EDITOR: | May 17th, 2013

The Pulse: Potash to pick up; Setback for Brazil project: Will some countries “die”?

| May 17, 2013 | No Comments
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Pulse_FinalOn the back of news from Potash Corp of Saskatchewan that spot potash prices have gained up to $70/tonne in recent weeks, with deals in Southeast Asia being done at $470/tonne, comes a bank report that sees shipments of the fertilizer feedstock on the recovery track.

Analyst Patricia Mohr at Toronto-based Scotiabank notes that spot prices were largely flat in April at around $405/tonne (against $452.50 last December) but look like picking up soon. Yet April, according to some press reports, saw Canada’s biggest monthly potash export volume since the 1990s.

Mohr notes that while buyers in Brazil and Malaysia are resisting price increases, “we believe prices are now at bottom”. Scotiabank says Potash Corp doubled its North American sales volumes in the March quarter, compared to the same period in 2012. Overseas sales in the quarter were up 69% year-on-year.

“The sales improvement partly reflects the resumption of purchases by China following a lower price agreed with Canpotex in late December,” Mohr writes. Meanwhile, other overseas buyers, who deferred orders last year awaiting lower prices, have also stepped up purchases. Potash shipments from Canada, Russia, Belarus and others should come in at 57.5 million tonnes in 2013, against 51.9 million last year.

Scotiabank sees Brazil and China being the big growth markets. In Brazil’s case, a record corn and soybean crop is expected for the early 2014 harvest. (In other words, that will require a lot of fertilizer.)

Potash Corp’s CEO Bill Doyle, in making the point about the rising spot prices, did caution that those prices were still not high enough to justify new mines being developed – which no doubt he hoped would deter BHP Billiton with Jansen. Mosaic seems to be in agreement considering its decision to defer expansion.

Meanwhile, Germany’s K+S, Europe’s biggest producer but also the owner of one of those new mines in Saskatchewan, has flagged a sharp increase in world potash demand. News reports quote the group saying it has been encouraged by new orders signed by China and India. A spokesman said demand for fertilizers rose significantly this latest northern spring season in Europe and North America but also in Southeast Asia and South America.

POTASH: Verde Potash (TSX:NPK) has announced it is delaying the release of its bankable feasibility study on the Cerrado Verde project in Brazil. The problem is that the company completing the engineering and design work on the rotary kiln cannot yet guarantee Verde will be able to guarantee 12,000 tonnes day of potassium recovery; so far they can sign off on only 3,000 tonnes a day. Verde is now talking to other parties to see whether they can come up with the answer to the kiln problem.

In the meantime, the engineers are recommending a demonstration plant be built.

Analysts at Ocean Equities in London see the delays as a “speed bump”. However, they add, given the scale and size of the Cerrado Verde project, the successful operation of a demonstration plant will further de-risk the project, provide the necessary guarantees on potassium recoveries, and enable plans for financing by the Brazilian Development Bank to go ahead.

However, Verde is yet to announce whether it will go down the demonstration plant route. Ocean Equities believes that if they do, this will push out the development timetable by at least 12 months. On the plus side, this will give Verde extra time to gain its environmental licences which are a precondition to the development bank financing and gaining the mining leases.

SUSTAINABILITY: Some nations are dying. We all know about Japan: earlier this month the government announced that the number of children aged 14 and under had fallen for the 32nd straight year.

But Japan is not alone in facing a declining population. The latest issue of Foreign Policy magazine zeroes in on Ukraine. Its population is shrinking by 330,000 a year (from the present 45.5 million). Apart from emigration, the birthrate is 1.3 per thousand, short of the 2.1 that represents replacement level.

The author of the article, associate editor Joshua Keating, says the first countries to “die” (as he terms it – he is talking about consistently declining population levels) are all in Eastern Europe. Belarus, Ukraine and Serbia are his top picks. Then the next to be put on the list could be Latvia.


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