Potash has promise as demand from the developing world gains pace


With the price of potash rising to $900 and then stabilizing at over $400 per ton in the past few years from about $100 just ten years ago, the potash industry has become more important. This article will look at the dynamics of the potash industry in the past five years, including demand and supply for potash, major events and companies, and new developments. At the end it will attempt to forecast where the industry is going in the foreseeable future.

History, Usage, And Prices

Potash contains potassium, which is one of the three main agricultural fertilizers (the other two are phosphorus and nitrogen). Potash has been derived from organic plant ashes for centuries (hence the name pot-ash). In 1808, chemists derived potash from caustic potash by way of electrolysis. Potash is used in fertilizing agricultural land and also to a lesser extent in animal feed supplements, water filtration, aluminum recycling, snow and ice melting, and soap making. When added to crops, potash improves the water retention, nutrients, yield, and pest resistance of plants. The major importers of potash are United States, China, Brazil, and India.

The U.S. Geological Survey estimates that 2011 worldwide potash production was 37 million metric tons, up 9.8% from 2010. Due to rising demand for potash, the price of this important fertilizer has been relatively volatile in the past five years. It reached a high of $900 per ton and it seems to have stabilized at its current price of about $475 per ton. According to industry data, historical potash prices, before the last several years, have been historically low, rarely rising above $200 per ton, and with little volatility. At one point, the European Union instituted anti-dumping tariffs to protect its own potash industry from cheap imports from Belarus and Russia, which it ended in mid-2011. After prices quadrupled for a short time period in the last decade, the stock prices of many of the potash producers increased, there were merger and acquisition deals, and it became feasible for new companies to explore potash resources around the world.

While the price of potash has fallen from its highs, it has stabilized at about $475 or more than 300% higher from where the price was before the sudden rise began. It is likely that this will be the new low for potash prices and with this come more mining projects, which were not feasible at prices under $200 per ton.


The major suppliers of potash are relatively few companies located in Canada (which has nearly half of the world potash reserves), Russia, Belarus, Brazil, and Israel. The six largest producers of potash and their estimated potash production for 2011 are as follow:

The major potash marketing and export companies are Canpotex, for the Canadian-based PotashCorp, Mosaic, and Agrium, which was established in 1970. Uralkaili and Belaruskali established in 2005 the Belarusian Potash Company with a similar purpose as Canpotex. Both Canpotex and Belarusian Potash Co. control over 70% of the potash market.

Due to the increase in demand and subsequently the prices for potash, there were a number of mergers and attempted mergers involving the largest potash producers. The largest (unsuccessful) acquisition was attempted by the Australian BHP Billiton (BHP). In 2010, it proposed to acquire PotashCorp for $39 billion but the offer was rejected by both the Canadian authorities and PotashCorp management. Canadian politicians feared that BHP Billiton will reduce the revenue stream to the Saskatchewan province while the management believed the offer was too low. Even the Chinese were against the deal as they feared that an acquisition would increase potash prices and tried to make a counter-bid for PotashCorp. Later, in 2010, Uralkali merged with Silvinit (both of Russia) to create one of the largest potash company, Uralkali. Moving further West, the German company K+S purchased a Canadian junior potash miner, Potash One.


The potash industry in the U.S. is also getting some action. In 2012, Yara (Oslo: YAR), a global fertilizer company based in Norway, invested in IC Potash in exchange for 30% of IC Potash (Toronto: ICP) production in its New Mexico project, Ochoa. Currently, the largest U.S. potash producer is Intrepid Potash (IPI), which supplies about 9% of the U.S. demand for potash. The company was established in 2000 and went public in April of 2008. Intrepid estimates it will produce about 800,000 tons of Potash from its three mines in Utah and New Mexico in 2012.

Due to a federal law limiting possession up to 96,000 acres per state per entity for potash mining there are three companies currently exploring for potash in the Holbrook Basin in Arizona. Passport Potash (OTC Market: PPRTF) is expected to complete its preliminary economic assessment in early 2013 and start production in 2016. It recently signed a letter of cooperation with the Hopi tribe, which will allow Passport Potash to include their land in its preliminary economic assessment. The other two major players in the Holbrook Basin of Arizona are Prospect Global Resources (PGRX) and HNZ Potash (privately held). Passport Potash is valued at five times less than Prospect Global although the companies have comparable resources in the Holbrook Basin.

Similarly, with the price of potash rising from its multi-decade lows, a company in the UK, Sirius Minerals (London: SXX), is starting potash exploration at the York Potash project and as of September of 2012, the company has started planing to build a mine. In Ethiopia, Allana Potash (OTC: ALLRF) of Canada obtained a preliminary economic assessment in late 2011 and is expected to produce about one million metric tons per year for an estimated mine life of 30 years. Similarly, ICL of Israel and Arab Potash Company of Jordan are ramping up production of potash.

New Majors

In the past couple of years the major potash companies have began to expand their capabilities and also non-potash miners are becoming more interested in potash. A major focus is again the Saskatchewan province. In 2011, Rio Tinto (RIO) of UK and Acron (Moscow: AKRN) of Russia agreed to explore jointly for potash in the province. Later in 2011, K+S decided to advance a multi-billion potash project in southern Saskatchewan. And Agrium (AGU) is spending $1.5 billion to expand its brownfield mines. Even BHP is building its own mine in Saskatchewan, following its failed bid for PotashCorp.


In conclusion, following an increased volatility and reaching record highs in the past five year, the price of potash seems to have stabilized above $400 per metric ton. A number of potash deposits, which were not feasible to develop are gaining increased interest. In addition, existing mines are ramping up their capacity and other fertilizer and mining companies are trying to enter the potash production industry. According to the International Fertilizer Industry Association, demand will rise approximately by 4.7% through 2015. With a rising demand for potash from emerging economies and need for more efficient farming, the expected increase in supply should be able to meet this new demand. Investors looking to invest in mining stocks should consider the less risky majors and riskier minor potash producers.