Price of Potash Sending Producers into $16 Billion Capital Spending Frenzy

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Researched by Industrial Info Resources (Sugar Land, Texas)--Increased agricultural plantings, fueled in part by worldwide demand for biofuels, have been a key driver in the increase in the use of potassium-based fertilizers in recent years. Potash, a key potassium-bearing fertilizer, is experiencing worldwide increases in demand and price. According to the U.S. Geological Survey, potash (K2O) consumption is up significantly and the price has more than doubled since 2003, increasing from $170 per metric ton up to $390 per metric ton in 2007. In the U.S., potash is produced at a handful of mines in New Mexico, Utah and Michigan. With a limited number of potash producers, the U.S. relies on imports to make up about 80% of its demand. Canada, the world's leading producer of potash, contributes about 88% of the imports into the U.S. Other leading producers are Russia, Belarus, Germany, Israel and Jordan.

Capital spending at potash mines has exploded as of late with more than $16 billion planned worldwide. Canada leads the world in production and accounts for about 79% of the worldwide capital spending.

Click on the image at right to view a pie chart showing the breakdown of worldwide potash mine project spending.

There are about 20 potash mines in North America. Canada is leading the development charge with 19 projects representing almost $13 billion in planned mine and plant capacity expansion projects on the books. Other countries with major projects include Argentina, Congo, Russia, Tanzania, Thailand, Turkey and the U.S. The Mosaic Company (NYSE:MOS) (Minneapolis, Minnesota) is planning more than $3.7 billion in new potash mines and mill expansions in the U.S. and Canada as well.

Leading potash miner and fertilizer producer Potash Corporation of Saskatchewan Incorporated (NYSE:POT) (Saskatoon, Saskatchewan), which claims 22% of the world's potash capacity, is in the midst of a significant expansion program at its Canadian mines and is planning in excess of $6.1 billion for new mines and mine expansions in Canada.

For details on the trend for more potash mine capacity see related October 12, 2007, news article - Export Potash Projects in the Americas Underscore Worldwide Upswing in Demand.

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