The Israel-Palestine conflict is driving up crude oil prices, and potassium fertilizer prices may also see an upward trend.
On October 7th, conflict erupted between Palestine and Israel, with Israel issuing a "comprehensive blockade" on the Gaza Strip on October 9th, escalating the conflict. Crude oil prices have continued to rise due to the Israel-Palestine conflict, and expectations for a sustained increase in potassium fertilizer prices have also emerged. As of the closing of the U.S. stock market on October 9th, the stock price of Nutrien Ltd. (NTR.N), the world's largest potassium fertilizer producer, increased by nearly 4%, marking the largest gain since July of last year. The Mosaic Company, one of the world's largest producers of potassium and phosphate fertilizers, saw an increase of nearly 7%.
In fact, the rise in crude oil and potassium fertilizer is driven by concerns about the future scarcity of major essential resources.
Potassium resources are a scarce resource more concentrated than petroleum resources. In the Dead Sea region, where the Israel-Palestine conflict erupted, potassium resources amount to as much as 2 billion tons, with potassium fertilizer production capacity of about 6.5 million tons. As an important component of global potassium resource supply, if the Israel-Palestine conflict escalates, it could pose a risk to as much as 3% of the global potassium fertilizer supply.
According to public data, Israel and Jordan rely on the development of potassium fertilizer and associated resources such as bromine from the Dead Sea. They are major global suppliers of potassium fertilizer and the largest exporter of bromine. Israel Chemicals Ltd. (ICL), established in 1968, is the sixth-largest potassium fertilizer producer and the second-largest bromine supplier globally. It has an annual potassium fertilizer production capacity of about 4 million tons and an annual bromine production capacity of about 280,000 tons within Israel. The Arab Potash Company (APC) is Jordan's largest potassium fertilizer producer with an annual potassium fertilizer production capacity of about 2.5 million tons. As the Israel-Palestine conflict intensifies, there is a risk of stagnation in potassium fertilizer production around the Dead Sea.
Taking ICL's sales as an example, potassium fertilizer sales in 2022 were 4.5 million tons, accounting for 7% of the global potassium fertilizer shipments in 2022. Since Israel and Jordan are in Western Asia, ICL and APC are major suppliers to key potassium fertilizer markets in Southeast Asia, such as Thailand and Vietnam. If the potassium fertilizer supply from these suppliers is affected, it will also impact potassium fertilizer prices in the Southeast Asian market. Other potassium fertilizer suppliers in the Asian market may also adjust prices upward in response.
In addition to impacting potassium fertilizer supply, the escalation of the Israel-Palestine conflict will have a preemptive effect on potassium fertilizer transportation.
For example, ICL's traditional transportation route is mainly divided into two parts: the core transportation route involves transporting the product 18 kilometers to the west via conveyors from the factory, then using railways or highway trucks to transport it to the Ashdod Port, located north of the Gaza Strip. Ashdod Port is Israel's second-largest port, primarily used for the import and export of containers, general cargo, and bulk cargo. It is also a crucial hub for the country's potassium fertilizer exports and serves as a military port. If the conflict escalates further, not only will road transportation within Israel be disrupted, but Ashdod Port, due to its strategic military importance, may also face difficulties.
The other transportation route involves transporting the product from the factory to the south via highway trucks to the Eilat Port, and then shipping it to the international market through the Red Sea. According to the latest information from maritime insurance giant North Standard as of October 10th, among Israel's ports, Ashkelon Port, primarily used by oil tankers, has ceased operations, while Ashdod Port is currently in an "emergency state."
Against the backdrop of the current fractured international political environment and frequent geopolitical conflicts, the world is closely monitoring bulk commodities related to energy and resource security, believing that risks are accumulating continuously. The intensification of tensions in the Middle East may push up energy prices and disrupt the efforts of central banks worldwide to control inflation. The escalation of the Israel-Palestine conflict may bring new shocks to global commodities, especially with a focus on the sustained reduction in the supply of resources like potash in the region, which is a significant concern for the industry.
The global shortage of potash caused by the Russia-Ukraine conflict cannot be resolved in the short term, and the new Israel-Palestine issue has catalyzed the severity of this problem. Potash prices may experience a new round of increases.
Attention: This article is provided for readers' commercial reference and is not intended as investment advice. Kelewell is not responsible for the accuracy of the data.
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