Events
The shutdown of Canadian railways may affect the global supply of potash fertilizer. On March 20, 2022, the Teamsters Canada rail conference issued a statement saying that its subordinate union members had launched a general strike. As a result, Canadian Pacific Railway (CP rail) had to declare a complete shutdown. CP rail is one of Canada's largest train operators and a major railway supplier of potash fertilizer to overseas markets. The shutdown of the company will affect the transportation and export of potash fertilizer from Canada to China.
Comments
Canada is a major producer and exporter of potash fertilizer, which is sold to many countries and regions around the world. In terms of output, according to NRCan data, in 2020, the output of potash fertilizer in Canada was 21.98 million tons, accounting for 31.8% of the global total. In terms of exports, Canada exported 21.96 million tons of potash fertilizer in 2020, accounting for 39.0% of global exports, making it the world's largest exporter of potash fertilizer. According to the annual report data of nutrien, Canada's largest potash fertilizer producer, the company produced 11 million tons of potash fertilizer in 2020, of which 32% were sold to Latin America, 22% to China, 14% to India and the rest to other markets in the world.
The exports of major potash producing countries have been restricted one after another, and the global supply gap has deepened again and again. Canada, Belarus and Russia are the three countries with the highest export volume of potash fertilizer in the world. In 2020, the three countries exported 44.56 million tons of potash fertilizer, accounting for 79% of the total global export volume. In the second half of 2021, Belarus potash was jointly sanctioned by Europe and the United States, and Lithuania's state-owned railway terminated its cooperation with Belarus potash. Belarus faces difficulties in potash export. In February 2022, the largest potash fertilizer producer in Belarus announced that it was difficult to perform the potash fertilizer supply contract due to force majeure. Meanwhile, under the influence of the situation in Russia and Ukraine in March 2022, Russia announced the temporary suspension of fertilizer exports. Belarus and Russia's potash exports together account for 40% of the total global exports, and a supply gap has been formed due to sanctions. The shutdown of Canadian railways will undoubtedly further deepen this gap.
In the short term, it is difficult to make up for the formed global potassium fertilizer supply gap in terms of volume and time. Although nutrien recently announced that it would increase production by 1 million tons in 2022, this is a drop in the bucket compared with the existing supply gap. At present, the Canadian Chamber of commerce is calling on the federal government to take action to restore the work of railway workers so as not to have a terrible impact on the economy. As Karen proud, CEO of the Canadian fertilizer chamber of Commerce, said, 75% of the fertilizer in Canada is transported by rail. In the preparation stage of spring sowing, every day and every hour are very important. The shutdown of Canadian railway also has a great impact on the global potash supply, or will further push up the international potash price.
Recently, the international price of potash fertilizer has continued to rise and reached a new high. According to wind data, as of March 21, 2022, the FOB prices of potassium chloride in Vancouver, northwest Europe and Israel were US $691.5, US $792.5 and US $789.0/ton respectively, up US $97.50, US $162.50 and US $133.50/ton respectively compared with March 1, with increases of 16.4%, 25.8% and 20.3% respectively. Affected by the deepening global supply gap of potassium fertilizer and the release of spring farming demand, the price of potassium fertilizer continues to rise.
In the long run, with the further deepening of the global supply gap, we expect the price of potash fertilizer to continue to rise in 2022.
Investment advice
With the deepening global potash supply gap, relevant potash fertilizer production enterprises may benefit, such as Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qinghai Salt Lake Industry Co.Ltd(000792) , Zangger mining, Qingdao East Steel Tower Stock Co.Ltd(002545) .
Risk tips
Geopolitical changes, repeated overseas epidemics, exchange rate changes, etc.
