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Belarusian Potash Force Majeure Causes Global Fertilizer Chaos

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Belarus exports about 10-12 million tons per year, according to Green Markets

Belarusian Potash Force Majeure Causes Global Fertilizer Chaos

A Belarusian potash producer, which accounts for the bulk of global supplies, has announced a force majeure event that has rocked a market that is already struggling with rising prices.

Around February 16, Belaruskali said it would be unable to fulfill its contracts, according to a letter from the exporter to customers seen by Bloomberg. Shipments were halted as a result of US and European sanctions.

The lack of Belarusian supplies will have big consequences. Potassium is a key nutrient for major cash crops such as corn and soybeans, as well as foods. Fertilizer prices have already skyrocketed as rising natural gas prices have forced some European plants to shut down or reduce production, and US potash spot prices have nearly doubled over the past year. Expensive fertilizers make food production more expensive and fuel global inflation for consumers.

"This is a fairly unprecedented situation in the potash market," CRU Group analyst Humphrey Knight said by phone. “It could take many months, if not more, to rebuild this stock.”

Belarus exports about 10-12 million tons per year, according to Green Markets. The country accounts for about a fifth of the world's supply. It is a major shipper to Brazil as well as India and China.

“Global potash contracts hit the highest price since 2008, providing another year of expensive inputs for farmers and high returns for producers,” Alexis Maxwell, an analyst with Bloomberg-owned Green Markets, said in an email. “US sanctions against Belarus eliminated a key competitor” in the absence of an alternative supplier.

US sanctions against Belaruskali, the only potash producer in Belarus, came into effect in December, and sanctions against the Belarusian Potash Company, which exports all of the country's potash, are due to come into effect on April 1.

The sanctions could lead to a shift in trade flows and some demand rationing, Nutrien Ltd's acting CEO said in an interview. Ken Seitz. Customers who have historically bought in Belarus are trying to secure supplies elsewhere. For example, Russia is doubling the amount of fertilizer it offers to Brazil, Brazilian President Jair Bolsonaro told Radio Jovem Pan on Thursday.

Belarusian President Alexander Lukashenko has discussed potash sanctions with his Russian counterpart Vladimir Putin, he said during a joint televised press conference in Moscow. Putin has ordered the construction of a nutrient export port near St. Petersburg, Lukashenko said, adding that Belarus expects to start loading "millions" of tons of cargo there within 1-1.5 years.

According to Seitz, Nutrien has an additional half million tons of production capacity available in the second half of 2022 if needed. Producer margins are high, so higher potash prices will not dampen demand.

The company could also increase its potash output, Seitz said, but would first need to see a sustained market impact of "years" to secure additional sustainable capacity. According to him, Nutrien increased its potash capacity by 1 million tons in 2021, and additional volumes from other companies are expected to be commissioned in 2022.

"We're not going to stand by and say we're not doing anything," Seitz said, noting that the company doesn't want to incur additional costs if supply issues are quickly resolved. "We're scaling up."

Nutrien expects global potassium supplies to be between 68 and 71 million tonnes in 2022.

The situation with potash in Belarus is bleak, says Scotiabank analyst Ben Isaacson. Nutrien will benefit not only from higher prices, but also from being able to use its amount of nutrients for crops.

“Nutrien is now responsible for how high potash prices will be this year, and Belaruskali will determine how low they become,” Isaacson said.

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