The potash market
The market environment for potash has seen a better recovery than nitrogen and phosphate fertilizers have seen, as we’ve discussed in the preceding parts of this series.
There are expectations that potash capacity will see some curtailment in 2017, but PotashCorp (POT) expects about 2.2 million metric tons of capacity additions in 2017.
In the above chart, you can see that potash capacity in 2017 is expected to be close to 71 million metric tons. As we approach 2018, this capacity is expected to increase to ~78 million metric tons and go as high as ~81 million metric tons in 2021.
Potash production (as depicted by the green bar in the chart) has been lower than total capacity. Fertilizer companies don’t usually run at full or total capacity (also referred to as nameplate capacity or maximum capacity). Rather, production takes place at a lower rate than nameplate capacity, or at a lower operating rate.
In August 2016, CRU Group estimated that the operating rates for potash fertilizers over the next five years would likely range between 86% and 88%. Usually, when operating rates increase consistently above 90%, companies (XLB) such as PotashCorp (POT), Mosaic (MOS), Agrium (AGU), and Israel Chemicals (ICL) sometimes consider expanding their nameplate capacity.
In the next part, we’ll continue our discussion of potash supply and demand.