The price of muriate of potash has risen significantly in recent months, broker Liberum noted in market commentary released on the morning of 23 March.
The big producing areas in Eastern Europe, one of the world’s potash powerhouse regions, are all either directly in the firing line of the Russia-Ukraine war, or else impacted negatively by sanctions.
Canada produces the most potash per year out of any country, at 22mln tonnes, or just under 32% of world production, according to figures compiled for 2020.
But the next three countries in the production rankings are enough to give any policy-maker or potash buyer pause for thought.
Russia is the second biggest producer, Belarus is the third biggest producer, and China is the fourth biggest producer. Between them, this block of countries, now firmly aligned against the Western economic bloc, to put it mildly, accounts for 48% of world production.
Will that production be available to Western markets?
It doesn’t look like it.
Because, for the first time in several generations, it looks like policy is getting the better part of economics as far as the western world is concerned.
Western companies have until 1 April to stop buying Belarussian potash, according to edicts issued by the US State Department, and although the Belarussian president seems disposed to continue selling to anyone willing to bust the sanctions, it seems likely that a significant component of world supply is about to come off the market with no ready source of replacement.
Markets have already anticipated the impact to some extent. Granular MOP delivered to Brazil spiked earlier this month to an eye-watering US$1,100 per tonne.
To compound the issue, a rail strike in Canada is negatively impacting supply chains there. Major Mosaic is now expecting that the amount of potash it will be able to ship will be at or near the low end of its last guidance.
Peer Nutrien is likely to be similarly impacted.
China, meanwhile, is releasing potash from reserves, and has said it will “actively” import potash to support spring planting.
All of which means that conditions for smaller potash and fertiliser companies with assets outside of Eastern Europe are becoming increasingly favourable.
Among the notable examples of these are Emmerson PLC (AIM:EML), which has assets in Morocco, Australian Potash, Highfield Resources, which has assets in Spain, the major Anglo American PLC (LSE:AAL), which is developing the old Sirius Minerals project in the north of England, Kore Potash, which has a project in West Africa, and South Harz Potash, which has a project in Germany.
Also worth looking at is Harvest Minerals Ltd (AIM:HMI, OTC:HMIFF), shares in which have just about tripled since the start of the year.
Harvest is at the point where long-held promises to ramp up fertiliser production are starting to come good in one of the world’s biggest fertiliser markets, at a time when fertiliser supply is greatly curtailed. Storms don’t come much more perfect than that.