The global potash supply has returned to the levels before the invasion of Ukraine. Russia and Belarus have increased shipments to Asia, South America and Europe to avoid Western sanctions, and to pressure producers to reduce output to avoid an oversupply.

Julia Campbell, the head of Argus's potash pricing service, told Argus that this year's production will reach 73 millions metric tons. Russian exports are expected to be 12-13 million tonnes, while Belarus is expected at 10 million tonnes.

After a period in which prices fluctuated due to the Russian invasion of Ukraine, potash prices are now starting to stabilize.

Due to logistical and financial challenges, Russian exports fell sharply following the start of the Ukraine war. Campbell stated that these problems had since subsided.

Exports from Canada and Jordan have also increased global supply, bringing down prices. This has added to fears of oversupply. A slight improvement in the demand is expected in 2025.

Major potash producers, such as Germany's K+S, expressed optimism about the growing demand and stabilizing of prices.

Analysts have warned that the abundance of global supply will limit pricing and dampen the earnings prospects for the companies.

"I do not think that there will be any premium pricing or real pricing benefits as a result the global supply and trade shift. Morningstar analyst Seth Goldstein said that this was mostly seen in 2022 and 2023, when prices were still moderate.

Canada's potash share in the global trade increased dramatically by 2022. Belarus and Russia saw their share decline. Data from Argus shows that prices have dropped to below $300 a tonne from a peak of $1,000 in mid-2022, due to weak demand.

Paul Joules, Rabobank's analyst, said that we are probably nearing our operational costs of production. This may force some firms to reduce production.

Nutrien Canada, the top producer in the world of this mineral, which is mainly used to make fertilizers, has suspended plans to ramp up production. The company cited market conditions as the reason for the suspension.

RISE IN SHIPMENTS AND GROWING CONCERNS

Since Russia's exit from the Black Sea grain agreement last year, Russian producers have increased their shipments to China via new rail routes. Morningstar's Seth Goldstein stated that this has led to a surge in demand for grain from Southeast Asia and South America.

Belarusian exporters are shifting cargo from Baltic to Russian ports and offering potash for a discount through these new routes, bypassing sanctions.

Eurochem, a Swiss company, is currently expanding its facilities in Russia at the Volgakaliy and Usolskiy sites.

Humphrey Knight is an analyst with CRU London. He said: "The MOP sector (muriate or potassium chloride), in particular, has already experienced a period of heavy supply."

FARMING THE PRICE DROPPEMENT

Delphine Leconte Demarsy, a fertilizer consultant with the U.N. Food and Agriculture Organization, said that the fall in potash price has made some grains and oilseeds more affordable.

Leconte Demarsy stated that "in the U.S. potash is still more expensive than before the price increase, but the higher crop prices compensate for this."

She added that local farmers are affected differently depending on logistics costs and exchange rates.

She said that while the price of potash for rice is lower than it was before the price increase for wheat and corn, this is due to the depressed market for these crops.

Potash prices in Brazil, which is a major agricultural exporter, are now back at 2019 levels. This has led to a rise in its use on more expensive crops, such as maize and soybeans.

Rabobank's Joules stated that farmers will continue to benefit as the tight potash market is expected keep prices below historical averages. $1 = 0.9215 euro (Reporting and editing by Mill Nissi and Matt Scuffham in Gdansk)

(source: Reuters)