Potash and phosphate: Demanding industries

On 24 April this year, the world’s population was estimated to have hit 7.5bn. The number of humans on the planet has increased sevenfold in a matter of decades, a trend which, according to the United Nations (UN), has been driven largely by increasing numbers of people surviving to reproductive age, changes in fertility rates, increasing urbanisation and accelerating migration.

The global population is set to continue growing, albeit at a slower rate than in the last 50 years, to peak somewhere between 8.8bn and 10.8bn people by 2050. 

With population growth comes increased demand for food. According to the UN’s 2016 "Food & Agriculture Organization" report, demand for meat, fish and dairy products will see the strongest expansion rates to 2025. This in turn will boost the need for coarse grains, such as corn and soya beans. 

World population by world regions

Source: HYDE Global population by region

Anglo-Australian miner BHP Billiton, the world’s largest mining company by market capitalisation, is considering how it can take advantage of the rising need for food, forecasting that global crop demand will grow by 50% between now and 2050.

In order to maximise yields from ever-shrinking areas of productive land, nutrients in soils have to be regularly bolstered and replenished by adding fertilisers. There are various kinds of fertiliser, including compounds, organics, elemental fertilisers, nitrogen, phosphate and potassium (potash) fertilisers. 

Potash, a term used to describe various salts that contain water-soluble potassium, is one of the major mineral fertilisers targeted by mining companies.

BHP has blown hot and cold on its potash mining plans, as prices for the mineral have fluctuated. The company owns the Jansen potash project in Saskatchewan, Canada and according to its current strategy, plans to begin mining at the site between 2020 and 2023. Once completed, Jansen is slated to have a capacity of 10m tpa potash for up to 50 years, providing BHP with "long-term growth and diversification benefits".

However, it has not been an easy period for the fertiliser industry.

"2016 was clearly a challenging year for the fertilizer industry, due to a combination of factors, including lower pricing, volatile energy pricing and uneven global nutrient demand," a spokesperson from EuroChem told IM.

"Agriculture commodity prices started the year depressed from another bumper crop and a stream of new fertiliser supply came to the market, outpacing demand and pressuring fertiliser prices further. So far this year, we see continued pricing pressure but predict a more encouraging environment emerging from next year as the market begins to rebalance," EuroChem added. 

The International Fertilizer Association predicts modest growth in nutrient fertilisers of about 1.4% a year up to 2021.

Float with ArrMaz collector: Mineral laden froth paddled off flotation equipment. ArrMazz

ArrMazz lab testing of new flotation collectors. ArrMazz

Potash

If and when BHP enters the roughly 64m tpa global potash market, it will face stiff competition from incumbent producers. Canada’s Potash Corp of Saskatchewan (PotashCorp) and Agrium Inc., US-based Mosaic Co., Russia’s Uralkalai and Uralchem and Belarus’ Belaruskali, along with Israel Chemicals Ltd (ICL) and Germany-based K+S AG, are the world’s leading producers of the mineral.

According to data compiled by EuroChem, a phosphate, potash and ammonia producer headquartered in Switzerland with mines in Russia, PotashCorp and Mosaic each have over 13m tpa total nutrient capacity, including 10m tpa and 8m tpa, respectively, of potash and phosphate.

Uralkali and Belaruskali have respective capacities 7m tpa and 6.8m tpa potash, while ICL and K+S have 4.8m tpa and 4.3m tpa of nutrient capacity, the majority of which is potash.

China is the world’s largest consumer of potash, with demand reaching a record 15.8m tonnes in 2015. While the country’s consumption tailed off slightly in 2016, speaking at the 2017 BMO Capital Markets Farm-to-Market Conference in New York, PotashCorp said it expected Chinese potash demand to regain momentum this year, due to "farm consolidation supporting improved fertilisation practices, and a continued shift to high-value, nutrient-intensive crops".

Consolidation is also taking place in the Chinese potash industry. For example, PotashCorp holds a 22% stake in China’s Sinofert, the country’s largest fertiliser importer and distributor and one of the world’s largest fertiliser manufacturers. Sinofert in turn owns 21 percent of Qinghai Salt Lake Industry Co., China’s largest potash producer.

PotashCorp’s data indicates that, excluding China, Asian countries consistently consume around 9m tpa potash in total, just behind North America at 9.3-9.8m tonnes, while Latin America takes 11.7-12.2m tpa.

Last year, Mosaic predicted potash demand growth would be driven by China and Brazil in 2017, while India would shift from being a "drag" on the market to "a positive driver over the next five years", alongside South East Asia. Mosaic has a large in-country distribution network throughout Brazil, where it enjoys a near-20% market share.

EuroChem meanwhile said that "moving into the potash market was a good opportunity" for them.

"We currently have access to more than 10bn tonnes of potash reserves in two key deposits in Russia, one at Gremyachinskoe and the other at Verkhnekamskoe, which is one of the largest deposits in the world. These two potash developments represent very significant investments of between $7-$8bn for EuroChem and are among our most important corporate priorities. They will transform EuroChem into one of the world’s five largest global fertiliser producers."

Granule quality is improved with coating, colouring and anti-caking test runs. ArrMazz

Phosphate

Besides Mosaic, there are few significant phosphate producers globally. Morocco’s Office Cherifien des Phosphates (OCP) and Russian chemical producer PhosAgro are two of the next largest phosphate companies, while Scandinavian firm Yara and EuroChem both have notable but modest phosphate capacities.

The USGS expects world phosphate rock capacity to increase by 2% per year to 48.9m tonnes in 2020, from 44.5m tonnes in 2016, based on lower estimated production from China, which will limit production growth.  

"The largest areas of [phosphate capacity] growth were planned for Africa and the Middle East," the USGS stated in its most recent report on the mineral. "In Morocco, work continued on the expansion of phosphate rock mines and processing facilities, which was expected to double phosphate rock production capacity by 2020," it added.

Hedley Widdup, fund manager at Australian investment firm Lion Selection Group, told IM that Morocco may be the phosphate producing nation to watch in the short to medium term, as tightening supply in North Africa could swing in favour of Moroccan production. 

In its outlook for 2017 published at the end of last year, Mosaic said that while disappointing consumption in India undermined global phosphate demand growth in 2016, the company was hopeful that a good monsoon season and above average reservoir storage would bolster India’s appetite for phosphate this year. 

Mosaic was also positive about continuing robust demand from Brazil, but noted that significant shifts in global shipment volumes will be dictated by India and the Latin American continent as a whole.

"The beginning of 2017 was still challenging despite generally better pricing points across nutrients," the spokesperson told IM.

"The phosphate fertiliser market has seen good demand levels across most major markets though in terms of nitrogen demand, market sentiment has remained depressed with prices failing to sustain upward momentum. However, we think the outlook is one of continued steady growth and industry figures also point to modest growth in demand for nitrogen, about 1.2% a year up to 2021, according to the International Fertilizer Association. Overall, we would say that with demand growing and supply additions ebbing, this sets the stage for the emergence of a more favorable backdrop from next year into 2019 for nitrogen and phosphate," the company said.

Fertilser pellets are either distributed by hand or by using a spreader which distributed them among the crops. BanksPhotos

ArrMaz collector and frother: Flotation froth loaded with phosphate mineral pouring off column flotation cell. ArrMazz

Quality and prices

"2016 was clearly a challenging year for the fertiliser industry, due to a combination of factors, including lower pricing, volatile energy pricing and uneven global nutrient demand," a spokesperson for EuroChem told IM. 

"Agriculture commodity prices started the year depressed from another bumper crop and a stream of new fertiliser supply came to the market, outpacing demand and pressuring fertiliser prices further. So far this year, we see continued pricing pressure but predict a more encouraging environment emerging from next year as the market begins to rebalance," the spokesperson added.

 In a presentation delivered by US-headquartered speciality chemicals producer ArrMaz at the AIChE 2017 conference in Minneapolis, US, earlier this year, the company said that sellers need to be strategic in order to benefit fully from any price rises for fertilisers and to maximise profitability during downturns.

The Mosaic Esterhazy K1 potash mine: The Mosaic Company is the world’s leading  integrated producer and marketer of concentrated phosphate and potash. The company mines phosphate rock from nearly 200,000 acres of Mosaic-owned land in Central Florida, and potash from four mines in North America, primarily in Saskatchewan. sprokop

According to ArrMaz, there is a positive relationship between the BPL (bone phosphate of lime) content of a fertiliser and its selling price. BPL is a reference to the amount (by weight percentage) of calcium phosphate contained in phosphate rock or ore body. 

The amount of contained BPL is important, as higher grade rock improves a fertiliser’s operational efficiency, ArrMaz explained, which is the reason why greater BPL content commands a higher price.

While other impurities and qualities also influence prices, ArrMaz claims that using higher grade phosphate rock leads to the production of purer phosphoric acid.

Proper processing is now integral to producing fertiliser-grade phosphate. Easy-to-treat siliceous phosphate resources have now largely been depleted, leaving miners to extract mostly low-grade phosphate ores with high levels of impurities. 

Similarly, the potash industry is also facing processing challenges. The concentration ratio, representing how many tonnes of ore are needed to produce one tonne of saleable product, is largely determined by the quality of the potash ore. The sodium chloride content, particle size and colour (which usually represents iron content) are key factors in determining the grade of raw potash.

As demand for fertiliser minerals continues to grow, competition among suppliers is also set to increase, while the quality of mineral reserves is irreversibly declining. In these circumstances, processing techniques will be key to preserving producer margins, increasing the effectiveness of fertiliser end products, and for minimising waste in an industry that continues to be closely scrutinised for its efficiency and environmental impact.

EuroChem meanwhile told IM that there was "considerable discussion about pricing pressure as new capacity in the industry comes on stream." However, it added that, although this is a market in which there is already substantial capacity, with more coming online, it believed the pressure "will be far more modest than some analysts expect."

In terms of markets, EuroChem said that while Europe is the largest market now, it is a more mature market.