The client is an existing fertiliser producer which had acquired a controlling stake in an African potash project. The project included plans to produce both potassium chloride (MOP) and potassium sulphate (SOP).
As the more opaque market about which the Client held most questions, it was requested that CRU Consulting focus on the SOP market for this assignment. The key objective of the assignment was to formulate an SOP market strategy to inform the Client’s market plan and support their understanding of what would be required to successfully market future SOP production.
Our Recommendation
CRU Consulting profiled individual target markets for the Client and recommended an entry and development strategy for each market including individual assessments of the requirement for a local distribution presence in markets and the possible involvement of traders.
Assessment of optimal output volumes and other high level findings from the report regarding overall market strategy options were presented on a series of conference calls following delivery of the PowerPoint report.
Methodology
CRU Consulting prepared an extensive PowerPoint report with the primary objective of proposing SOP market strategies for a number of production volume scenarios.
Our analysis culminated in a model which utilised CRU’s outlook for the SOP prices to estimate the total revenue and average netback price based on a range of supply scenarios; this indicated the optimal range of production volumes for the Project under what we defined as passive and active marketing approaches.
Our model was designed to be user-friendly, allowing the Client to run a number of scenarios independently after completion of the project. The model incorporated a number of factors based on extensive research including: (i) potential for increased SOP demand by country using our agronomic chloride-sensitive K2O uptake model; (ii) elasticity of prices in individual country markets; (iii) delivered SOP supply cost curves profiling the delivered cost structure for a range of markets; (iv) in-depth analysis of SOP trade by supplier and importer.
Upon request by the Client, we also prepared an in-depth study of the Chinese SOP market including detailed mapping of supply and presentation of a detailed cost survey of Chinese SOP supply with a view to analysing the cost competitiveness and probability of future Chinese SOP exports – a key concern of many existing and potential SOP producers.
Outcome
The Client was extremely pleased with the quality of the analysis which enabled them to understand two critically important points for their Project: the range of additional supply volumes the SOP market should be able to absorb without impacting price, and; what level of marketing efforts would be required in individual markets. This information has been key in the company’s evaluation of the feasibility of its project.
