(Bloomberg) — A Belarusian potash miner, who accounts for a large chunk of global supply, has announced the unexpected, shaking up a market that is already grappling with rising prices.
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According to a letter from an exporter addressed to customers seen by Bloomberg, around February 16 Belaruskali said it would not be able to fulfill its contracts. Shipment has been halted as a result of US and European sanctions.
The absence of Belarusian supplies would have major consequences. Potash is a key nutrient for yield as well as major commodity crops such as corn and soybeans. Fertilizer prices have already skyrocketed as rising natural gas costs have forced some European plants to halt or reduce production, and US spot prices for potash in the Corn Belt have nearly doubled in the past year. Expensive fertilizer is making food more expensive to produce and contributing to rising global inflation for consumers.
“This is a pretty unprecedented situation in the potash market,” CRU Group analyst Humphrey Knight said over the phone. “It could take several months if that supply doesn’t take much longer to recover.”
Read more: US potash sanctions could push Belarus into Putin’s arms
According to data from Green Markets, Belarus exports about 10-12 million tons annually. The country accounts for about a fifth of the global supply. It is a major shipper for Brazil as well as India and China.
“Global potash contracts have settled at the highest price since 2008, ensuring another year of prices for farmers and strong earnings for growers,” Alexis Maxwell, analyst at Green Markets, the Bloomberg-owned company, said in an email. ” “US sanctions on Belarus eliminated a major competitor” without any readily available alternative supplier.
US sanctions against Belarus’ lone potash miner, Belaruskli, went into effect in December, while penalties against the Belarusian Potash Company, which exports all potash from the country, should take effect on April 1.
Ken Setz, interim chief executive officer of Nutrien Ltd, said in an interview that the restrictions could result in a change in trade flows and some demand rationing. Historically, customers shopping from Belarus have been trying to secure supplies elsewhere. For example, Russia is doubling the amount of fertilizer it delivers to Brazil, Brazilian President Jair Bolsonaro said on Thursday during an interview with Radio Jovem Pan.
Belarus President Alexander Lukashenko discussed potash sanctions with Russian counterpart Vladimir Putin, he said during a joint televised conference in Moscow. Petersburg to export nutrients, Lukashenko said, Belarus hopes to start loading “millions” of tons of cargo within 1 to 1 1/2 years.
The CRU’s Knight said exports to Russian ports were the only option left for the Belarusian Potash Company, but most are already operating at capacity. While some Belarusian potash could be re-sent to the Russian market, prompting Russian companies to export more, volumes would be smaller, he said.
Setz said Nutrien has an additional half a million tons of capacity that will be available in late 2022. Producers have strong margins, so higher potash prices will not dampen demand.
The company could also increase potash production, but first, it would need to see a long-term impact on the market for “years” to bring in additional sustained capacity, Seitz said. Nutrien will increase its potash capacity by one million tonnes in 2021 and additional quantities from other companies are expected to come online in 2022, he said.
“We don’t stand to say we’re not doing anything,” Seitz said, noting that the company doesn’t want to live with additional costs if the supply challenges go away quickly. “We’re bringing the volume.”
Nutrien estimates that global potash shipments in 2022 will be between 68 million tons and 71 million tons.
The potash situation in Belarus is bleak, Scotiabank analyst Ben Isaacson said in a note. Nutrients would benefit not only from higher prices, but also from being able to take advantage of the amount of crop nutrients.
“Nutrition is now in the driver’s seat for how high potash prices are this year, while Belaruskali will determine how low they go,” Isaacson said.
(Updates with comments from analysts and the President of Belarus from the fourth paragraph)
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