Belaruskali: is the loss of Asian markets inevitable?
While Belaruskali is busy reorienting transit and finding alternative supply routes, rival companies are increasing their presence in the Asian market, particularly in India and China, the Belorusy i Rynok newspaper reports.
India
For a number of years, India has been one of the key markets for Belarusian potash fertilizers. The country accounted for 13% of Belaruskali‘s exports.
In 2019, Belarus exported 825.4 thousand tons of potassium to India and earned 346,972.0 thousand dollars. In 2020, exports increased to 872.6 thousand tons, but foreign exchange earnings decreased (289,712.0 thousand dollars) due to price reduction.
Exports of potash fertilizers to India, kg of potassium oxide (data source – Belstat (the National Statistical Committee of the Republic of Belarus)
Until the summer of 2019, Belarus sold potassium to India at a price of $ 290 per ton, from the end of 2019 – at a price of $ 280. In May 2020, a new contract was signed with Indian Potash Limited (IPL) at a price of $ 230 per ton on CFR (Cost and Freight) shipping terms. The CTF terms of delivery mean that the seller pays for the delivery of the goods to the port, loading and freight of the vessel, as well as ensures the passage of customs procedures for the export of goods.
Fertilizer export statistics for 2021 are closed, so it is difficult to say how much potassium went to India last year. However, there are official press releases of Belaruskali and the Belarusian Potash Company, which allow us to obtain certain information.
Thus, on January 21, 2021, it was reported that the Belarusian Potash Company and the Indian IPL signed an annual contract for the supply of 800,000 tons of potash fertilizers at a price of $ 247 per ton. In April 2021, a new contract price was agreed upon for the supply of potash fertilizers to the Indian market – $ 280 per ton.
The signing of a new potash contract between Belarus and India was expected in early 2022, but for a number of reasons the process was delayed. First, sanctions were imposed on the Belarusian potash industry. Secondly, Belarus lost transit to the Baltics and access to the port of Klaipeda.
In February, Reuters reported that India plans to buy Belarusian potash fertilizers, despite EU and US sanctions. For settlements with the Belarusian side, India offered the Belarusian Potash Company to open an account in rupees in the Indian State Bank.
However, Bloomberg later reported that India does not want to sign a potash contract with Belarus until the latter shows all the logistics of supplies and specifies which ports will be used to deliver fertilizers.
The situation of uncertainty played into the hands of Belaruskali‘s competitors. The Canadian company Canpotex, the world’s largest exporter of potash fertilizers, signed a contract with India in February this year to supply potassium until December 31, 2022 at a price of $ 590 per ton.
Experts, including analysts at the Canadian manufacturer Nutrien, suggested that Belaruskali could be rehabilitated in March and sign a new contract with India. But at the moment there is no official information about such a deal.
At the same time, in March, India acknowledged that there were problems with the delivery of fertilizers from Belarus and Russia, and in these circumstances the country is forced to look for new suppliers. According to Reuters, Indian Potash Limited plans to increase purchases from Canada, Israel and Jordan.
“In 2022, IPL will purchase 1.2 million tons of potassium in Canada, 600,000 tons in Israel and 300,000 tons in Jordan to partially replace supplies from Russia and Belarus. Traditionally, India has used the prices set in deals with Belarus and Russia as a guide for supplies from other countries. In 2022, Canada became the price target”, Reuters writes with reference to the sources informed of the situation.
China
According to the Belarusian manufacturer, the People’s Republic of China accounted for 15.7% of Belaruskali‘s sales.
Geography of Belaruskali‘s exports to Asia (data source – kali.by)
India – 13.0% Bangladesh – 4.3% Indonesia – 6.5% China – 15.7% Vietnam – 2.9% Malaysia – 3.2%
In 2019, China purchased 841.5 thousand tons of domestic potassium and paid for it 353,316.1 thousand dollars. In 2020, Belarus supplied 1,057.5 thousand tons of fertilizers to China (foreign exchange earnings – 319,796.4 thousand dollars).
In April 2020, Belarusian Potash Company signed a contract for the supply of potassium to China at a price of $ 220 per ton. In February 2021, Belarus and China agreed to set a contract price of $ 247 per ton. The price was agreed upon for 2021 with a delivery date of December 31, 2021.
China exports of potash fertilizers, kg of potassium oxide (data source – Belstat)
A new potash contract with China (as well as with India) was expected in 2022. However, there have been no news about it so far.
Belaruskali‘s competitors took advantage of the situation again and entered the Chinese market on favourable terms. In February 2022, Canpotex announced that it had signed a contract with China, having agreeing upon the same level of potassium as in India – $ 590 per ton.
In addition to Canpotex, a contract with China has been signed by Israeli fertilizer manufacturer Israel Chemicals. It signed a three-year agreement to supply potassium to China in 2022-2024, and under that agreement agreed to deliver 700,000 tons of fertilizer to Chinese customers this year at the same price as Canpotex ($ 590 per ton).
In the current circumstances, Belaruskali risks losing its position in the Asian market, especially in countries such as India and China. However, problems can arise not only in the Asian vector.
Brazil
In March this year, Brazilian President Jair Bolsonaro called on the country’s parliament to approve a bill authorizing the extraction of minerals in the territories occupied by the indigenous peoples of Brazil.
According to him, it is time for Brazil to embark on the path of potash import substitution. The bet is on the Amazon Potash Basin, which Potássio do Brasil plans to develop.
“The current difficult times, whether one likes it or not, make us discuss the need for potash production in Brazil. We cannot rely on the supply of potash fertilizers from other countries”, said Bolsonaro.
Against the background of these events, the Canadian company Canpotex told the Minister of Agriculture of Brazil Teresa Cristina Dias that it is ready to double sales of potassium to Brazil. In addition, Canada is ready to participate in the development of the Amazon Basin and the development of industrial infrastructure.
In the long run, this means that Brazil will reduce its purchases of potassium abroad and launch its own production. For Belaruskali, this news is not pleasant.
According to the company, Brazil accounted for 17% of Belaruskali‘s exports. In 2019, Belarus exported 1,082.0 thousand tons of potassium to the South American country (foreign exchange earnings – 560,960.3 thousand dollars), in 2020 – 1,521.0 thousand tons (foreign exchange earnings – 520,700.7 thousand dollars).
Exports of potash fertilizers to Brazil, kg of potassium oxide (data source – Belstat)
Thus, in the near future, Belaruskali may face a very serious problem – the loss of key markets. After all, India, China and Brazil were the main buyers of Belarusian potash fertilizers. The scale of the “export tragedy” will be much greater than the loss of the contract with Yara.