By Steve Fiscor, Editor-in-Chief
During late June, Canada’s Potash Corp. of Saskatchewan (PCS), the largest potash producer, made an offer to acquire Germany’s K+S, the world’s largest salt producer and the No. 6 potash producer. K+S said the process was ongoing and it is currently assessing available options.
Last year, PCS produced 12.2 million metric tons (mt) from its six mines in Canada. PCS also owns 28% of the Arab Potash Co., 14% of Israel Chemical Ltd. and 22% of Sinofert (a Chinese fertilizer importer and distributor).
K+S has been mining salt for 120 years. Annually it produces a little more than 3 million mt of potash. The company’s subsidiary, K+S Potash Canada, is launching the Legacy project near Moose Jaw. The mine is expected to produce 2 million mt/y when it reaches commercial production in 2017.
The potash market has recovered somewhat from the price collapse that occurred when Uralkali withdrew from the Belarusian cartel in July 2013. Potash prices dropped 25% to $300/mt. More recently, record demand levels and a tighter supply supported an increase in potash prices during 2014, according to PCS. Chinese consumption alone increased by more than 2 million mt. Latin America also set records for potash consumption.
Prices for potash, however, have been under pressure during the first half of 2015. U.S. potash prices have moved lower due to a delay in spring demand, higher warehouse inventories and increased offshore imports. Brazilian prices declined primarily due to slower fertilizer demand in early 2015 as growers assessed the impact of lower agricultural commodity prices and a weaker currency.
For 2014, PCS said global potash shipments reached a record of nearly 63 million mt. Basic supply-demand fundamentals were in play; low distributor inventories and strong growth in consumption were the major drivers. Volatile currency markets, lower crop prices and higher inventories in some markets could result in lower shipments in 2015.
More than half of the potash produced in North America was exported in 2014. Producers in the Former Soviet Union (FSU) and the Middle East are major global suppliers with approximately 90% of their products sold to export markets.
To satisfy 2014 demand, FSU producers were reportedly operating at or near “full capability” and accounted for more than half of the increase in global shipments. Sales from North American producers were partially constrained by logistical issues in the first half of 2014 and production constraints in the second half, according to PCS.
In 2015, total sales are expected to decline along with global demand. Shipments from North American potash miners, however, are expected to remain the same as 2014. With annual potash contracts for China and India now in place, PCS said it expects global shipments to accelerate.