced from rock phosphate.

China is the single largest producer of rock phosphate – outstripping both of the next largest producers Morocco-West Sahara and the US – which, given its ban on exports, neatly explains why prices have soared.

Meanwhile, potassium is essential for water uptake and for synthesising plant sugars for use as food.

The most common form of potash fertiliser is Muriate of Potash (MOP), a 60 to 70mtpa global market favoured for bulk crops such as wheat, oats and barley due to its lower cost.

However, its high chloride content means that the more expensive Sulphate of Potash (SOP) – often synthesised from MOP – is used for high-value, chloride-intolerant crops such as avocados or where soils have high salinity.

‘The world has realised that food can be a weapon and it is being currently used’

SOP production from MOP requires plenty of energy, which adds further to its cost, though there is growing interest in SOP production from potassium-rich brines.

But for now, potash typically comes from either underground or solution mining with Canada, Russia, Belarus and China accounting for about 80% of the world’s production.

With sanctions on Russia and Belarus as well as China’s export ban, this means that Canada is now the world’s single remaining major producer of potash – a development that neatly explains why potash prices have more than doubled since early 2021.

Impacting food production

The fertiliser shortage has already started to bite with both global corn and wheat production down according to theUS Department of Agriculture.

This had led Norwegian fertiliser giant Yara to tellReutersthat donors are urgently needed to close the UN’s US$10bn food program funding gap.

“The world has realised that food can be a weapon and it is being currently used,” Yara chief executive officer Svein Tore Holsether noted.

“We need to work on an emergency response for the most vulnerable. For that we urgently need to unlock funds of the world food programme.”

He added that Europe and the rest of the world needed to build a system that is less reliant on Russia while taking a green approach to producing fertiliser.

However, crisis also brings with it opportunity and there are a number of junior ASX fertiliser plays poised to play a part in alleviating the shortfall.

ASX Small Cap phosphate and potash fertiliser producers

MinBos Resources (ASX:MNB)
0.17Up 21.43% this year

This March the company finalised the DFS design for its Cabinda Phosphate Fertiliser Plant in Angola, Africa.

The plant has been designed with an initial production capacity of 150,000tpa with capability to expand up to 450,000tpa.

And commissioning is expected in H1 2023.

“The company is looking forward to delivering the DFS and Final Investment Decision in the coming months, as we prepare to get into production in the first half of 2023,” CEO Lindsay Reed says.