VINACHEM

Facing disruptions to the global fertilizer supply chain due to the Ukraine war, Thailand, a key producer of food and agricultural products in Southeast Asia, has decided to restart a potash mining project that has been dormant for decades. The $1.8 billion project aims to ease shortages of chemical fertilizer and lower prices at home.

"The cabinet has approved the potash mining project and assigned the Ministry of Finance to pay for new ordinary shares in order to hold a 20% stake in the project," Ratchada Thanadirek, the government's deputy chief spokeswoman, told reporters earlier this month.

The previously dormant entity, ASEAN Potash Chaiyaphum Public Co., plans to operate a potash mine in Chaiyaphum, 367 kilometers northeast of Bangkok. "Potash produced at home will help reduce fertilizer prices and production costs of many agriculture products and food," Ratchada said.

According to the Thai Fertilizer and Agricultural Suppliers Association, chemical fertilizer prices in Thailand are hovering around $1,200 per tonne, including transportation costs, up from a prewar price of $400, largely due to supply disruptions and higher transport costs. Elevated prices for potash are one factor behind the rise in fertilizer prices, which in turn pushes up farmers' input costs to produce rice, rubber, sugar and other agricultural products.

TRC Construction, a company listed on the Stock Exchange of Thailand, will be the largest shareholder in the project with a 25.13% stake. Several other listed companies have expressed interest in taking stakes in the project, including Energy Absolute, a renewable power producer, as potash can be as a raw material in the company's business of manufacturing sodium-ion batteries for electric vehicles.

The kingdom currently depends heavily on imported potash, buying around 700,000 tonnes a year, worth about 10 billion baht ($293.3 billion). Canada, Belarus, Israel and Russia are its main suppliers.

Potash, or potassium chloride, is a key ingredient in fertilizer. According to a World Bank database, the world market price for potash was around $560 per tonne in February, 2.5 times higher than in January last year, before the Ukraine war erupted. Price trends are similar for other fertilizer inputs, such as urea, DAP (Diammonium phosphate), and TSP (Triple Super Phosphate).

The Thai potash mine project was launched in 1989, when the ASEAN Potash Chaiyaphum Public Co. and the Ministry of Industry discovered 40,000 rai (6,400 hectares) in Chaiyaphum province containing rock salt with a production potential of 1.3 million tonnes of potassium per year, according to the ministry. The company was set up as part of a program by members of the Association of Southeast Asian Nations to reduce imports from the West and help develop industry in the region.

However, low fertilizer prices at the time, along with the huge investment needed to develop the site, led to negative expected returns and put the project on ice. The Asian Financial Crisis of 1997 and the ensuing liquidity crunch across the region also weighed on the project's feasibility. But now things have changed.

As the potash production by the company is expected to exceed the volume of Thailand's annual imports, Ratchada said the revival of the potash project "can help increase income by exporting fertilizer to neighboring ASEAN countries."

Senior government officials told Nikkei Asia that other ASEAN governments, including Malaysia, which relies heavily on fertilizer imported from distant producers, were also interested in joining the project.

After the Finance Ministry paid for the first tranche of new ordinary shares, worth 90 million baht, in the first quarter of this year, the remaining shareholder arrangements and project finance are expected to be completed by the second quarter of this year, according to a senior official at the Ministry of Industry.

Ratchada said the mine is expected to start commercial operation in 2026, as the project needs a few years to secure loans and finish construction.

– Asian Nikkei –