Quite a bit has been written about the Russian military buildup on the borders of Ukraine and the economic and market impacts if the situation were to escalate. Most of the impacts discussed (beyond the horrible human impacts resulting from military action) typically focus on two commodities: oil/gas and wheat. This is certainly a logical place to start. There are a large number of gas pipelines running through Ukraine and an escalation of military action would also be expected to interrupt Russian exports of oil/gas to the rest of Europe (which they are heavily dependent on). In terms of wheat, Ukraine is known as the 'Breadbasket of Europe' and is one of the largest wheat exporters in the world. So there is no question that there could be considerable impacts on both oil/gas and wheat. But what other commodities might be heavily impacted by a military escalation?
One sleeper commodity that could potentially experience major impacts is potash. In fact, many people have never heard of potash or understand its significance. Potash is a general term for a number of mined potassium-based compounds - potassium chloride (KCl) and potassium carbonate (K2CO3) being primary among them. Potash is an essential fertilizer (potassium is the third number when you look at the label of a specific fertilizer product (xx-xx-xx)). There is currently about 41 million metric tons of potash produced each year worldwide. While Canada is the leading producer in the world (producing just under 35% of the world supply), Russia and Belarus collectively produce about 36% of the world’s potash supply. Belarus is a close ally of Russia and it also happens that some of the Russian troops stationed on Ukraine's borders are on the Belarus-Ukraine border. Historically, until its breakup in 2013, Russia and Belarus have also closely coordinated to manipulate the potash market through the Belarusian Potash Company that was a combination of Belarus producer Belaruskali and Russian producer Uralkali and operated as an international cartel (similar to what OPEC has done with oil).
It is anyone's guess whether Russia will move forward with any military action or how the US and other NATO allies might respond to a Russian incursion into Ukrainian territory. But at a minimum, any response would certainly include stiff economic sanctions on Russia (and its allies). Those sanctions would have the effect of causing major disruptions to the worldwide supply chain for potash.
One other factor that could put additional upward pressure on potash prices is an increase in oil drilling. Another major use of potash is soil stabilization and to prevent clay swelling when drilling oil well holes. With oil prices hitting highs not seen in more than 7 years, we should expect to see increased drilling and exploration activity among domestic oil companies. Escalation of the situation in Ukraine could also have the effect of pushing oil prices even higher - thereby compounding the impetus to increase domestic oil production.
Supply chain disruptions and increased domestic oil production could end up having a double whammy effect on potash prices. So what companies would stand to benefit from an increase in potash price?
Nutrien ($NTR) - Largest potash producer in the world. Nutrien is based out of Saskatoon and has the capacity in its current operations sites to boost production substantially.
Intrepid Potash (NYSE:IPI) - A large producer based out of Colorado with active operations located in Utah and New Mexico.
The Mosaic Company (NYSE:MOS) - A producer based out of the United States with most of its active operations located in Saskatchewan.
Altius Mineral ($ALS) - This might be a surprise inclusion on this list for some, but about 25% of Altius’ revenue comes from royalties it holds on six active potash mines in Saskatchewan (five operated by Nutrien and one operated by Mosaic). Any substantial increase in the price of potash would go straight to their bottom line.
There are also a number of potash exploration/development companies that could benefit from a boost in potash prices:
Gensource Potash ($GSP)
Verde Agritech ($NPK)
Karnalyte Resources ($KRN)
Western Resources ($WRX)