|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 fertiliser consumption.
A number of deals were concluded in the past month. Potash
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 buyer.
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.
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
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 US.
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 Columbia, Canada.
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