Can Bangchak Compete in S.E. Asia’s Growing Potash Market?
Thailand's high-quality potash deposits hold enormous potential, but development has faced significant hurdles. Operational costs, environmental challenges, and logistical hurdles have slowed development. Additionally, the global market for potash is competitive. Legacy producers have significant cost advantages.
Laos-based producers benefit from lower production costs, strong Chinese investment and proximity to the Thai market. Sino-Agri Potash (Sino KCL) in Laos have increased their market share in Thailand from less than 5% in 2019 to 22% in 2024 (187,200 tons). They plan to increase their capacity from 2 million tons to 5 million tons per year by 2025/26 and eventually to 10 million tons per year.
The other major potash player in Laos, Lao Kaiyuan currently has a capacity of 1 million tons and plans to double that by the end of 2025. Three other ongoing projects near the Laos capital of Vientiane are funded with Chinese investment: Sino Hydro Mining (2.5m mt/year), Ruiyuan Richfield Sylvine Sole (500k mt/year) and Zangee Mining (2.0m mt/year).
Two other undeveloped MOP projects in Thailand (Chaiyaphum and Udon Thani) are currently being reviewed. Reuters recently reported that China’s SDIC (the largest SOP producer in the World) was looking to acquire 49% of the MOP mine in Udon Thani, Thailand.
While Laos-based producers are growing rapidly, global giants like Eurochem and BHP are also increasing capacity, adding pressure to an already competitive market.
Bangchak’s success will ultimately hinge on its ability to manage development and operational costs and make a profit at market prices. Potash demand will be there.
Bangchak Invests in Thailand’s Potash Potential
Article: Bangkok Post, 17 Dec 2024, B2
U.S. Farmers Struggling
Some key takeaways from a recent article in Barrons titled, “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, [according to Dan Basse, CEO of AgResource].”
1. Declining U.S. Agricultural Dominance:
• U.S. share in global agricultural trade dropped from 62% in 1979 to 11% today and the trade deficit is at a record $42 billion.
• Brazil now leads in soybean and corn exports, surpassing the U.S.
2. Impact of Geopolitical Shifts and Trade Wars:
• The divide between G-7 countries and BRIC nations is altering trade patterns at the expense of U.S. farmers.
• China's pivot away from U.S. agricultural imports benefits Russia, Brazil, and Argentina.
• Potential retaliation from U.S. import tariffs on China, Mexico, Canada, and other trade partners.
3. Economic Pressures on Farmers:
• Corn and soybean production costs are below current futures prices. “Net farm income has dropped by 31% since 2022, marking the largest two-year decline on record.”
• High fertilizer and seed costs, further squeeze farmer profits. Fertilizer costs continue to be affected by a volatile global supply chain and energy market. Additionally, 30% of U.S. farmers rent their land.
• USDA data reports that 85 cents of every farm dollar goes to the middlemen (processing, packaging, and transportation).
• Beef producers benefit from record-high prices ($8.50/lb), partially supported by innovations in dairy-beef crossbreeding; “The first time the dairy industry is helping the beef industry get additional supply.”
Space Testing vs
Soil Testing
4. Future of U.S. Agriculture:
• Enhanced understanding of soil and soil fertility should be a critical focus, leading to my favorite quote from the article:
“As I watch Elon Musk land spaceships, I think, we know more about what is 200 miles above our heads than what is two feet under our shoes.”
Well said Dan!
#fertilizer #AgResource
(Source: “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, This Ag Expert Says”, Debbie Carlson, Barrons, 28 Nov 2024)
Rice Fertilizer Program Approved
As reported on 26 June in the Bangkok Post, the Government has approved a budget of 29.9 billion Baht (USD $808 million) to reduce the cost of chemical and organic fertilizer for rice farmers. There are 8 fertilizer formulas included in the program including: Urea, 20-8-20, 16-20-0, and 16-8-8.
The program is targeted for the major or first rice crop grown in the third and fourth quarters. According to the Office of Agriculture (OAE) economics, Thailand harvests approximately 9.5 million hectares of land for the major rice crop with an average fertilizer application of 250-500kg per hectare.
Thailand consistently ranks as one of the top 5 rice exporters in the world and the government expects the program to increase this season’s rice production.
https://www.bangkokpost.com/business/general/2817700/cabinet-allocates-b29-9bn-for-fertiliser-scheme
The Changing MOP Market
The order is rapidly fadin'
And the first one now
Will later be last
For the times they are a-changin'
Bob Dylan
The Muriate of Potash (MOP) market has changed a lot in Thailand over the last 15 years. MOP contracts in the past have been limited to a select group of well-financed, major importers in any one country.
In 2013, the Uralkali and Belaruskali (BPC) coalition separated. The period briefly opened the market for new importers and changed MOP purchasing patterns.
Around 2017, SQM limited MOP production from Chili to focus on the more profitable lithium and potassium nitrate markets.
Belarusian authorities diverted a plane in May 2021 en route to Lithuania carrying journalist Roman Protasevich to Minsk. The incident had wide-reaching implications and led to sanctions against Belarus from many countries.
Soon thereafter, Lithuania terminated the railway transport agreement with BPC thus denying access to the port at Klaipeda. With exports restricted, BPC was forced to alter trade routes.
In February of 2022, the conflict between Russia and Ukraine commenced. Restrictions and sanctions soon followed on Russian potash. MOP trade flows were again disrupted.
In May of 2022, MOP was hitting new highs not seen since 2008. Prices reached $1,100 per metric ton CFR on supply tightness and port congestion from the aftermath of Covid-19.
Since October 2023, Dead Sea Works (DSW) and Arab Potash Corporation (APC) have had Red Sea transit routes disrupted by the conflict in Gaza. Cargoes diverted around the Cape of Good Hope have further increased logistics costs and port congestion worldwide.
As of 17 June 2024, the threat of unionized port workers at the Port of Vancouver currently looms over Canada’s largest port.
The Rise of Laos
One of the big stories in MOP is the emergence and growth of Laos. China has made substantial investments in Lao Kayuan and Sino-Agri Potash over the last 5 years. Both plants are in Khammouane province.
As Argus Media recently reported, Sino-Agri Potash will increase their capacity from 2 million tons per year to 5 million tons by 2025/26 and eventually 10 million tons per year. Lao Kaiyuan currently has a capacity of 1 million tons and plans to double that by the end of 2025. Deliveries to China have grown massively to 1.7m tons in 2023 from just 127,800 tons in 2020. (Argus Media, Insight Paper, May 2024, Laotian MOP supply boom: Key challenges and the need for a new Laos MOP price assessment).
Sino-Agri Potash Plant. MV Cheng Ji Hai. 1st Granular MOP Vessel from Laos to Thailand.
There are also three ongoing projects near the Laos capital of Vientiane which are funded with Chinese investment: Sino Hydro Mining (2.5m mt/year), Ruiyuan Richfield Sylvine Sole (500k mt/year) and Zangee Mining (2.0m mt/year).
In July 2023, we imported MOP from the first bulk vessel sent from Laos to Thailand, a 4,500 ton coaster from Cua Lo Port, Vietnam. Argus reported in May 2024 that Sino-Agri sent their first bulk vessel from Vietnam to Europe and this month sold their first bulk cargo (27,000 tons) of granular MOP to Brazil.
Two undeveloped MOP projects in Thailand (Chaiyaphum and Udon Thani) are currently being reviewed. Reuters recently reported that China’s SDIC (the largest SOP producer in the World) is looking to acquire 49% of the MOP mine in Udon Thani, Thailand.
With increasing supply from Laos, Eurochem and BHP’s Jansen project, there will be heightened competition, especially for importers that resell to smaller bulk blenders and manufacturers. Small plants in Malaysia will compact inexpensive Russian and Belarusian standard-grade MOP and export to Thailand via container. International traders will compete for MOP allocation from new manufacturers to the Southeast Asia markets.
The Sulphate of Potash (SOP) market will continue to grow in areas where soils accumulate too much chloride and growers learn more about chloride-sensitive crops. Agricultural byproducts, locally sourced high-quality minerals, and bio-waste projects that produce fertilizers with considerable soluble K2O content and low Chlorides will all compete as a K2O source.
For MOP times are certainly ‘a-changin’.
If MOP contains 60% K2O, what is the other 40%?
Canpotex Granular MOP
We are frequently asked this question. The chemical name for Muriate of Potash (MOP) is Potassium Chloride (KCl). However, the Chloride content is never listed on fertilizer bags.
If the chemical purity were 100%, the Potassium (K) would be 52.4% (63.1% K2O) and the Chloride (Cl) would be 47.6%.
However, the simple answer is approximately:
50% Potassium (as K) [ 50% K is equivalent to 60.2% K2O ]
48% Chloride (as Cl)
2% Magnesium (Mg), Calcium (Ca), Sodium (Na), Sulfates (SO4) and insolubles such as clay.
The logical next questions: Are Chlorides helpful or harmful to plants and soils and why isn’t the Chloride content listed on the bag?
Stayed tuned.
Welcome
Like a seedling - ready to grow and excited about the future.
Chewa (ชีวา) in Thai means “Life”.
Chewachem was named for the important role of chemical fertilizers in sustaining life through agriculture. As the population continues to grow and arable land declines, maintaining and improving crop yields is extremely important. The role of fertilizers in food production is critical to sustaining our food supply. With approximately 20 million hectares of planted area, Thailand is one of the world’s most important agricultural markets.
Thailand imports over 5 million tons of chemical fertilizers annually. There are 13 essential nutrients for plant growth. Chewachem supplies many of these nutrients to manufacturers and dealers across the country.
We’re happy you chose to learn more about Chewachem. Please drop us a note - we would love to hear from you.
Thanchanok (Air) Suwaprasert, Managing Director