Published July 2015
Potash is the third most widely used fertilizer nutrient, following nitrogen and phosphorus. Fertilizer use accounts for approximately 89% of total potash consumption, the balance being consumed in a variety of industrial applications. World potash production is confined to only 12 countries and is dominated by Eastern Europe (Belarus and Russia) and Canada, which together accounted for about 59% of world production in 2014. China, Western Europe, and the Middle East accounted for about 35%, while the Americas (excluding Canada) accounted for most of the remaining 6%. Potassium chloride (KCl) is the most common and least expensive source of potash. Most of the potash-consuming countries have large agricultural bases and require imports to meet fertilizer demand. Fertilizer demand is driven by growing populations food requirements, as well as the switch from a carbohydrate-based regimen to a protein-rich diet. Potassium chloride accounts for about 90–95% of world potash production. Potassium sulfate compounds account for most of the remainder.
The following pie chart shows world consumption of potash:
For the past three decades, the potash industry has been highly concentrated, with high barriers to entry, assisted by flat price levels. Higher crop prices and planting rates in recent years provided impetus to increase demand. Potash prices rose to unprecedented levels in 2008 and 2009, which resulted in several new entrants applying for drilling permits for potash ore mining. However, with the advent of the economic crisis and credit problems, the global potash market collapsed in 2009 as demand levels plummeted to low levels. Capacity utilization fell well below 50% as inventories piled up. Sales of potash fertilizers fell more than consumption as existing inventories were being exhausted.
As the global population increases, the need for food and the nutrients required to produce food will correspondingly increase. Although crop prices and the timing of purchases may affect short-term demand, growth is definite in the medium to long term. Demand for food directly influences potash production. The global population is expected to grow at an annual rate of slightly over 1% during the forecast period. Increased meat consumption will drive livestock production, which consumes crops like corn, which in turn increases the requirement for potash. The rate of growth of potash fertilizers is dependent on consumption patterns in China, Latin America, and India. Demand will also come from the production of regulatory-driven biofuels, including ethanol and biodiesel, as there will be an increasing requirement to cultivate more corn, sugarcane, and palm crops.
The potash supply/demand balance improved tremendously during 2012–14 and further growth is anticipated for 2014–19, driven mainly by China and Latin America, as well as by countries in Asia and Eastern Europe. The world economy is also showing signs of steady recovery; global GDP growth is expected to be above 3.3% per year in 2016 and beyond. With a steady improvement anticipated for world consumption, particularly for developing countries, the world production rate will be climbing back to a satisfactory level toward the end of the forecast period. Canada, China, and Eastern Europe (Russia and Belarus) will be the primary beneficiaries of the revived world market and together will account for about 90% of projected increased world production of potash through 2019. Potential consumption would rise mainly from China and Latin America, taking into account their soil nutrient balance. Brazil is one of the fastest-growing potash markets. The Southwest Asian market, primarily India, is also expected to have a fairly high increase in consumption levels during the forecast years.