Nutrien, Mosaic expect potash market disruptions beyond 2022

Nutrien Ltd. decreased its 2022 global potash shipments forecast on the back of the Russia-Ukraine war and biting sanctions on Belarus, while it and potash peer The Mosaic Co. flagged market disruption beyond 2022.

Nutrien estimated global potash shipments will drop about 10% in 2022, to 62.5 million tonnes at the midpoint of its guidance range compared to an earlier forecast of 69.5 Mt at the midpoint.

The updated forecast comes as it becomes clear that potash from Belarus and Russia, both major producers, is not getting to market and that it is increasingly unlikely there will be a quick resolution to the barriers blocking potash trade. Earlier in 2022, Lithuania banned Belarus from using the port of Klaipėda, through which it had exported the vast majority of its potash, thereby forcing it to divert exports to Russia. But analysts and producers say little Belarusian product is shipping through Russia, and output from Russia faces difficulties finding buyers in the wake of the country's invasion of Ukraine.

Nutrien's reduced supply forecast echoes analyst projections that assume little of Belarus' output will make it to market for the rest of the year.

"We believe these issues could extend well beyond this year," Kenneth Seitz, Nutrien's interim president and CEO, said on a May 3 earnings call. "Sanctions on Russia and Belarus have the potential to create more lasting changes to global trade patterns as customers prioritize reliability of supply."

Likewise, Mosaic warned that reduced supply could extend beyond 2022, opening the door for producers outside Russia and Belarus to consider boosting output.

"Belarus and Russia represent close to 40% of the global potash market. Their absence is nearly impossible to replace and today's prices reflect that," Mosaic President and CEO James O'Rourke said on a May 3 earnings call. "Belarus remains sanctioned and our previous assumption of those tonnes coming back midyear appears optimistic as most or all of their exports will be curtailed due to logistics."

O'Rourke said Mosaic is assessing an acceleration of expansions to increase production without making major new investments, such as by restarting a second mill at its Colonsay potash mine in Canada. Mosaic could be churning out an aggregate 25 Mt of fertilizers by the end of 2023, up from 19.7 Mt of production in 2021, O'Rourke said.

Nutrien management also dangled the prospect of increasing production but said major investments on expansions would depend on the unfolding situation in Belarus and Russia.

Demand strong in face of high prices

As for potential demand destruction on the back of high fertilizer prices, Mosaic and Nutrien management said that buying remained strong, in part given high crop prices, which has helped offset higher farming costs due to the increase in fertilizer prices.

"Corn, soybean and wheat futures prices are 50% to 90% above the 10-year average and are trading at elevated levels on a multiyear basis," Seitz said. "Prospective crop margins are significantly above historical average levels as the increase in revenues from higher crop prices has more than exceeded the projected increase in input costs."

Spring plantings in North America are behind schedule, but prepayment for product from customers is looking strong, Seitz said.

"Consumption will be forced to adjust to available supply," O'Rourke said, noting the issue for the market is fertilizer availability, not price.

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