|Fields of soy:
A growing middle class and an increased appetite for meat
is expected to fuel demand for animal feed and fertiliser
as a result (Source: carlfbgge via
is widely anticipated by producers to improve for the remainder
of 2016 following the settlements of key supply contracts in
China and India, which provided clarity to the depressed
fertiliser market, the main end use for the mineral.
Growth in the
world's population, expansion of the middle class in a number
of developing countries and as a result, a shift towards more
meat-heavy diets, are
all regularly cited factors for an expected increase in
A number of deals were concluded in the past month. Potash
producer Belarusian Potash Co.
(BPC) first announced at the end of June that it would be
supplying potash to India’s Indian Potash Ltd
(IPL) at $227/tonne on a CFR India basis for 2016/2017. The
agreed price was a 32% decline on 2015 supply contracts, which
were signed at $332/tonne.
Two weeks later, deals at the same price level were struck
by Tel-Aviv-headquartered Israel Chemicals Ltd
(ICL) and German fertiliser producer K+S with the Indian
In July, Chinese buyers also
finalised agreements with BPC at $219/tonne on a CFR basis for
the rest of 2016, compared with $315/tonne last year. This was
followed by ICL’s announcement that it too had
concluded a 700,000 tonne supply contract with
China is the biggest
potash buyer in the world and Chinese potash agreements are an
important indicator of global fertiliser demand. Chinese
contracts are traditionally signed earlier in the year, but
this year contracting was delayed due to industry destocking
during the first quarter.
The latest spate of supply agreements has provided direction
in the uncertain fertiliser market, which has seen long-term
supply contract prices fall by about 30% year-on-year
Many producers believe that potash prices have bottomed out
and demand will recover
during the second half of 2016, which would support agrimineral
prices. At the same time, oversupply will continue to put
pressure on prices and a number of producers have plans to reduce operational
capacity to optimise costs.
Leading fertiliser producer The Mosaic Co. believes
that demand from the agricultural sector in Brazil is expected
to drive near-record fertiliser consumption in 2016 and 2017.
Brazil is the third-largest potash market behind China and the
Weak Q2 performances
Amid weak global fertiliser demand and oversupply, several
producers saw their profits wiped out and earnings plunged into
losses. US-based potash and phosphate
producer Mosaic said on 2 August that low potash and phosphate
prices have pulled their second quarter earnings into a
US-based Intrepid Potash Inc.
reported bigger losses while North American fertiliser producer
Potash Corp. of Saskatchewan Inc (PotashCorp) saw profits
crash during the same period.
In order to stem further losses and optimise costs,
producers have cut capacity to reduce output. In July, Intrepid
Potash idled its West facility in New
Mexico, US, one of its core production plants, and Mosaic
mothballed its Colonsay potash mine in Saskatchewan, Canada for
the rest of the year.
Amid lower demand, new infrastructure
investments for fertiliser exports were also halted earlier
in June. Canadian potash exporter and logistics company Canpotex International PTE
Ltd announced that it will scrap plans for a new fertiliser
export terminal at the Port of Prince Rupert in British
Canpotex is a joint venture (JV) between PotashCorp, Mosaic
and Agrium, and has decided not to proceed with the Prince
Rupert project on cost-saving grounds. The availability of up
to 2.5m tonnes of storage and loading capacity at the Port of
Saint John in New Brunswick also influenced the company's