Potash Capacity Development Accelerates but is a Surplus Looming?
LONDON, January 12, 2012 /PRNewswire/ –
World potash capacity has changed relatively little since the 1980s, as a post-Soviet
capacity surplus has adequately covered demand requirements. However, this has changed.
High potash capacity utilisation, record prices and buoyant industry profitability has
stimulated a swathe of interest in new potash investment projects.
Most of the existing potash producers will add capacity over the next few years
through brownfield expansion, whilst there has also been an abundance of greenfield
projects. In recent years, large mining corporations BHP Billiton
[http://www.bhpbilliton.com ], Vale [http://www.vale.com ] and Rio Tinto
[http://www.riotinto.com ], as well as a collection of junior mining companies, have
acquired potash deposits and started to develop projects.
After its failed bid for PotashCorp [http://www.potashcorp.com ], BHP has now focused
its attention on the development of the Jansen project in Saskatchewan, Canada and aims to
build an 8 million tpy mine in stages. There are also a number of other projects at the
feasibility stage in Saskatchewan, including large corporations, K+S
[http://www.k-plus-s.com ] and Vale, and several smaller exploration companies including
Karnalyte Resources [http://www.karnalyte.com ] and Western Potash
[http://www.westernpotash.com ]. Furthermore, Rio Tinto re-entered the potash market in
September 2011, teaming up with Russian fertilizer producer Acron [http://www.acron.ru ]
to explore opportunities in the region.
There is also significant greenfield activity projected in Russia with four new mines
planned to be commissioned by Uralkali [http://www.uralkali.com ] and Eurochem
[http://www.eurochem.ru ] over the next decade. Uralkali plans to open two mines at
Ust-Yaivinsky and Polovodovsky, with capacities of 2.8 million tpy and 2.5 million tpy
respectively. Eurochem will enter the potash market with two new mines at Gremyachinskoe
(4.6 million tpy) and Verkhnekamskoe (3.4 million tpy).
Vale is developing greenfield mines in Brazil (1.2 million tpy) and Argentina (4.3
million tpy), which would turn the company into a major global player if each project is
commissioned. Exploration companies such as Rio Verde Minerals [http://www.rvminerals.com
], Aguia Resources [http://www.aguiaresources.com.au ], Potassio do Brasil
[http://www.potassiodobrasil.com.br ] and Verde Potash [http://www.amazonplc.com ] are also
assessing potash deposits in Brazil.
In Africa, South Boulder Mines [http://www.southbouldermines.com.au ] (Eritrea),
Ethiopian Potash Corp [http://www.ethiopianpotash.com ] (Ethiopia), and Allana Potash
[http://www.allanapotash.com ] (Ethiopia) are at the feasibility stage of projects in the
Danakil depression region. Furthermore, MagIndustries [http://www.magindustries.com ] and
Elemental Minerals [http://www.elementalminerals.com.au ] are at the feasibility stage of
greenfield projects in the Republic of Congo.
Most of these projects will not realise production until after 2015, and the timing of
completion is likely to be highly sensitive to market conditions and how prices and
industry profits develop. For junior potash mining companies, project development will
rely heavily on finding finance. Most of these companies exist by continuously raising
funds as they move through the project stages. Finance limitations put them at a
significant disadvantage to the major mining companies and existing potash producers, as
shown in the chart below, which compares the cash position of PotashCorp with the sum of a
sample of listed junior potash mining companies. Brownfield projects also have significant
advantages from lower capital cost per tonne of new potash capacity, and shorter lead
To view a chart showing junior potash exploration companies’ cash positions compared
to PotashCorp, click here
The combination of brownfield and greenfield project activity looks set to raise
global capacity substantially over the next ten years. There is a possibility that profits
and prices are so strong in potash that they over-stimulate capacity investment.
Nevertheless, the chart shows the significance that finance makes to developing capital
intensive projects and the advantages which are had by existing producers and the large
mining companies which are diversifying into potash, when adding new potash capacity.
How will the potash supply/demand balance develop as these projects reach fruition?
We examine this issue in our 2011/2012 edition of The Outlook for Potash
. We also evaluate new potash investment economics, tracking over 100
greenfield and brownfield projects through the development stages.
Integer is a specialist provider of research, data, analysis and consultancy services
across a range of global industrial markets.
To receive sample data from the next update to The Outlook for Potash, contact: Peter Darlington Email: email@example.com Tel: +44-20-7503-1265 Fax: +44-20-7503-1266
SOURCE Integer Research