Global Potash Stocks, page-11

POTASH SECTOR:

Uralkali yet to sign MOP contracts, US$300/t “fundamentally unreasonable” for the Asian markets (including China and India)

This is in the light of “current robust trends” in potash prices, “further confirmed by current Asian tender levels and spot sales”, as well as prices in Brazil already achieving US$350-360/t.
Uralkali also noted increased annual demand of up to 10% of sales in Russia.

In August and September 2018, Belaruskali settled both its Indian and Chinese contracts at US$290/t CFR. This marked the first time ever that the Chinese MOP benchmark price has matched the Indian benchmark. Historically, the Chinese contract price has settled slightly lower than that for India, e.g. the 2017 Chinese price was US$230/t versus the Indian price of US$240/t. In settling at US$290/t, Chinese buyers actually agreed a larger price increment (US$60/t) than India (US$50/t). This was at odds with claims by some industry observers that China had ample stocks.

Since then, updates from Nutrien, Mosaic, Canpotex (the joint venture that sells Nutrien’s and Mosaic’s output outside of North America), ICL and K+S (amongst others) continue to testify to the strength of potash demand this year and in 2019.

Earlier this month, EuroChem said that it expects a “tightly balanced market scenario” through H1 2019, “significant price increases” in all regions and “no major relief to the tight market scenario” during 2019.

Nutrien tightened upwards its 2018 global potash shipment forecast to 66-67Mt saying that it expects “curtailments and permanent closures in 2018 to match or exceed new production capability”.
Meanwhile, downstream inventories in major global potash markets were reported to “remain relatively tight”, and continued strong consumption is expected due to the combination of record crop yields in 2018 and potash prices remaining affordable relative to grower revenues.
Last month, Canpotex reported being sold out till January 2019 “due to continued strong demand”.


Nutrien had previously noted that strong consumption trends in China are being supported by affordability – and a shift to more potassium-intensive crops like fruits and vegetables. We note that while different crops have varying degrees of chloride tolerances, ‘high value’ crops do better with SOP (Sulphate of Potash): yields and important premia-determining aspects such as taste and appearance can be significantly improved.
We therefore see the MOP price news as having positive readthrough for SOP demand and prices.
K+S’s on-going wastewater issues in Germany should also be supportive of MOP, SOP prices, we believe.

Higher SOP and MOP prices should boost project valuations, which should benefit SOP developers such as Salt Lake Potash and Danakali and MOP developers such as Kore Potash and Emmerson.