By any measure, 2018 has been a strong year for potash suppliers, who have seen substantial price rises in Asia and elsewhere.
A $50/t increase in the annual India contract, $60/t rise in the annual China contract and southeast Asia spot values ending 2018 trading around three-year highs all create a positive story for MOP sellers in Asia.
But the question being increasingly asked now is how much longer will this uptrend last?
Robust potash demand throughout much of 2018 supported the rising price trend in Asia. Malaysia and Indonesia imports were up year on year during January-August, GTT data show, while Vietnam's MOP imports look set to exceed 1mn t/yr again this year. Thailand's January-September imports were down modestly year on year, but still the second-highest level since GTT records started in 2007.
This solid demand is not exclusive to Asia. Major North America producer Nutrien, which exports to Asia and elsewhere via Canadian marketer Canpotex, saw record sales volumes earlier this year, highlighting the genuine strength of potash demand in many regions.
So the question has now become one of supply-demand balance. How long can the price uptrend last, considering the substantial raft of new capacity that has recently, or soon will, come on stream?
In terms of capacity scheduled, more than 10mn t/yr of potash should have come on stream over the past two years from the likes of Turkmenkhimya Garlyk, K+S Bethune and Eurochem at Usolskiy and Volgakaliy.
In reality, a lot less is being produced and there have also been some output losses. Among them, German producer K+S shut down its Hattorf and Wintershall sites for periods this year because of ongoing waste water disposal issues. Chile's SQM is cutting MOP and SOP output in favour of lithium products. China's Tianqi Lithium has acquired a substantial stake in SQM, suggesting this trend may continue.
But these output losses are greatly outweighed by new supply. Operating rates are ramping up at Bethune, the newest K+S MOP facility in Saskatchewan, Canada, with the firm forecasting 1.4mn t of output this year. Shipments are steadily coming to Asia from Bethune.
The first MOP shipment to Asia from EuroChem's new 3.7mn t/yr Usolskiy mine — one of its two new mines in Russia — arrived into southeast Asia during October. Belarusian producer Belaruskali is due to add a further 1.5mn t/yr of MOP capacity at the end of next year.
At some point these extra tonnes have to tell, most participants agree. The question is when and to what degree?
The International Fertilizer Association forecasts global potassium demand (in K2O terms) to rise by 2pc/yr through to 2022, which will see the potential global supply surplus widen to around 8mn t/yr.
So demand will be vastly outweighed by production over the coming years — at least in theory.
The likelihood is that new production will actually be rolled out slowly and eased into the market, in an attempt to mitigate the impact on prices.
Producers are also not averse to aligning their output with perceived demand.
"In this market, the company will adhere to its adopted strategy of matching production with price and demand, seeking neither to overproduce nor to sell at unreasonably lower prices than the market indicates," Russian potash firm Uralkali Trading's chief executive Alexander Terletsky said recently.
This will support the view that a sharp price correction is unlikely.
Another factor to consider is crop prices. Do crop price levels allow farmers to absorb ever-higher potash input costs? A look at today's palm oil market in Malaysia suggests not.
While potash prices have trended upwards, crude palm oil (CPO) futures have declined by around 15pc in the past six months, prompting delayed fertilizer purchasing among plantations. As a result, MOP prices have started to stagnate and sales volumes could shrink going forward.
The trend is not isolated to palm oil in Asia. The International Grain Council's grain and oilseeds price index fell to a five-month low at the end of November amid declines in rice, soyabeans, wheat and barley export values.
These agricultural market factors, combined with the looming additional potash tonnes, suggest the upward MOP price trend may not last too much longer.
This explains why suppliers are asserting their advantage while they have one.
