In over-built potash sector, tiny segment commands premium
By Rod Nickel
TORONTO, March 4 (Reuters) - Excess production capacity over-hangs the price of potash, but its premium form may offer upside that investors have yet to cash in on.
Sulfate of potash (SOP) is a chloride-free fertilizer suited to sensitive crops such as fruits and nuts. Standard SOP traded over five years to mid-2013 in northwestern Europe for 20 percent more than granular muriate of potash (MOP), but that premium averaged 50 percent in 2014 as supplies became short and MOP prices fell, said Paul Burnside, manager of fertilizer analysis at consultancy CRU.
"Demand has proved to be very sticky and consumers have accepted that SOP prices aren't going to fall," Burnside said.
Global SOP production is 5 million tonnes annually, but demand may be 10-12 million, according to Potash Ridge Corp , a company developing a 645,000-ton Utah mine.
"You can take all the SOP projects on the drawing board and it won't make a dent in that demand-supply deficit," said Chief Executive Guy Bentinck during the Prospectors & Developers Association of Canada convention.
Norwegian nitrogen producer Yara International owns a 17 percent stake in IC Potash, which plans a $1 billion SOP mine in New Mexico.
"We see strong growth for SOP and an underlying weakness in supply," said Yara's Bernhard Mauritz Stormyr.
Yara and Allana Potash are also gearing up their own potential SOP production. Continuación...