As the Russian and Ukraine war continues to play out, almost every sector is feeling the ripple effect, with energy prices among the first to surge, but fertiliser products and their raw ingredients aren’t far behind – attracting substantially higher prices.
Russia and Belarus contribute 40% of traded volumes annually in the potash market, a key ingredient in fertiliser, and in the midst of the war in Ukraine as well as sanctions in Belarus, the price for fertilisers looks set to further spike in the near future.
Head of fertilisers at CRU Group Chris Lawson says the Russia-Ukraine crisis has caused a serious stir in the industry.
“Trade with Russia has not stopped but slowed significantly as importers and vessel charterers steer clear of the country,” he said.
Food security could become a concern world-wide
Concerns have been raised worldwide with increased fertiliser prices leading to lower crop yields per year – damaging hopes to minimise hunger and poverty.
For example, Brazil which is the world’s largest importer of fertilisers, was expecting low crop yields this year due to ongoing droughts. On top of this, the country is now looking to increase domestic production of fertilising products to cover the burden left by Russia.
Chief executive officer and president of fertiliser giant Yara International Svein Tore Holsether says there is a serious element of concern.
“I’m afraid we’re going to have a food crisis,” Mr Holsether said.
In addition to the exponential rise in global fertiliser prices, the price of fuel is also rising –negatively impacting fruitful crop yields around the world.
National Farmers Federation Chief Economist Ash Salardani says diesel is just about the key component to any producer.
“Diesel is a huge energy source for on-farm use, tractors, generators, you name it – diesel is the main energy source for farmers,” he said.
Diesel costs have risen to between $2.10 and $2.40 a litre this week.
Many experts believe the prices have still not peaked, with analysts expecting increases to continue at the expense of farmers and also motorists.
Commonwealth securities senior economist Ryan Felsman says the Russian-Ukraine situation is causing havoc on petrol prices.
“There is still a risk it could shoot up to 150 bucks a barrel if tensions escalate,” he said.
ASX-listed fertiliser stock performance
Since the start of the year, the raw material prices for fertiliser manufacturers including ammonia, nitrogen and potash are said to be up 30%.
This, along with Russia’s invasion of the Ukraine, has pushed fertiliser product prices to record highs.
Granular urea traded at up to US$920 per tonne FOB for April – up substantially on September prices last year of US$418/t.
However, increased energy costs may be dampening any price hikes producers are attracting for their fertiliser products.
After lifting more than 3.4% over the past month, Australian conglomerate Wesfarmers (ASX: WES) was last trading at just over $50.
Australia’s other major fertiliser producer is Incitec Pivot (ASX: IPL), which has seen its share price increase more than 21% over the past month to last trade at $3.80.
Leigh Creek Energy (ASX: LCK) is planning to become Australia’s first fully-integrated urea producer from its namesake project in South Australia.
The project has achieved carbon neutral status, and the company plans to use its proprietary syngas technology to produce a low-cost carbon neutral urea for domestic and international markets.
Potash explorers rise amid increased investor interest
With sulphate of potash (SOP) and muriate of potash (MOP) as critical ingredients in fertilisers, many ASX-listed explorers are attracting increased investor interest.
Advanced explorer Australian Potash (ASX: APC) was last trading at $0.069 – up almost 17% for the month.
This comes after Australian Potash secured a 10-year agreement for sulphate of potash products to be produced from its Lake Wells project.
Trigg Mining (ASX: TMG) has risen more than 9% over the last month and was last trading at $0.071.
The company has two SOP projects near Laverton in WA.
Agrimin (ASX: AMN) is advancing the Mackay SOP project in WA. The company’s share price is up 15% for the month.
In Eritrea, Danakali (ASX: DNK) is progressing the Colluli SOP project in joint venture with the Eritrean National Mining Corporation.
Although unchanged over the last month, Danakali’s share price closed 10% higher on Wednesday at $0.32.
South Harz Potash (ASX:PHO SHP) is developing Germany’s historic South Harz MOP field and has more than 5.27 billion tonnes in inferred resources.
The company is up almost 45% for the month and closed out Wednesday 10.53% higher at $0.21.
Phosco (ASX: PHO) is up almost over 70% in the past week, trading at 15c a share.
The company recently delivered a 50% mineral increase to its Kef El Louz phosphate deposit, that forms part of its flagship Chaketma phosphate project.
Innovating to fill the gap
On the innovative end, companies like Veratin (NSX: VTN) are looking to gain from the growing consumer demand for sustainable and environmentally-friendly products as it has found a way to ‘upcycle’ wool waste using green technology.
Through green chemistry processes, the company develops high-end value products from low-grade wool including its flagship product Verigrow, an all-purpose fertiliser and soil improver.