Basic Materials

Why fertiliser prices are surging and 3 emerging ASX-listed players

Mon 28 Mar 22, 2:20pm (AEST)
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Key Points

  • Russia and Belarus supply approximately 40% of global potash supply
  • Challenges out of Canada and an export ban from China is adding further tightness
  • BCI Minerals and Agrimin are two ASX-listed companies which could hit producer status by 2025

Fertiliser prices have surged past 2008 highs as the market is squeezed by several factors including reduced supplies from Russia and Belarus, a China export ban and a Canadian rail strike. 

Fertiliser price index
Source: CRU Insights

Russia and Belarus supply at risk

Russia and Belarus are the world’s second and third largest producers of potash, a key ingredient used to produce nitrogen-containing fertilisers. The two nations account for approximately 40% of global potash supply.

Sanctions have yet to hit the Russian fertiliser industry, however, it is understood that Russian exports are facing increasing difficulties with bank payments and vessel chartering, according to CRU Insights.

Belarus was also hit with export sanctions after the nation permitted Russian troops to enter Ukraine across its borders. 

Russia Belarus share of MOP imports
Russia and Belarus share of Muriate of Potash (MOP) fertiliser (Source: CRU Insights)

Canada struggles to step up

Canada is the world's largest supplier of potash, however, facing challenges of its own when it comes to ramping up production.

Two weeks ago, more than 3,000 employees of Canada's CP Rail, which transports potash to ports for export, voted to strike from 16 March over wage disputes and unmet union demands.

Implications

"While farmers in developed markets have benefited from high agricultural commodity prices, helping to partly offset high input prices, demand destruction is increasingly likely due to high prices and supply shortfalls," said CRU Head of Fertilisers, Chris Lawson.

"Given the already tight grains and oilseeds market, and the importance of both Russia and Ukraine in those markets, food price inflation is an increasingly prominent risk.”

Earlier this month, the United Nations Food and Agriculture Organisation reported that global food prices reached an all-time high in February.

The Food Price Index was up almost 4% on-the-month in February, and up 24.1% compared to last year. As the index only covers prices over the month, the February reading only partly incorporates the market effects from the Russia-Ukraine conflict.

The ASX potash scene

The most advanced potash stocks are still pre-production. Notable names include:

  • BCI Minerals (ASX: BCI) is developing its Mardie Salt & Potash Project in Western Australia. The company recently kicked off construction and expects to make first salt sales in late 2024

  • Agrimin (ASX: AMN) has its eyes set on a final investment decision for its Lake Mackay Project in the third-quarter of 2022. The company believes the project is the world's largest undeveloped potash-bearing salt lake. Project construction is expected to take 2 and a half-years

  • South Harz Potash (ASX: SHP) is developing its South Harz Project located in Germany. Its an early-stage project with a few near term catalysts including drill program scheduled for April completion and a scoping study with expected completion in May

For a full ASX potash company list, click here.

Things to consider

Potash prices have now far exceeded price assumptions from emerging producers.

BCI Minerals for example, expects Sulphate of Potash (SOP) prices to sit around US$480 a tonne when its Mardie project commences production in 2025.

Mardie SOP forecast
Mardie SOP Price forecasts (Source: BCI Minerals)

A recent update from Agrimin said that current prices for stand bulk SOP are US$720/t in China and US$860/t in Northwest Europe.

On the flip side, higher prices could lead to a "demand destruction" scenario that Lawson had warned about.

After all, the previous high for fertiliser prices coincidentally coincided with the 2008 Global Financial Crisis.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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