(New throughout, adds comments from BHP, Sirius Minerals,
By Rod Nickel
NEW YORK May 17 The owners of several new
potash mines that are adding fertilizer to an already
over-supplied market are banking on better times, bucking
industry thinking that the projects may snuff a modest price
The drive to build new mines began when potash prices were
higher, but last year prices slid to nine-year lows. BHP
Billiton caused a further chill among miners on Tuesday
when it outlined tentative plans to start production in 2023 in
Privately held fertilizer producer EuroChem Group plans to
produce 1.1 million tonnes of potash in 2018 from its two new
Russian mines and increase output steadily over six years, but
it will be "rational" amid concerns about a supply glut, Chief
Financial Officer Andrey Ilyin said on Wednesday.
Output capacity will reach 8.3 million tonnes annually by
2024 or 2025.
"We think that our product is not going to be a big
disruption for the market in the near term," Ilyin told Reuters
on the sidelines of BMO's Farm to Market conference in New York.
"As anybody who is long potash, we are very mindful of what
effect we might have on the global supply-demand balance."
The company will also make its production decisions taking
into account rivals' actions and the pace of sales growth, he
"All of these things in combination will basically determine
our behavior, which I'm sure will be very rational in the
economic sense," Ilyin said.
The surplus capacity of potash, also known as potassium,
over demand is 16.6 million tonnes this year and may climb to
18.4 million tonnes in 2018, according to BMO.
"We see little support for a bullish or even neutral view on
potash," said Scotiabank analyst Ben Isaacson, in a May 9 note.
Demand, however, remains strong and it is possible that new
supplies will push out higher-cost producers, said Gertjan van
der Geer, a senior investment manager at Pictet Asset
Management, which manages shares of potash majors Potash Corp of
Saskatchewan and Mosaic Co.
"It's a concern, but I'm also not sure if it's going to get
worse from here," he said. "Today, it looks quite difficult with
all that capacity coming on."
Ilyin said EuroChem is more confident in the industry's
future than some analysts because the small number of potash
producers makes it possible to curtail production as needed.
BHP expects prices to fall further in the near term, but is
focused on a longer time period, said spokeswoman Bronwyn
Wilkinson. Annual compound demand growth of 2-3 percent will
absorb most of the new capacity during the next decade, while
some high-cost competitors may face pressure, so the market may
be recovering once BHP starts producing in 2023, Wilkinson said.
K+S AG, which opened a Canadian mine this month,
could not immediately comment, a spokeswoman said.
One start-up is trying a more specialized approach. Sirius
Minerals PLC started construction in May on a United
Kingdom mine that will produce polyhalite ore that includes
potassium and several other nutrients.
Even so, the gloom around the potash glut overshadows its
product, called polyhalite, Chief Executive Officer Chris Fraser
"It shouldn't but it does. Everyone's (potash) is the same
as everyone else's. This is a value-added specialty."
(Reporting by Rod Nickel in New York; Editing by Tom Brown and