Rabobank report: Changing the potash game plan
Despite the ongoing softness in demand, the supply side is still able to maintain strong margins. Rabobank advises that in order to increase their “walk away” factor in future negotiations, and to put a cap on potash prices, importers need to build a more balanced potash supply mix. This will require building alternatives in the form of equity investment in junior greenfield mines, long-term contract agreements with existing miners, or the acquisition of an existing major potash player.
"It has become extremely challenging for new players in the industry to finance further progress in their respective projects, making it clear that without proactive action by the major importers, the industry structure is guaranteed to remain intact, turning in favor of consolidated suppliers once demand picks up. It is therefore imperative for importers to take steps now to ensure more market-driven pricing that has a stronger alignment with the cost of production," said Sehrawat.
Rabobank says that potash importers need to play tactically to benefit from current bearish market sentiment without losing focus on the long-term strategy. The balance between pushing for price discounts in the short-term and strategic investments to improve future supply mix is crucial. A suitable equilibrium between supply and demand could prove to be a win-win outcome for both sides of the potash market.