Potash Market

Global Annual Demand for Potash is approximately 58-60Mtons, and growing. Potash consumption has grown at 5.6%CAGR over last 10 years, driven principally by increased demand from India, China and Brazil. It is expected that the pricing anomalies experienced in 2008 should not repeat themselves, as there has been more discipline amongst potash suppliers, and current potash prices are within historical norms, compared to underlying grain prices.

Specialty Plant Nutrition (SPN) and Sulphate of Potash (SOP) premiums

Despite the fact that 90% of the growth in crop production is projected to come from higher yields and increased cropping intensity, arable land will have to expand by around 120 million hectares in developing countries, mainly in sub-Saharan Africa and Latin America. Arable land in use in developed countries is expected to decline by some 50 million hectares, although this could be changed by the demand for biofuels.” (FAO (2009)).

Based on the results of PDI’s solar evaporation chemical analysis, 82% of its anticipated sales revenues are expected to be derived from SPN products such as potassium sulphate (SOP) and nitrate fertilizers, collectively referred to SPN. SOP commands a significant premium over potassium chloride or Muriate of Potash (MOP) due largely to the process costs involved in converting MOP to SOP, which process accounts for 85% of world SOP supply. The conversion cost, combined with the scarcity of primary SOP production buoyed by the demand for application to premium crops has contributed to a price premium of SOP over MOP averaging approximately 50% for the past decade. The SOP premium increased significantly in the latter part of 2013 to 98% as demonstrated by Compass Minerals’ Q3/13 realized price of $712/ton for SOP and Potash Corp’s Q3/13 realized price $360/ton for MOP.

GDR’s long term price assumption modelled for SOP is $585/t. Sociedad Química y Minera de Chile S.A. (SQM) is one of the world’s largest producers of SPN, from its operations in the Atacama Desert of Chile, and during 2012 SQM reported $675 million in sales of SPN at an average sales price of $893 per tonne.

SOP Consumption

According to various industry sources global potash consumption is expected to grow at 4% per annum with approximately, 47% of potash fertilizer consumption, equivalent to 17-18 Mt per annum of K₂O, being used for "premium" crops where SOP is preferred over MOP as the most commonly used alternative to MOP when the presence of chloride ions is undesirable. SOP holds additional advantages over MOP, due to improved crop yield, quality, shelf life, and taste benefits. SOP performs particularly well with crops that have a low tolerance to the chloride in MOP (such as fruits, vegetables, beans, nuts, potatoes, tea, tobacco and turf grass) and in arid, saline and heavily cultivated soils.



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