21.
12.21
14:30

US sanctions against Belarus' potash exporter cause fertilizer price rally

Global potash prices are set for an extended rally after the United States imposed sanctions on major supplier Belarus Potash Company (BPC). This increases the pressure on farmers and consumers, who are already faced with skyrocketing costs. The world economy has to deal with rising food prices.
The prices of fertilizer, which plays an important role in plant health, are expected to continue to rise, which may curb the growth of soybean acreage in Brazil, the world's largest supplier, according to analysts.
After several years of growth, there is now a pause in the expansion of the acreage in Brazil, which is further propping up soybean prices.
Sanctions against BPC would make the world more dependent on other suppliers like Canadian Nutrien, the world's largest potash producer.
The company has idle potash capacity that it could bring back to market if needed, a Nutrien spokesman told Reuters.
Nutrien's shares are up 6.6% since the BPC sanctions announced, and hit record highs last week.
Another major supplier, Russia's Uralkali, declined to comment.
BPC is the export division of Belaruskali, the second largest potash producer in the world. The US has blacklisted Belaruskali and placed BPC on its sanctions list. The West is escalating its punitive measures against the Belarusian President Alexander Lukashenko. Potash exports are an important source of foreign currency for Minsk.
Washington has given BPC customers - including India, China and Brazil - until April 1 to cease doing business with BPC. US sanctions will prevent BPC from accessing dollar-based financial services, making it difficult to trade in international markets.
Prices for other fertilizers like urea and phosphate have also risen this year as record prices for natural gas and coal sparked production cuts in the industry.
Reduced fertilizer use could lead to lower crop yields as food commodity prices reach their 10-year highs and food inflation is a major problem worldwide.
Global spot prices for potash are at a 13-year high of around USD 650 per tonne this year following a surge in crop prices and a recovery in demand.
The record price for potash was set at around $ 800 per ton when contracts were signed in 2008, said VTB Capital analyst Elena Sakhnova.
In Brazil, spot potash prices could rise from the current $ 800 per ton to $ 900 to $ 950 per ton in the first quarter of 2022, Marcelo Mello, director of the StoneX fertilizer counter in Brazil, told Reuters. They are up more than 230% since January.
Potash is needed to grow many crops, including soybeans, rice, corn, fruits, vegetables, palm oil, and wheat.
It improves the plants' resistance to disease and drought and ensures higher yields. It cannot be replaced by fertilizers based on phosphate or nitrogen.
India's potash consumption and imports could decline if potash prices continue to rise due to sanctions against BPC, an industry representative in India said.
BPC typically has annual supply contracts with India, with the last contract signed in January.
"We are trying to solve the problem or at least find a temporary solution," another senior industry official in India told Reuters.
China gets 20% of its potash imports from Belarus. Prices at the world's largest consumer are also high, despite the recent release of part of China's potash reserves.
"Potash supply ultimately remains tight as imports are still limited and port inventories are falling," said Humphrey Knight, lead potash analyst at CRU Consulting, of China.
BPC's ability to supply customers could also be hampered by logistics as inland Belarus relies heavily on the Lithuanian port of Klaipeda for potash exports, he added.
Russia, which is still a Belarusian ally, does not have enough free port capacity to handle the 12.5 million tons of BPC per year.
Lithuania continues to transport Belarusian potash by rail to its Baltic Sea port for the time being under a previously signed contract and an advance payment for December and part of January.
However, public pressure on state-owned companies to comply with US sanctions is mounting in Vilnius, one of Europe's most vocal critics of human rights violations in Belarus. The United States is a strategic partner of Lithuania.

Source
Hansa Terminhandel GmbH
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