CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
During the last week of July, Uralkali blasted the global potash market wide open sending stock prices in the sector tumbling.
Uralkali CEO Vladislav Baumgertner’s move was supposed to move potash from a clubby system of tightly controlled global supply and set prices to an open market where volume and cost-based pricing is key.
Baumgertner predicted at the time the price of potash would fall 25% to below $300 a tonne in short order.
Fast forward two-and-half months and the full effects of the breakup of the Russia-Belarus oligopoly that controlled more than 40% of world exports have not really been felt.
Canada’s Potashcorp said in September the market for the crop nutrient is essentially paralyzed with all the big players waiting to see who would blink first on price and production.
The price of potash FOB Vancouver is hovering around the $400 a tonne level where it was before the Baumgertner bombshell.
Now K+S AG (OTCMKTS:KPLUY), Europe’s biggest producer of potash, said it is even prepared to put its credit rating at risk to raise $1.4 billion in fresh funding for a project in Canada.
Bloomberg reports K+S is this confident about the bond issue that will fund around a third of its $4.1 billion Legacy mine because the Germany company predicts prices for potash are not going to go lower than $400 a tonne.
Tough talk from a company that has almost halved in value this year and is now worth under $5 billion.
The Legacy mine, currently under construction, is expected to start production by the end of 2016, ramping up to two million tonnes per year in 2017 and reaching full capacity of 2.86 million tonnes by 2023.
3 Comments
james
The budget is actually 4.1 billion not 1.4 billion as stated in the article
MINING.com Editors
Thanks for the comments James. You’re right, the $1.4bn mentioned is the amount K+S is raising by issuing a new bond. The $1.4bn constitutes a third of the overall budget for Legacy which K+S increased from $3.25bn to the $4.1bn in April. I’ve amended the post to make this clear.
wendy
K+S is looking to the future,why would they suspend the Legacy project just because of the current situation with stagnant potash prices? You cannot let swings in the market cause you to make hasty decisions,when the future demand for potash looks promising.By postponing or stopping the project from proceeding at all would foolish,considering the production costs would be greatly lower at Legacy once it is operating,compared to their European mines.So economics alone warrant the continuation of their new mine.You have to look at the longterm goal,even though the current potash environment is uncertain.