China’s Potash Purchases May Spur Demand in Other Markets

Bloomberg

Contracts to supply potash to China, the world’s biggest consumer of the soil nutrient, are likely to be signed before the year-end and may spur demand in Europe and other markets, Russian producer OAO Uralkali said.

It’s “reasonable” to expect a cut compared with last year’s price given market conditions, Acting President Mikhail Antonov said in an interview in Moscow.

“Any contract with China at acceptable terms will be a positive signal for the market,” he said.

Potash contract prices slumped because of the global economic crisis, after tripling in 2008 on booming demand from farmers and biofuel producers. The biggest potash producers agreed in July to lower prices for Indian customers by 26 percent to $460 per metric ton. Some users are delaying purchases while they adopt a wait-and-see attitude, German producer K+S AG said.

Potash stockpiles in China are estimated at about 3 million tons, BPC Sales Director Oleg Petrov said in a separate interview in Minsk, Belarus, on August 31. Once signed, the Chinese accords may boost demand for potash in Europe and other markets, he said.

“We can expect a significant revival in demand starting in spring,” Petrov said.

BPC controls more than 30 percent of the global potash market, according to the company’s Web site. It forecasts sales of 5 million tons this year, down from more than 11 million tons in 2008, Petrov said.

The Chinese contract, if signed this year, will help raise Uralkali’s capacity utilization to more than 50 percent in 2009, Antonov said.

K+S, Europe’s biggest potash producer, predicts its potash sales will rise 50 percent next year, Chief Executive Officer Norbert Steiner said in an Aug. 31 interview.

Troika’s Stiskin forecasts Chinese contracts will be settled at $420 per ton on a so-called free-on-board basis, which doesn’t include freight costs. Prices will be $400 to $410 per ton, predicts Elena Sakhnova, a Moscow-based analyst at Russian bank VTB Capital.

Producers including BPC and Canpotex, a trader representing North American potash suppliers, last year raised the price for Chinese customers to $567 per ton, excluding freight costs. BPC raised spot prices for Brazil to as much as $1,010 per ton including freight.