EuroChem Group AG, a new potash producer, has the ambition to become one of the main players in the business by claiming around a 10th of the world’s market for the crop nutrient by 2025. The Russian company that is a maker of phosphate fertilizers and nitrogen is entering the potash-mining business in an attempt to bring a new dynamic into the market dominated by few producers in North Africa and the former Soviet Union.
EuroChem has recently launched its first potash mine and the second is due to become operational in 2019. The new supply is going to feed EuroChem, which will not need to buy potash from competitors such as Uralkali. As output goes up in the upcoming years, the additional supply will be sold in international markets. Prices for potash have somewhat recovered in the past 12 months but the fresh production could send the markets back down. According to Joel Jackson, an analyst at BMO Capital Markets, demand would need to go up by around 3% annually to absorb the new supply in a market in which some producers carefully balance output and demand to prop up prices.
“The market is worried about us coming in, the total volume we can produce,” said Tom Luigs, global product manager for phosphates and potash at EuroChem’s trading arm. Mr. Luigs and some other experts played down the potential impact, saying the firm wanted to boost production gradually in a way that would meet new demand that he anticipates from fast-growing markets such as Brazil and Southeast Asia. “EuroChem should be able to make incremental increases in production without disturbing the markets,” added Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co.