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The State of Fertilizer: Your End-of-August Outlook

PART:
1 2 3 4 5 6 7 8 9
Part 8
The State of Fertilizer: Your End-of-August Outlook PART 8 OF 9

Why Have Potash Capacity Additions Moved so Tightly?

Potash supply and demand growth

The potash supply, unlike the nitrogen and phosphorus supply, has kept pace with demand, as the chart below shows.

Why Have Potash Capacity Additions Moved so Tightly?

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Tight capacity addition

In the chart, you can see how about 2.2 million metric tons of global potash capacity is expected to be added in 2017. This would be almost equal to the demand in 2017. This close movement in supply and demand has led to a more favorable price condition for potash fertilizers.

Notably, the potash fertilizer industry is oligopolistic, wherein only a few players control a big chunk of the market. This helps output keep pace with demand.

Demand

In 2016, the demand for potash fertilizers dipped, but this was only temporary, as customers (XLB) waited for prices to fall further. Demand quickly jumped back up as channel inventories ran low.

According to PotashCorp—which is set to merge with Agrium (AGU)—the demand for potash fertilizers in 2017 was lifted more by crops such as soybeans and cotton than by corn. The increase in demand for potash fertilizers should help explain why Intrepid Potash (IPI) has had a positive year in 2017.

Aside from the growing inventories, demand for potash has also increased due to the high affordability of potash fertilizer products, according to PotashCorp (POT). PotashCorp expects the overall demand for potash to range between 62 million and 65 million metric tons. By contrast, Mosaic (MOS) expects potash shipments to range between 62 million and 63 million metric tons.

In the next and final part, we’ll discuss prices for potash fertilizers.

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