China's Fertilizer Shortage Giving Global Producers a Boost

LOS ANGELES, April 27, 2018 /PRNewswire/ --

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USA News Group - China's campaign to heat millions of extra homes this winter by redirecting natural gas has forced their domestic fertilizer producers to cut production in half. Due to China being the world's top agricultural market, the impact of halving their domestic fertilizer capabilities should instantly be felt worldwide.

Given the heightened state of China's agricultural pressure, boost for fertilizer firms around the world is plausible, including Potash Ridge Corporation (TSX: PRK) (OTC: POTRF), CF Industries Holdings, Inc. (NYSE: CF), Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR), Sociedad Química y Minera de Chile S.A. (NYSE: SQM), and Verde Agritech Plc (TSX: NPK) (OTC: AMHPF).

The result of the decline on fertilizer production in Chinas has been a spike in agricultural production costs, as the sector scrambles to make up the gap. Prices have soared on urea, synthetic ammonia, and compound fertilizers-Domestic urea having risen 34 percent; and compound fertilizer up 17.1 percent. Where China will seek its supplies to make up the fertilizer shortfall is still up for grabs.

Imports from South American firms, such as Sociedad Química y Minera de Chile S.A. (NYSE: SQM), and Verde Agritech Plc (TSX: NPK) (OTC: AMHPF), could come in the short term.

However, as trade negotiations continue between China and North American leaders, there's a long-term possibility of supplies coming from North American firms-Such as CF Industries Holdings, Inc. (NYSE: CF), Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR), or even up-and-comer Potash Ridge Corporation (TSX: PRK) (OTC: POTRF).

With major projects in development in both the US, and Canada, Potash Ridge soon could eventually export their rarer form of potash-based fertilizer, known as sulfate of potash (SOP), to world markets including China. What could be a long-term result, is a Chinese agricultural sector that becomes accustomed to slightly higher operations costs, but ultimately the potential for higher yields.

WILL CHINA TURN TO INTERNATIONAL POTASH?

China is the world's largest commodity market, and is becoming known as the most obvious buyer for large projects. Therefore, as the needs of the nation shift, so too will China's buying habits.

While more headlines have been made for China's push into lithium to feed growing demand for electric vehicles (EVs), the immediate pressures on the agriculture sector could force the country to entertain buying fertilizer feedstocks around the world-of varying quality.