Potash and Phosphate Investing in Australia

How important is the potash and phosphate market in Australia? 

There is no replacement for phosphate in humans, animals and plants. It’s an essential nutrient, and as such, is always in demand.

Australia currently has no potash production of its own. The majority of Australia’s SOP comes from Canada, Europe and the Middle East.

However, Western Australia has relatively new SOP mines and projects in development that may challenge other countries’ dominance of the market within the decade. Some believe that the Pilbara region of Australia could become the next big producer of potash.

The Western Australian salt lakes, where mining projects are currently in the works, provide ideal conditions for sulphate of potash to develop naturally. In the coming years, this could give Australia a lead over other countries thanks to the unnatural way it’s produced around the world.

For these reasons, many investors see the Australian potash market as a relatively undiscovered and promising sector.

What is the market outlook for potash and phosphate?

As mentioned earlier, the market for these two essential components of fertilization is expected to grow in the coming years.

According to the US Geological Survey’s Mineral Commodity Summaries 2022, the global consumption of potash increased from 44 million tons in 2020 to 45 million tons in 2021, with the biggest consumers being in Asia and South America.

Thanks to an increasing demand for fertilizer and a steady decrease in arable land, the industry is expected to grow at a compound annual growth rate of 4.44 percent between 2022 and 2026, an increase of around US$21.62 billion.

However, there have been a few setbacks in the last year that have caused some uncertainty in the market. Some of the industry’s first movers ended up in the negative after one major Australian SOP company, Kalium Lakes (ASX:KLL), had to raise an emergency AU$61 million in May 2020. This was to cover the cost blowouts at its Beyondie project.

However, the company managed to fund expansion plans in October of 2021. According to Kalium Lakes, their Beyondie SOP project is near production for SOP at 100,000 tonnes per year.

Salt Lake Potash, another key player in the Australian potash market, declared itself insolvent in 2021. Salt Lake was originally anticipated to bring the first SOP product to production in July of that year, but operational issues at its Lake Way plant caused the company’s shares to be suspended.

As a new and developing market in Australia, these sorts of setbacks are to be expected. However, the need for a strong supply of potash and phosphate is undeniable, and Australia seems promising as a producer for the mineral.

Strong fertiliser prices are another good sign for those optimistic about Australia’s potash market.

According to a recent presentation by Trigg Mining (ASX:TMG), the price of SOP increased 70 percent in the 12 months leading up to March 2022. This was driven by:

• A strong demand for potash globally
• EU trade sanctions against MOP from Belarus
• China restricting fertiliser exports in June 2021
• The Russian invasion of Ukraine, which caused an increase in geopolitical tension

These trends point to a strong investment possibility for potash in Australia over the next few years.