Why Potash?
“Potash” is the common term used for the fertilizer forms of the element potassium (K) and comes from the pioneer practice of extracting potassium fertilizer by leaching wood ashes and evaporating the solution in large iron pots. Potash is one of the three most important nutrients to plants, which are: 1) nitrogen; 2) phosphorus; and 3) potassium. Potassium fulfills numerous vital functions in various processes in plants, animals and humans. For adequate nutrient supply of potassium, soil reserves are essentially required, which commonly contain more potassium than any other nutrient, including nitrogen.
Potash-bearing rock deposits occur in many regions of the world and are derived from the minerals in ancient seas that have been dry for millions of years. Fertilizer potash is mostly derived from these potash rocks. It requires only separation from the salt and other minerals.
Growing Market for Potash
The potash market has been experiencing rapid growth in the last decade primarily due to an increase in global demand for food, fiber and feed. The current potash market is estimated at 50 million tons annually, and is projected to grow at 3-4% rate (International Fertilizer Association). This means an additional 2 million tonnes of potash will be required every year to keep up with demand (equivalent to a new potash mine starting each year).
Several Factors Contributing to this Growth:
- Steadily Rising World Population – The world's population is increasing at a rapid pace and is expected to reach almost 10 billion people by 2050. This naturally puts pressure on the agricultural sector worldwide to increase food supply.
- Expanding World Economy – The world economy has been expanding at an average pace of 5%. However, economies of the developing nations such as China and India have been growing at a rate of 10% and 9% respectively. With expanding economies come rising wealth levels and the urge to improve diets, especially with the intake of meat, which is rich in protein. For example, meat consumption in China tripled in the last 20 years to 70 million tonnes, and is expected to grow further. As such, the feed for animals becomes an important factor and potash serves as a key ingredient to improve the quantity and quality of feed.
- Increased Demand for Biofuels - High oil prices, increasing concerns about carbon emissions and the subsequent drive to use more alternative fuels has led to the boom in ethanol and biodiesel use as alternative energy sources. These biofuels are produced from crops such as corn, sugar cane, oil palm, soybeans etc. To increase the yield of these crops, more fertilizers are needed, which directly increases the demand for potash.
Why Iron Ore?
While iron is the second most abundant metal in the earth’s crust after aluminum, demand has been growing at 10% per annum and quickly outpacing supply.
This demand is driven principally by growth in both developing and Western countries including China, Japan, Korea, the US and the EU. Meanwhile, the world’s big three producers – VALE (formerly CVRD), Rio Tinto, and BHP Billiton – are finding it increasingly difficult to keep production in line with global demand. The result has been price increases completely out of proportion with historical averages. Based on a 2007 TEX report, prices for iron ore pellets have risen from $30 per Dry Metric Tonne (DMT) in 2002 to over $70/DMT in 2007 (based on Eastern Canadian Pellet Price with 64% iron content).
According to a 2007 report from Lehman Brothers, the contract price of iron ore has risen in each of the past five years to a record even as China boosted steel output. Prices will gain another 50 percent this year on massive demand from China.
Why Uranium?
Concerns over global warming and the associated fears of catastrophic climate change have spurred governments and international agencies to view nuclear power as a clean, efficient and reliable alternative to society's current reliance on fossil fuels. Additionally, the nuclear industry's sustained safety record over the past decade has improved public acceptance for the use of uranium to generate electricity. Such changes have led to an explosion in demand for new nuclear reactors, which in turn increases demand for raw uranium to fuel the reactors.
Currently, 438 reactors operate in 30 countries with an additional 32 reactors now under construction and another 300 planned for development. Supply shortfalls and delays from major uranium producing companies, and decreasing secondary uranium supplies from converted nuclear weapons stockpiles, are putting pressure on the price of uranium, which reached US$136/lb earlier during the year before pulling back to US$74/lb due to supplies meeting demand in the short term. As such higher uranium prices are foreseeable over the next five years and possibly beyond.
