Potash in 2018
Earlier in this series, we reviewed potash prices in 2017. We saw that prices rose for key players in the second half of 2017. Could this momentum continue in 2018?
Factors driving potash prices
Prices are driven by supply and demand. Whereas for fertilizers (XLB), global demand usually grows at a stable rate, this may not be true for supply. Industry players add capacity when fertilizer prices are high. However, supply lead times can stretch over a couple of years, and by that time, the market scenario can change significantly.
As shown in the above chart, potash consumption is expected to grow to 70 million tons by 2020 from the current 60 million tons, and operational capability is expected to be higher. Usually, operational capability is higher than potash shipments (or consumption).
There appears to be a consensus that the industry has enough capacity to cover any spike in demand. However, some believe that demand may not be covered right away with idled capacity. Whereas a temporary imbalance in supply and demand may boost potash prices in 2018, tight supply-demand dynamics could also keep potash prices balanced.
Earnings season is around the corner, and PotashCorp’s (POT), Agrium’s (AGU), Mosaic’s (MOS), and Intrepid Potash’s (IPI) results will likely shed more light on potash prices in the coming month. Next, we’ll look at nitrogen fertilizers.