The global potash market experienced several weather- and price-related challenges in 2019, but global mining major BHP is optimistic about the sector. In its recently released half-year results for the period ended 31 December 2019, BHP also reported that it is on track to present its Jansen Stage 1 potash project in Saskatchewan to its board in 2021. The capital cost to get Jansen into production is estimated to be between US$5.3 billion and US$5.7 billion, a monumental investment for the potash sector. Last October, the firm’s board approved US$345 million for engineering work at the asset, finalizing the port solution as well as preparations for underground development at the Canadian site. To date, more than US$2.7 billion has been spent on Jansen, which is estimated to be 84% complete. Final shaft lining is taking longer than expected; however, the delay is not anticipated to impact the execution timeline for the project.
Canada took one of the biggest hits in the potash sector last year, with key producer Nutrien temporarily curtailing production at three projects in Saskatchewan in Q4 2019. Earlier this year, US-based Mosaic announced plans to indefinitely shut down the Colonsay potash mine, also in Saskatchewan, due to excess inventory and poor market conditions. According to the BHP report, exports out of Canada were down 8% year-over-year in 2019, making the North American nation the hardest impacted by the downturn in demand. Globally, potash output slipped from 43 million metric tons in 2018 to 41 million metric tons in 2019. While the current market may give cause for concern, BHP is looking ahead, where it sees the need for potash steadily growing.
“Turning to the long-term, demand for potash stands to benefit from the intersection of a number of global megatrends: rising population, changing diets and the need for the sustainable intensification of agriculture,” the company states. The diversified miner, which has base metals and energy projects around the world, expects that over the next decade these factors will lead to potash demand growth of 1.5 million to 2 million metric tons per year, or 2 to 3%. “The pace of demand growth is important, because the need for new supply to be induced will only arise once both the spare capacity held by incumbents and capacity additions that are under construction have been absorbed by the market.” The global potash fertilizer market is expected to grow from US$19.7 billion in 2018 to US$25 billion by 2026, which is a compound annual growth rate of 4.3%.
