Plummeting Demand for Potash: the Forces at Play
In an interview with Third Bridge Forum, the former Uralkali executive said he expected global demand to be down by 2-3 million tonnes in 2019 and a further 1-2 million tonnes in 2020, providing nothing extraordinary happens such as a collapse in the global economy.
The slowdown in the economy is pushing farmers to prioritise the nutrients they need for their land. Of the three, which include nitrogen, phosphate and potash, the latter is needed the least.
According to the interviewee, while farmers are never able to pause their consumption of nitrogen, they can complete a season or a year potash-free without seeing any significant impact on yields. Ultimately, this means that as farmers are not placing the orders for the coming year, distributors are not ordering product from suppliers. This all results in the demand decrease.
However, there are positives, despite of global demand concerns and geopolitical tension. India, for example, is much more dependent on potash imports because it is not able to produce it domestically – unlike nitrogen.
Africa and Brazil have also been tipped as the main drivers for growth going forwards. Today’s consumption of potash in Brazil stands at 10-11 million tonnes and is growing fast. While volumes in Africa are currently low, it too is on an upward growth trajectory.
Equally, if the trade war is resolved then it is likely that China will resume its purchasing of potash product to build up the stocks. A fixed contract in China, our interviewee explained, would give an immediate demand and price boost.
Another item that could result in a demand push would be regulatory changes in some Asian countries on biofuel or also biodiesel, he said.
To access all the human insights from Third Bridge’s K+S, Nutrien & Uralkali – Global Potash Interview, click below to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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