South Harz Potash poised to fill Europe’s needs as demand and prices surge, questions raised about Belarus supply

South Harz Potash ASX SHP Europe Germany demand prices Belarus supply fertiliser
South Harz Potash says its German portfolio represents Western Europe’s most significant potash resource.

Germany was once the dominant power in the potash world yet remains as the fifth largest producer — and South Harz Potash (ASX: SHP) is working to add to the country’s output with its project in the former communist East Germany.

Now it has plans to ensure that Europe is meeting its own fertiliser requirements.

The European issue has been recently highlighted by the move by the Belarus Government to force down an over-flying passenger aircraft in order to arrest two of its passengers.

Belarus, through the state-owned company Belaruskali, supplies about a quarter of Europe’s muriate of potash (MOP) requirements.

So far, sanctions imposed for that act have not included potash, but the European Commission is sensitive to its heavy dependence on a large range of minerals, so that potash supplies to Europe may now be added to those concerns.

Potash market now most bullish in decade

After years in the doldrums, and several disappointments regarding price expectations, potash is now looking its most bullish in a decade.

Demand and prices have been soaring of late.

Enter South Harz Potash, which underwent a recent name change from Davenport Resources.

Founded in 2015, South Harz Potash holds three perpetual mining licences, Ohmgebirge, Ebelebenand Mühlhausen-Nohra, and two exploration licences, Küllstedt and Gräfentonna, in the South Harz potash district in north-western Thüringia, central Germany.

These licences are located in a region with an ingrained potash mining history and established infrastructure.

“Our portfolio of German licences represents Western Europe’s most significant potash resource,” the company noted.

These contain high-grade MOP inferred mineral resources and “valuable” potassium and magnesium sulphate minerals at relatively shallow depths.

Crop prices soaring and world food demand growing

Brazil’s MOP prices hit US$450 per tonne this month, the highest level since 2013 — and the price has risen 81% since the beginning of 2021

Similarly, the US Midwest price is also the highest in eight years, hitting US$440/t this month.

This comes at a time when soft commodity prices, particularly those for corn and soybeans, are at their highest levels since 2011.

Meanwhile, soils around the world have become depleted over that period due to inadequate use of fertilisers.

It is not so much the need for fertilisers that governs the price, with these crop nutrients always being needed. The governing factor is whether the farmers can afford it.

BHP move signals bright potash outlook

One sure sign that potash is back in business is the signal coming out of BHP (ASX: BHP) suggesting that it is about to green-light its Jansen project in Canada.

In the 2008 Global Financial Crisis, North American farmers could not use their desired levels of fertiliser because they could not get loans from besieged banks.

On other occasions, falling crop prices will restrict what farmers can spend on fertilisers. Or, in the case of India, it was the reduction of fertiliser subsidies by a budget-strapped government.

The South Harz Potash district, located in the heart of Germany, was one of the world’s most important MOP producing regions, with a history of mining going back over 120 years.

Prior to the re-unification of Germany in the 1990s, the former German Democratic Republic produced approximately 3.3 million tonnes of MOP annually from mines within and around the South Harz district.

Germany has long been a potash powerhouse

German potash output has long been overtaken by others — Canada, Russia, Belarus and China are the world’s “big four”.

But, back in 1929, Germany and France dominated the potash business. In 1925 German and French mines supplied 96.5% of the world’s potash: Germany 1.22Mt, France 300,000t, the US 30,000t and Poland 25,000t.

The German MOP industry had characteristics that potash followers today would find familiar.

For one thing, most of the deposits were comparatively deep — the mining was occurring between 365m and 1,067m — but some of the richer grades were found down as far as 1,525m below surface.

The salt beds of Germany were estimated to contain 20 billion tonnes of crude potash salts; in other words, hundreds of years of supply.

In 1915 Germany was unrivalled in potash

The German Potash Syndicate supplied all the potash used in America before 1915. It set the price.

But from 1915 to 1918, due to the First World War, supplies to the Allies from Germany were cut off.

This led to many small domestic producers springing up in the US.

But this local industry collapsed when German supplies resumed crossing the Atlantic in 1920; until 1932, only one US producer stayed in business.

However, from 1936 more North American producers of potash got into gear so that, by the time the war began in 1939, much less potash was being imported with the US by then mining about half its domestic needs.

South Harz to join important German producers

But, by 1939, things had changed for good.

By that year, the Americans were producing 52% of their own needs.

Nevertheless, Germany in 2021 is still a major producer with several important companies.

The 125-year-old K+S is the leader, being the major potash producer in Germany and also mining in Saskatchewan in Canada.

South Harz Potash is now aiming to join the ranks of German producers.

    Join Small Caps News

    Get notified of the latest news, interviews and stock alerts.