South Harz potash poised to meet Europe’s needs as demand and prices rise, questions raised over Belarus supply
Germany was once the dominant power in the potash world but remains the fifth largest producer – and South Harz Potash (ASX: SHP) is working to increase the country’s production with its project in the former Germany of Communist East.
Now he has plans to make sure Europe is meeting its own fertilizer needs.
The European issue was recently highlighted by the Belarusian government’s decision to force an overhead passenger plane in order to stop two of its passengers.
Belarus, through the state-owned Belaruskali company, supplies around a quarter of Europe’s muriate of potash (MOP) requirements.
Until now, the sanctions imposed for this act have not included potash, but the European Commission is sensitive to its heavy reliance on a wide range of minerals, so potash supplies in Europe may now add to these concerns.
The potash market is now the most bullish of the decade
After years of slump and several disappointments with price expectations, potash now appears to be at its most bullish level in a decade.
Demand and prices have skyrocketed lately.
Enter South Harz Potash, which recently changed its name to Davenport Resources.
Founded in 2015, South Harz Potash holds three perpetual mining licenses, Ohmgebirge, Ebelebenand Mühlhausen-Nohra, and two exploration licenses, Küllstedt and Gräfentonna, in the potash district of South Harz in the north-west of the Thuringia, in the center of Germany.
These permits are located in an area with a deep potash mining history and established infrastructure.
“Our German license portfolio represents the most important potash resource in Western Europe,” the company noted.
These contain high MOP inferred mineral resources and “valuable” potassium and magnesium sulfate minerals at relatively shallow depths.
Crop prices are soaring, global food demand is on the rise
MOP prices in Brazil hit US $ 450 per tonne this month, the highest level since 2013 – and the price has risen 81% since the start of 2021
Likewise, the US Midwest price is also the highest in eight years, reaching US $ 440 / t this month.
This comes at a time when commodity prices, especially corn and soybeans, are at their highest levels since 2011.
Meanwhile, soils around the world have become depleted during this period due to improper use of fertilizers.
It is not so much the need for fertilizer that determines the price, these nutrients of the crops are always needed. The determining factor is whether farmers can afford it.
BHP move signals good prospects for potash
A sure sign that potash is back in business is the signal from BHP (ASX: BHP) suggesting that it is about to give the green light to its Jansen project in Canada.
During the 2008 global financial crisis, North American farmers could not use desired levels of fertilizer because they could not get loans from besieged banks.
On other occasions, falling crop prices will limit what farmers can spend on fertilizer. Or, in India’s case, it was the reduction in fertilizer subsidies by a budget-strapped government.
The South Harz Potash district, located in the heart of Germany, was one of the most important MOP producing regions in the world, with a mining history stretching back over 120 years.
Before German reunification in the 1990s, the former German Democratic Republic produced around 3.3 million tonnes of MOP per year from mines in and around the southern Harz district.
Germany has long been a potash power
German potash production has long been overtaken by others – Canada, Russia, Belarus and China are the “big four” of the world.
But by 1929 Germany and France dominated the potash trade. In 1925, German and French mines supplied 96.5% of the world’s potash: Germany 1.22 Mt, France 300,000 t, the United States 30,000 t and Poland 25,000 t.
The German MOP industry had characteristics that today’s potash enthusiasts would find familiar.
On the one hand, most of the deposits were relatively deep – mining took place between 365 m and 1,067 m – but some of the richest grades were found as far as 1,525 m below the surface.
Germany’s salt beds have been estimated to contain 20 billion tons of crude potash salts; in other words, hundreds of years of supply.
In 1915, Germany was without rival in potash
The German Potash Union supplied all the potash used in America before 1915. It set the price.
But from 1915 to 1918, due to the First World War, the supply of the Allies from Germany was cut.
This led to the emergence of many small domestic producers in the United States.
But this local industry collapsed when German supplies resumed crossing the Atlantic in 1920; until 1932, only one American producer remained in business.
However, starting in 1936 more North American potash producers began to operate, so that at the start of the war in 1939 much less potash was being imported with the United States, whereas ‘it exploited about half of its national needs.
Southern Harz joins major German producers
But by 1939 things had changed for good.
That year, Americans produced 52% of their own needs.
Nevertheless, Germany in 2021 is still a major producer with several important companies.
K + S, 125, is the leader, being the main potash producer in Germany and also mining in Saskatchewan, Canada.
South Harz Potash now aims to join the ranks of German producers.