CEH Report

Table of Contents

Abstract

The global potash market collapsed in 2009, as worldwide demand plummeted to its lowest level in the past three decades. Capacity utilization was at 50% levels as inventories were piling up. Sales of potash fertilizers fell more than consumption as existing inventories were being exhausted. As the economic situation improves along with clarity on market conditions, sales of potash fertilizers are also expected to keep pace and advance. Demand is seen to be rising in the Americas and also in China and India. The largest exporter in the world, Canpotex, which is owned by a consortium consisting of Agrium, Mosaic and Potash Corp., executed large contracts with China and India in February 2010.

Potash is the third most widely used fertilizer nutrient, following nitrogen and phosphorus. Fertilizer use accounts for approximately 95% of total potash consumption, the balance being consumed in a variety of industrial applications. World potash production is confined to only twelve countries and is dominated by Canada, the former USSR and Germany, which together accounted for about 63% of world production in 2009. The Middle East and Socialist Asia accounted for about 22% while the Americas accounted for an additional 7%.

The following pie chart shows world consumption of potash:

The need for food and the nutrients required to produce food will not go away. Though the prices of crops and the purchase timing may affect short-term demand, growth is definite in the medium to long term. The demand for food directly influences potash production. The global population is expected to grow at an average annual rate of slightly less than 3% during the forecast period to 2014. As developing nations improve their economies, there is a shift from traditional rice-based grain production to high protein–based grain production. The increase in meat consumption will drive livestock production, which consumes crops like corn, which in turn increases requirements for potash. The rate of growth of potash fertilizers is dependent on consumption patterns in China and India. According to some estimates, China could potentially be a 15 million metric ton market and India could be a 10 million metric ton market. Demand will also be emanating from the production of regulatory-driven biofuels, including ethanol and biodiesel. There will be an increasing requirement to cultivate more corn, sugarcane, and palm crops. These crops will increase the use of potash. The United States is the largest ethanol producer and uses corn as a primary crop to produce ethanol. Brazil produces ethanol mostly from sugarcane, and Asia, Malaysia and Indonesia grow palm for use in biofuel production.

During the 2009–2014 period, a significant improvement in the world potash supply/demand balance is expected, as demand improves from China, Brazil and India. The world economy is also showing signs of steady recovery and global GDP is expected to be above 4.2% in the near future. With a steady improvement anticipated for world consumption, particularly for developing countries, the average world industry operating rate should climb back to a satisfactory level toward the end of the forecast period.