The Belarusian producer of potash fertilizers, which accounts for the bulk of the world's supplies, has announced that it will not be able to fulfill most of the obligations under the contracts, the well-known portal reports. Potatoes news.
On February 16, Belaruskali OJSC announced that it was stopping the supply of fertilizers. One of the reasons is the US and European sanctions.
The lack of Belarusian supplies will have catastrophic consequences. Potassium is a key nutrient for major crops. Fertilizer prices have already risen significantly.
Some European plants have completely stopped or reduced production volumes due to rising natural gas prices.
Expensive fertilizers make food production more expensive and fuel global consumer inflation.
“Global potash contracts were awarded at the highest price since 2008, providing another year of expensive inputs for farmers and high returns for producers,” Alexis Maxwell, an analyst at Green Markets, a Bloomberg-owned company, said in an email. “US sanctions against Belarus have eliminated a key competitor in the absence of an alternative supplier.”
According to Green Markets, Belarus exports about 10-12 million metric tons per year. The country accounts for about a fifth of the world's supply. It is a major shipper to Brazil as well as India and China.
U.S. sanctions against JSC Belaruskali, the only potash producer in Belarus, came into effect on December 8, and sanctions against the Belarusian Potash Company, which exports all of the country's potash, are due to come into effect on April 1.
The sanctions could lead to a shift in trade flows and some demand rationing, the acting chief executive officer of Nutrien Ltd. said in an interview. Ken Seitz. Customers who have historically bought in Belarus are trying to secure supplies elsewhere. For example, Russia is doubling the amount of fertilizer offered to Brazil, Brazilian President Jair Bolsonaro said Thursday in an interview with Radio Jovem Pan.
Nutrien has an additional half million tons of production capacity available, if needed, in the second half of 2022, Seitz said. Producer margins are high, so higher potash prices will not dampen demand.
The company could also increase potash production, Seitz said, but first it needs to make sure the extra capacity is needed for the long haul. According to him, Nutrien increased its potash capacity by 1 million tons in 2021, and additional volumes from other companies are expected to be commissioned in 2022.
"We're not going to say we're not doing anything," Seitz said, noting that the company doesn't want to incur additional costs if supply issues are quickly resolved.
Nutrien expects global potassium supply in 2022 to be between 68 and 71 million tonnes.
- In 2021, as in the past month, the Belarusian potash industry has been hit hard. Last year, the EU and the US imposed tough sanctions on Belarusian potash exports. EU ban touched upon several commodity codes of potash exported to the EU countries. USA for its part completely banned trading with several large potash companies.
- Lithuania was at the forefront of the implementation of the sanctions, as most of Belarus' potash exports passed through the port of Klaipeda. However, there was no easy way for Lithuanian railways to stop the transit of Belarusian potash and adhere to US sanctions, as they had already signed a contract until 2023 with potash giant Belaruskali. The Lithuanian government resolved this by terminating the treaty, citing national security concerns, and rejecting other companies' attempts to sign a new one.