The EU’s move to cut off Belarus, one of the world’s top suppliers of potash, is creating a potential earnings boost for non-Russian and Belarus potash companies. Belarus has permitted Moscow to use its territory as a conduit to invade Ukraine.

Potash is a term commonly used for potassium and it is a crucial ingredient for agricultural fertilisers. Its production is heavily concentrated in just four countries. Over 75% of the world’s potash production comes from Canada, Russia, Belarus and China, and over half of the world’s reserves lie within the top two producing nations.

Bank of America says Russia and Belarus are the second and third largest potash producers globally, accounting for 20% and 18% of global supply respectively.

Potash is a naturally occurring substance, but the levels of potash in surface-level agricultural soils have been in gradual decline as farming techniques have intensified. Lands once rich in potassium have slowly become depleted and farmers must now add it in to grow decent crops.

This has driven the need for potash to be produced elsewhere and sold to farmers so they can top up their land’s potassium levels after each harvest. Potash is also used to increase the production of corn, the major feedstock for bioethanol production in the US.

Soaring energy prices have already been pushing fertiliser prices higher and the EU’s move to curtail Belarusian potash exports will accentuate this trend.

Potash prices have increased from less than $250 a tonne in April to $800 recently. However, analysts at Bank of America believe prices could rise further and they recently raised their 2022 potash price forecast to $850 a tonne from a previous estimate of $650.

This strong pricing environment might explain why shares in potash companies have been soaring in recent weeks. For example, Nutrien is up 34% in the past month. It was formed in 2018 from the merger of PotashCorp and rival Agrium and is the largest potash producer in the world, operating principally from six mines in Saskatchewan, Canada.

German group K+S is up 22% in the past month. It is one of the largest producers of potash in Europe and also specialises in magnesium and salts. Its operations are predominantly based in Germany, but it has been expanding elsewhere with projects in Canada, the US and Chile.

ICL, an Israeli company dual-listed in Tel Aviv and New York, has seen its shares rise 8% in the past month. It has gradually expanded into a global business since helping to establish its home country’s potash industry 80 years ago. The company is the sixth largest potash producer in the world.

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