Potash Industry Overview

Ninety five percent of all potash production goes into the agricultural sector where it is used as a plant nutrient. Typically potash is used as a component of N-P-K fertilizers, or compound fertilizers, which combine Potash (Potassium) with N (Nitrogen) and P (Phosphate). Potash plays a critical role in the regulation of plant physiological functions. It strengthens cell walls, aids in water retention, improves disease resistance and boost nitrogen and phosphate absorption. Enhancing these functions with potash results in improved plant quality and increased yields. The role of potassium cannot be substituted by any other nutrient.

Nitrogen (N) and phosphate (P) are the other essential ingredients for plant growth, but both are produced using natural gas (Natural gas is a critical feedstock for nitrogen fertilizer production through the Haber-Bosch process, and accounts for 70 – 80 percent of the cost of fertilizer) are abundant in supply; and because they depend on rising gas prices, profit margins are being squeezed. Potash is simply the most profitable of the high volume nutrients.

The fundamentals for potash are unique in the fertilizer marketplace. The leading drivers for fertilizer sales are the demand for food, economic growth and biofuels.

By 2050, The Food and Agriculture Organization of the United Nations (FAO) estimates production of oil crops will more than double, with soybean and oil palm contributing the highest increases. The oil crops sector potentially represents one of the highest growth rates
in the future; the sugar sector may also significantly increase as a result of the rapid expansion for biofuels.

By 2050, the U.N. expects world population to rise by 40% to 9.2 billion. Such an increase in population growth will result in an increase in the need for crops used in food, animal feed, fiber and bio-fuels. This will cause significant changes in agricultural production. Demand for a grain intensive diet (meat and dairy) will further stress global grain inventories as household incomes rise across the Asian continent.

These demand drivers exert extreme pressure on grain prices, while Arable land continues to decline globally at an average of –1%.