ICL Group CFO Kobi Altman told analysts on March 4 that the group assumes potash demand will continue to be healthy, fundamentals remain positive, and demand will continue to grow. He was speaking at Bank of America’s Global Agriculture and Materials Conference on March 4.
Altman expects much better potash prices this year. “We’ve already seen this, currently, nice increases, in the U.S., in Brazil versus the first half of 2020, where I think we marked kind of a 15 years’ bottom for pricing,” he said.
The CFO also pointed to the better price environment in the annual contract market, with the China contract price up $27/mt and India up $17/mt.
Like other suppliers, Altman said ICL believes the lack of follow-up signings following Belarus Potash Co.’s (BPC) settling new supply contracts with customers in both countries is because other suppliers are “waiting and seeing,” and also that there is not a lot of inventory in the channels.
ICL up until the end of last year had no potash inventory and is selling what it produces, he said, which he believes is also the situation with other suppliers.
ICL President and CEO Raviv Zoller told analysts last month that the group was in no rush to finalize contracts in the Asian market (GM Feb. 12, p. 17), a position Altman re-iterated this week.
At the beginning of this year, ICL had set price guidance for the group looking at around $270/mt for granular potash and about $250/mt for standard product; however, the company noted that since then there has been some improvement in the overall pricing environment.
Altman said that in general, the price environment that ICL saw for potash in the first part of 2020 was below an economical viable range, and did not reflect a sufficient return on investment for the existing potash players.
“The current price environment is around mid-cycle level,” he said. “So, I believe a world-wide average price of around $300/mt is the longer-term average that we can expect. And these prices provide reasonable return to existing players.”
He said ICL believes the existing potash capacity that is available today is enough to satisfy the world demand for “the next decade at least,” and it does not believe that an average price of $300/mt can justify large investments that would be required for greenfield projects.
With regard to its own potash production capacity, ICL said it is ramping up its Spanish operation toward 1 million mt, which will take group-wide potash production capacity toward the end of this year to around 5 million mt/y – “maybe 5-plus million mt.”
ICL said last month it expected potash production at Sodom at the Dead Sea to be between 3.9-4 million mt in 2021 (GM, Feb. 12, p. 31)
“We believe this will well-position ICL as a player in the potash market,” said Altman, adding that ICL is not looking to increase its exposure to this market.
“Our managerial focus is around expanding into the specialty businesses, but we are happy with the 5 million-mt capacity that we will have toward the end of this year and into the future,” he said.
The focus of the potash division will continue to be on cost leadership as the group is “a price taker,” as it cannot influence the world prices environment, said the CFO.
“The way for us to optimize our [potash] business result is to optimize the average realized price of where we sell in the various markets,” he said.
ICL also highlighted the increase in scale of its polyhalite mine at Boulby, in northeast England.
But 2020 has been a difficult year to promote “a one-of-a-kind new product,” Altman told analysts. “With the pandemic we had to stop the technical support to customers and were unable to visit them. Despite this challenge, we sold 50 percent more in 2020 than we sold in 2019.”
Altman reiterated that ICL is targeting sales from Boulby of around 1.3 million mt “in just a few years,” and highlighted the group would continue to promote the FertilizerpluS product family on a global basis. FertilizerpluS products have additional ingredients added to the basic polysulfate product – the marketed form of ICL’s polyhalite – and various other offerings.
Polysulfate production at Boulby was up 12 percent year-over-year in 2020, reaching 709,000 mt, despite the negative impact of COVID-19 (GM Feb. 12, p. 17).
Reflecting on Anglo American’s Woodsmith polyhalite project under development just some 20 miles down the road from ICL’s Boulby mine, Altman told analysts that ICL is clearly monitoring progress there, and “understands Anglo’s interest in the product” as “the market for polysulfate is clearly growing.”
But the CFO said ICL believes it will still “take years” before Anglo is taking products from Woodsmith to the market.
He also believes the basic cost structure of the Woodsmith operation is going to be “very significant” because of the challenges that Anglo has with the locations and underground tunnels, as well as other factors.
“So, their overall cost basis is going to be much higher than what we have at Boulby, which will also create for us a significant competitive advantage,” said Altman.