Potash
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[edit] Potash
Potash is the name generally given to various naturally occurring potassium salts and the products produced from those salts. The most common commercial product is potassium chloride (KCl), also known as muriate of potash or sylvite. The industry’s common standard of measurement for potassium content is in terms of equivalent percentage of potassium oxide (K2O). For example, KCl contains approximately 63% K2O equivalent.
[edit] General uses
Potash is used primarily as an agricultural fertilizer (plant nutrient) because it is a source of soluble potassium, one of the three primary plant nutrients; the others are fixed nitrogen and soluble phosphorus. Potash and phosphorus are mined products, and fixed nitrogen is produced from the atmosphere by using industrial processes. Modern agricultural practice uses these primary nutrients in large amounts plus additional nutrients, such as boron, calcium, chlorine, copper, iron, magnesium, manganese, molybdenum, sulfur, and zinc, to assure plant health and proper maturation. The three major plant nutrients have no substitutes, but low-nutrient-content, alternative sources of plant nutrients, such as animal manure and guano, bone meal, compost, glauconite, and "tankage" from slaughterhouses, can be used. Potash denotes a variety of mined and manufactured salts, all containing the element potassium in water-soluble form.[1]
Approximately 94% of world potash production is used for agricultural fertilizer. Potash is the main source of potassium (K), which with nitrogen (N) and phosphate (P), are the three essential nutrients for plant growth. Nearly every aspect of plant growth development, yield and quality is dependent upon an adequate supply of potassium. The functions potassium performs cannot be carried out by other nutrients and potash has no commercially viable substitute as a potassium fertilizer source.[2]
[edit] Pricing structure
Potash prices have about doubled over the last three years due to very strong demand and the industry’s tight supply/demand balance. This followed a long period of relatively stable prices. Demand growth was initially strong in Latin America, mainly Brazil, but the last two years the growth has been in Asia, mainly in China and India. While potash price momentum has slowed from its recent torrid pace, prices are expected to remain strong with excellent margins.[3]
[edit] Demand
There are two demand drivers lifting the potash price in Asia. Food is one; fuel, that is to say biofuel, is the other.
As an agricultural fertilizer, the fundamentals for potash are unique. Nitrogen and phosphate are the other essential ingredients for plant growth, but both are produced from natural gas; they are abundant in supply; and because they depend on rising gas prices, profit margins for producers are being squeezed.
Biofuel comes in two types -- bioethanol, refined mostly from crops of sugar cane and maize; and biodiesel, from vegetable oils distilled from palm, soybeans, and rapeseed. To offset the cost of filling the world's fuel pumps with $70 crude oil, the European Union has already legislated to oblige the oil companies to blend into every barrel of fossil-based fuel a minimum of 2.5% biodiesel or bioethanol by 2009. Two years later, the blend must be 5% biofuel. Canada is considering legislation for the same 5% target. India has mandated 5% by 2012; 10% by 2017. Brazil, the world's biggest producer of ethanol, is already up to 23% of biofuel per barrel, rising to 25% soon.
Brazil leads the world's biofuel exporters, with 48% of the global supply of sugar-based bioethanol; that's almost 5 billion gallons. The US is both a major producer of corn-based ethanol, and an importer. Germany produces roughly half the global supply of biodiesel, but last year China moved ahead of the European Union with production of just over 1 billion gallons of ethanol. According to a recent in May of this year by the International Fertiliser Association (IFA), domestic cropping has sufficed until now to supply the Chinese distillers. But as demand for the fuel outpaces supply, China will have to import both larger volumes of potash for the growers, and larger volumes of biofuel.
The IFA report calculates that in the 30 years between 1975 and 2005, global biofuel output rose from zero to 30 million tonnes. That was a drop in the bucket, compared to consumption in 2005 of 1.5 billion tonnes of oil in road transport. But the biofuel growth rate is accelerating. In the decade to 2015, biofuel output is expected to rise almost threefold to over 80 million tonnes.[4]
[edit] Current consumption trends
Chromite ore is not produced in the United States, Canada, or Mexico. Chromite ore is produced in the Western Hemisphere only in Brazil and Cuba. Most of Brazilian production is consumed in Brazil. Cuban production is small. The largest chromite-ore-producing countries (India, Kazakhstan, and South Africa) accounted for about 76% of world production. South Africa alone accounts for more than 45% of world production and has been the major supplier of chromium in the form of chromite ore and ferrochromium to Western industrialized countries.[5]
About 93% of the world potash production was consumed by the fertilizer industry. The United States ranked sixth in world production. Potassium chloride is the main fertilizer product, containing an average 61% of K2O equivalent. Other potassium fertilizers include potassium nitrate, potassium magnesium sulfate, and potassium sulfate. Potash demand and prices increased throughout the year domestically and worldwide as a result of more crop acres that required potash fertilizer being planted, owing in part to high grain prices. Initiatives promoting the production of biofuels (transportation fuels made from agricultural products) have spurred increased plantings and increased fertilizer consumption.[6]
[edit] Supply - Demand Imbalance
Only a limited number of potash producers have the available reserves to increase incremental production, therefore capacity additions will be needed to meet the estimated increase in incremental demand. The following comparison details the imbalance between estimated global increased demand and estimated global incremental production capacity available from 2006 to 2011.[7]
[edit] Price forecasts
- Bank of Nova Scotia recently named potash, an ingredient in fertilizer, as one of its favorite picks for 2008.In November, 2007, spot potash prices in Vancouver climbed to a record $265 (U.S.) per tonne, and they're expected to surge to more than $325 in early 2008, according to Scotiabank.
- With phosphate prices shooting up to $580 (U.S.) a tonne now from $460-to-$480 in early November, UBS analyst Brian MacArthur pushed Potash Corp. of Saskatchewan Inc.'s estimated 2008 profit up to $5.83 a share from $4.99. And he raised his price target to $155 from $135. His new 2008 estimate is 85 per cent higher than his profit estimate of $3.15 a share for this year.
- This is still one of my favorite sectors for the next few years. The change in asian diets to more meat, which is the driver of grain prices, is going to take a whole generation. I will be adding to my holdings in Potash and Agrium on any price weakness.[8]
- Chinese fertilizer importers agreed on Wednesday April 16 2008 to pay more than triple what they did a year ago to get hold of tight supplies of potash, sending the shares of global fertilizer makers to record levels. China, the world's biggest import market for the nutrient, which is used to boost crop yields, will pay $650 to $670 a tonne for product delivered to its ports, analysts estimated.[9]
[edit] Major producers
World trade in potash, mostly potassium chloride also called muriate of potash, increased from about 18.9 to 19.2 Mt K2O during the past decade. Between 1999 and 2001, North America, mostly Canada, accounted for 44% of the exports, the FSU (Russia and Byelorussia) for 25%, West Europe, mostly Germany for 19%, and Israel and Jordan for 12%. China accounted for 14% of world imports, India for 8%. [10]
In 2007, the production value of marketable potash, f.o.b. mine, was about $517 million. Domestic potash was produced in Michigan, New Mexico, and Utah. Most of the production was from southeastern New Mexico, where two companies operated three mines. New Mexico sylvinite and langbeinite ores were beneficiated by flotation, dissolution-recrystallization, heavy-media separations, or combinations of these processes, and provided more than 77% of total U.S. producer sales. In Utah, which has three operations, one company extracted underground sylvinite ore by deep-well solution mining. Solar evaporation crystallized the sylvinite ore from the brine solution, and a flotation process separated the potassium chloride (muriate of potash or MOP) from byproduct sodium chloride. Two companies processed surface and subsurface brines by solar evaporation and flotation to produce MOP, potassium sulfate (sulfate of potash or SOP), and byproducts. In Michigan, a company used deep-well solution mining and mechanical evaporation for crystallization of MOP and byproduct sodium chloride. The fertilizer industry used about 85% of U.S. potash sales, and the chemical industry used the remainder. More than 60% of the produced potash was MOP. Potassium magnesium sulfate (sulfate of potash-magnesia or SOPM) and SOP, which are required by certain crops and soils, also were produced.[11]
U.S. production has been relatively stable for several years, but the increased demand prompted some producers to consider capacity expansions in New Mexico and Utah. One company, however, planned to close a solution mining operation in Michigan. Initially, the closure was announced to take place in 2007, but market conditions delayed the closure of the mine until 2008. Canada continued to lead the world in potash production, and output reached record levels. In addition to restarting idled operations, plans were announced to expand current facilities in Saskatchewan, open a new mine in New Brunswick, and explore for potash in Manitoba.
Production increased in Russia and Belarus, two other major potash producers, which ranked second and third, respectively, in global potash production. Projects to increase capacity were underway in both countries. After a mine flood in Russia in 2006, expectations were for reduced production in that country, but the strong market spurred additional production at other operations. The flood, however, had unanticipated consequences that became evident in late July 2007 when a sinkhole began to form near Berezniki and continued to expand in size until October, threatening the integrity of a nearby rail line. The precarious situation resulted in the emergency rerouting of the rail line, and shipments from other potash operations were delayed.
The Russian Federal Antimonopoly Service conducted an investigation into allegations of unfairly high prices that resulted in the imposition of export tariffs, price caps for potash sold in Russia, and fines levied against the producers. The potash companies responded with lawsuits that overturned the rulings by the Russian agency. In Russia, 85% of all fertilizer is exported, making export tariffs detrimental to producers and causing increased prices worldwide.
A company in Jordan announced plans to increase capacity at its facilities on the Dead Sea by early 2009. The project included expanded evaporation ponds, construction of a new refinery, and additional compaction facilities. The Jordanian firm also contemplated building a new potassium sulfate operation in Egypt. Based on the strong market, a company in the United Kingdom made investments to prolong potash production for at least 20 more years.[12]
[edit] China’s recent rise
Base metal prices will ride a wave of tight supply, dollar weakness and Chinese demand to bolster prices into 2008 but the picture further out is murkier. A recent Reuters report outlined the views of several metals analysts who compiled metals industry outlooks for the London Metal Exchange's annual event in October. According to the Reuters report, the consensus is:
- China's voracious appetite for nonferrous metals remains undimmed, with its immense purchasing power barely affected by global rumpus that emerged during the summer crisis in credit markets.
- Physical metals supply tightness this year will continue into next year, exacerbated by mining and smelting disruptions and processing production delays.
- Commodities remain in focus for investment diversification, with pension funds diversifying their assets away from stocks, mostly to indices which buy and hold commodity futures.
A recent report from Goldman Sachs draws instructive parallels between the way China buys in the global iron-ore market, and the way it has been buying potash -- at least until recently, for the Russian sellers of potash look to have succeeded in eliminating the China Discount.
"The iron ore and potash markets exhibit similar characteristics," argues Goldman Sachs analyst Edlain Rodriquez, "-low producer inventories, China's strong appetite for product, solid global demand, concentrated supplier market, almost "prohibitive" barriers to entry, and expensive and long lead time greenfield projects. Using CVRD as a proxy for iron ore, that stock has surged 825% since early 2003, while iron ore prices increased 190%. Similarly, Potash Corp. is up 545% but domestic potash prices have only risen 85%." [13]
[edit] External References
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/potash/
- ↑ http://www.athabascapotash.ca/aboutpotash.xhtml
- ↑ http://yahoo.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHTML1?SessionID=X3J3juNdQ_41LlV&ID=4388527 THE MOSAIC COMPANY
- ↑ http://www.mineweb.com/mineweb/view/mineweb/en/page675?oid=24305&sn=Detail
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/chromium/180303.pdf
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/potash/mcs-2008-potas.pdf
- ↑ http://www.athabascapotash.ca/aboutpotash.xhtml
- ↑ http://realdealfinancial.blogspot.com/2007/12/potash-prices-to-soar-in-2008.html
- ↑ http://www.mineweb.net/mineweb/view/mineweb/en/page675?oid=51292&sn=Detail
- ↑ http://www.fertilizer.org/ifa/statistics/indicators/ind_trade.asp#POTASH
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/potash/mcs-2008-potas.pdf
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/potash/mcs-2008-potas.pdf
- ↑ http://www.mineweb.com/mineweb/view/mineweb/en/page675?oid=24305&sn=Detail
http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=A1ARTA0006428
