Potash Exploration on Rise amidst Low Prices

Potash Exploration on Rise amidst Low Prices

Potash producers have started this year with more competition and a supply glut caused by lower demand from top clients, such as China and India. While prices remain low, potash companies from Russia, Belarus and Canada are still waiting for China to sign this year’s contracts that will provide suppliers and customers with a benchmark and set the tone for the rest of the year.

Due to the delay with the deals, several producers have already downgraded their outlook for this year. Russia’s Uralkali, the world’s biggest potash miner by volume, said that it anticipated demand to go down to 58-60 million metric tons, compared to last year’s 61 million tons. Following the 2013 breakup of a Russian-Belarusian marketing cartel, there has only been a limited room for taming the supply. Moreover, not only is supply very high now but also producers’ stockpiles have soared, which further deteriorates the situation.

To make the things even worse, there are a few large projects that are about to open their operations very soon. For example, German K+S AG is expected to begin producing potash at its Legacy project in Saskatchewan, Canada, later this year and the Turkmenistan’s Garlyk mining and processing factory is set to start operations in early 2017.

At the same time, Sirius Minerals has started building a controversial potash mine beneath the UK’s North York Moors National Park, which is set to start producing in 2018 and Russia’s EuroChem is constructing two potash mines — Usolskiy and VolgaKaliy – with an expected 2.3 million tons of yearly production each in the first phase of development. Smaller players are on the move as well: Harvest Minerals Limited, for example, announced earlier this week that it had begun exploration work at its two projects in Brazil, which imports as much as 90 percent of its yearly potash needs.