Fertilizer International 498 Sept-Oct 2020
30 September 2020
Potassium sulphate: a premium product
SOP REPORT
Potassium sulphate: a premium product
The global market for potassium sulphate is on the rise. It has become the preferred potassium fertilizer for many chloride-sensitive, high-value cash crops. This speciality potash product also commands a price premium.
Potassium chloride (KCl, muriate of potash, MOP) has a number of well-known natural advantages as a fertilizer. It is widely available, relatively low-cost and readily soluble in water. Equally importantly, MOP has the highest potassium content (60-62% K2 O) of any of the mineral forms of potash.
As a fertilizer, potassium sulphate (K2 SO4 , sulphate of potash, SOP) has emerged as the most commonly used alternative to potassium chloride. Whilst MOP may be the preferred potassium fertilizer for cereals and oilseeds, SOP often finds favour for more chloride-sensitive, high-value cash crops, notably fruits, vegetables, tobacco and tree crops (Fertilizer International 458, p48).
The other obvious advantage of SOP is that its sulphate content also provides a concentrated source of sulphur in plant-available form. This makes SOP a highly effective product for correcting sulphur deficiency in crops, via direct soil application or through fertigation and foliar treatment.
The other main chloride-free alternatives to MOP are:
- Potassium nitrate (NOP, KNO3)
- Potassium magnesium sulphate (SOPM, langbeinite, K2 Mg2 (SO4 )3 )
- Polyhalite (K2 Ca2 Mg(SO4 )4 .2H2 O)
- Monopotassium phosphate (MKP, KH2 PO4 )
These can all offer agronomic advantages over potassium chloride under certain crop and soil conditions.
Total agricultural use of potash globally exceeds 100 million tonnes annually. On a product basis, the market divides into MOP (70%), SOP (9%), NPKs (18%) and SOPM/others (3%). Global MOP deliveries, an estimated 64 million tonnes in 2019, are forecast to increase to 64-66 million tonnes this year.
Potassium sulphate – key advantages
Potassium sulphate is the most commonly used alternative to potassium chloride. Fertilizer grades of SOP typically range from 50-54 percent K2 O and contain around 18 percent sulphur in sulphate form.
The key advantages of SOP over MOP are its chloride-free nature and high sulphur content. Indeed, SOP has the lowest salt index of the three most commonly-applied potash fertilizers (MOP, NOP and SOP). Its use is generally advised for:
- Chloride-sensitive crops – including many fruits and vegetables
- Areas at risk from salinity, particularly semi-arid or arid regions with low rainfall, where excessive use of chloride-containing fertilizers could eventually ‘poison’ the soil.
SOP also remains the cheapest low-chloride source of potassium, according to Tessenderlo Kerley International. The ability to supply plant-available sulphur is becoming increasingly valued too (Fertilizer International 476, p19). Sulphur fertilization is particularly important in crops with a high sulphur demand such as brassica, canola and onions.
A sizeable and growing market
The global SOP market has more than doubled in size over the last two decades to reach 7-8 million tonnes currently. The market grew particularly rapidly between 2012 and 2017, driven upwards by rising demand in China (Figure 1).
Further demand growth (1.3 percent p.a.) is expected over the next two decades, according to some forecasts, with the global market expanding to 8.7 million tonnes by 2040.
In contrast to the last decade, SOP demand is expected to increase more rapidly (2.3 percent p.a.) outside of China over the next 20 years. Other demand projections are more bullish with 2-3 percent growth out to 2040, accompanied by a rise in SOP prices to $961-997/t by the end of this period.
Large amounts of standard and granular SOP products are currently consumed in the manufacture of compound and blended NPK fertilizers. Indeed, growing demand for SOP-based NPKs is expected to drive up consumption in the European market.
The water-soluble segment, although representing less than 10 percent of the total SOP market, is growing at a faster rate of around five percent p.a. Most water-soluble SOP, unlike granular product, is sold straight, although some is used to manufacture water-soluble and liquid NPKs.
Demand for more?
There is still unmet SOP demand in the market, according to Tessenderlo Kerley International: “We believe that SOP market growth is probably constrained by supply. The supply/demand balance remains very tight – it is difficult to supply all demand – [and] if there was more product on the market it would almost certainly be consumed. So, potentially, growth could be even higher if more production was available.”
The demand potential for SOP is mainly concentrated in five countries, according to an analysis by CRU, being linked to specific crop types grown domestically in each of these economies:
- China: potatoes, tomatoes and beans
- India: potatoes, mangoes and peas
- United States: almonds, potatoes and citrus
- Russia: potatoes, sunflower seeds and apples
- Brazil: citrus, tobacco and beans
CRU calculated the potential SOP demand in these countries based on the acreages of chloride-sensitive crops grown. China emerged as the country with the highest potential level of SOP demand, with India coming a distant second and the United States ranked third. Russia, Brazil and Nigeria also appear to be significantly under-consuming SOP, based on the potential for potash removal by chloride-sensitive crops (Fertilizer International 475, p49).
“Cultivation of chloride-sensitive and intolerant crops has grown very rapidly in areas of significant population growth, such as Africa, South Asia and Southeast Asia,” CRU concluded. “We think there’s a lot of future potential in these regions.”
Primary and secondary producers
Annual global production capacity for SOP exceeds 11 million tonnes, according to some estimates (Figure 2), although actual output, and hence global supply, depends on the operating rates of individual producers.
SOP is mainly manufactured via two production processes: primary production from salt lake brines or by the secondary Manheim production process from potassium chloride ore. These two production routes account for around 57 percent and 32 percent of production capacity, respectively (Figure 3). In Germany, K+S also produces SOP from kieserite and potassium chloride ore using a re-crystallisation process.
The main primary SOP producers include:
- SDIC Luobupo at Lop Nur, Xinjiang, China
- Qinghai Lenghu Bindi, Kunteyi, Qinghai, China
- Compass Minerals, Ogden, Great Salt Lake, Utah, United States
- SQM, Salar de Atacama, Chile
- Archean Group, Great Rann of Kutch, Gujarat, India.
Leading secondary producers include:
- K+S, Werra, Germany
- Tessenderlo, Ham, Belgium
- Migao, four sites, China
- Yara, Kokkola, Finland
- Kemira, Helsingborg, Sweden.
Pricing, premiums and costs
SOP commands an attractive price premium over MOP. This has averaged $269/t over the last five years with European SOP prices remaining relatively stable at $500600/t over this period (Figure 4). While the MOP (f.o.b. Vancouver) price fell over the course of 2019, trading in the region of $240-320/t, the SOP price (f.o.b. Western Europe) generally traded above $490/t ($490-520/t) – offering attractive premiums of at least $170/t last year. This premium has since widened due to the further decline in the Vancouver MOP benchmark during 2020.
Although an over simplification, the SOP industry’s cost base broadly divides between lower cost primary (brine) and higher cost secondary (Mannheim) operations (Figure 5). Not only is the Mannheim production route exposed to raw material price volatility, it is generally more energy intensive than brine production, particularly in comparison to China’s large-scale primary producers which occupy the lowest position on the industry’s cost curve. The management and disposal of the hydrochloric acid by-product of the Mannheim process is an added burden for secondary producers.
Because of their position further up the cost curve, it is the conversion costs for the Mannheim process – roughly $100/t above the MOP raw material cost – that helps set the floor price for SOP. The industry’s cost curve (Figure 5) also suggests that about 50 percent of producers will make a loss at SOP price levels below $410/t.
As analysts CRU have commented previously: “Primary producers tend to be very large-scale and low cost. Whereas secondary producers are significantly exposed to fluctuations in price for both input MOP and output SOP. They pay particular attention to the premium between the two as this significantly impacts their margins. Secondary producers do well in the market when premiums are high.”
China’s central market importance
China’s primary SOP capacity is concentrated in the far western inland provinces of Xinjiang and Qinghai. The country’s SOP production capacity has expanded fast, rising from less than two million tonnes in 2007 to more than seven million tonnes currently, equivalent to about two-thirds of global capacity. The Chinese SOP market has been transformed over the last decade by the entrance of low-cost primary producers such as Xinjiang-based Luobupo (Fertilizer International 475, p49).
Secondary producer Migao Corporation, meanwhile, manufactures SOP at four Mannheim production sites in China with a combined capacity of 320,000 tonnes. While China’s primary SOP capacity is located inland, the coastal provinces of Guandong and Shandong dominate secondary production. A location near to ports is also a matter of necessity for secondary producers as they rely on imports for their main raw material, MOP. Secondary producers also benefit from a logistical advantage, being closer to the centres of agricultural demand in southern provinces (Fertilizer International 475, p49).
China accounts for more than half of global SOP consumption and has been the engine of global demand growth over the last decade. Domestic SOP demand has been driven upwards by a rapid rise in the cultivation of chloride-sensitive crops such as fruit, vegetables, tea and tree nuts in recent years. Consumption is concentrated in southern provinces where the majority of the country’s fruit and vegetables are grown. Rapid demand growth in the Chinese market has generally been strong enough to absorb newly-commissioned primary and secondary SOP capacity and keep prices stable. The concentration of primary production in western provinces has, however, resulted in a geographical mismatch with demand (Fertilizer International 475, p49).
Europe dominates world trade
Only six SOP producers globally have the capacity to produce more than 300,000 t/a. Leading producers outside China include:
- Tessenderlo Kerley International (GranuPotasse, SoluPotasse, K-Leaf) in Belgium
- K+S Group (KALISOP, soluSOP, horti-SUL) in Germany
- Compass Minerals (Protassium+) in the United States
These three SOP producers collectively account for more than 50 percent of ex China world SOP supply.
World trade in SOP largely comes from just four countries, namely Germany, (K+S Group), Belgium (Tessenderlo), Taiwan, (Sesoda) and Chile (SQM). Historically, Germany and Belgium combined have together accounted for over 80 percent of global SOP exports. The recent announcement of an offtake agreement with Kemira’s Helsingborg plant in Sweden should consolidate and bolster Tessenderlo’s – and Europe’s – market position (p56). Chile primarily supplies SOP to the Americas, augmented by minor supplies to Europe and Africa, whilst Taiwanese exports target smaller markets in East Asia.
“China accounts for more than half of global SOP consumption and has been the engine of global demand growth over the last decade.”
In contrast to the concentration in export supply, SOP imports tend to be highly dispersed with annual import deliveries of tens of thousands of tonnes being typical of most markets around the world (Fertilizer International 475, p49).
China opens the floodgates
Is the stable pattern of international SOP trade about to change? Last year, the Beijing government surprised the market by announcing the lifting of export tariffs on Chinese SOP from the start of January 2019. This move, according to analysts ICIS, could potentially open the floodgates and release “a deluge of refined SOP” onto the world stage1 .
Tariff removal has had significant market effects. A comparison of January-June trade data for the last three year reveals that Chinese SOP export volumes rocketed from just above 3,000 tonnes in 2018 to more than 200,000 tonnes in 2019 (Table 1). This export trend looks set to continue, according to ICIS, even as China starts to retire its older Mannheim operations.
First half data for 2020 shows that Chinese SOP export volumes fell back slightly, coming in at just under 187,000 tonnes. Iran, Myanmar, South Africa, Japan and India, and Latin American countries such as Mexico, Peru, Chile, Costa Rica and Ecuador, were among the top ten export destinations (Table 1).
“At seven million tonnes a year, in a market as small as SOP, demand from a new location – even one or two hundred thousand tonnes – can upset the balance,” one major European SOP producer told ICIS last year1 .
“Chinese tonnes are definitely putting more pressure on the market. We’re not seeing Chinese tonnes in Europe yet – though it’s only a matter of time,” the source added.
China is likely to continue to ship SOP internationally, if the government keeps export tariffs at zero, suggests Andy Hemphill, senior editor for potash at ICIS. “Although China’s January-June 2020 exports are down some eight percent yearon-year, this is likely a side-effect of the coronavirus, and not evidence of a change in China’s potential as a power-player in SOP,” Hemphill told Fertilizer International. “The question remains whether the globe’s increasing hunger for SOP will absorb Chinese tonnes, without a noticeable effect on the market balance.”
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