The free on board potassium chloride price in Vancouver (Canada) skyrocketed 154% in the last 4 weeks to 9th March, reaching USD 562.5/MT. This surge is directly attributed to new retaliatory sanctions which were imposed by the EU on 2nd March targeting Belarus for supporting Russia in its military attack against Ukraine. The EU ambassadors agreed on a total imports prohibition of potash or potassium chloride from Belarus.
Although Germany is the fourth-largest potash producer in the world, the European Union is largely deficient in potash production, with only a 6% share of global production. In 2020, total EU imports of potash amounted to 2.4 million tonnes, with 27% of the share imported from Belarus. Canada is the main potash producer, producing around 14 million tonnes per year. Replacing the 1.7 million tonnes of Russian and Belarusian potash imports with Canadian origin has added upward price pressure on potash prices.
The new sanctions introduced are in addition to the already adopted in June 2021, meaning that all potassium chloride mined in Belarus is subject to EU import ban. The other two main fertiliser nutrients phosphate and nitrogen, were not included in the sanctions. However, the restrictions introduced in June, already prohibited certain mixtures, including mineral chemical fertilisers containing the three fertilizing elements, as well as mixtures only containing phosphorus and potassium.
In the short term, this potash price surge is building up pressure on the already high input costs to EU farmers and is likely to cause a spiral effect in the rest of food commodities. However, some companies are currently doing test drilling in East Germany to look for new potash, which looked promising. Consequently, potash prices are likely to ease in light of higher supply availability in the mid-term.