Hopes rose that potash prices had, after plunging by one-quarter, reached a bottom as China signed a long-awaited import deal with Uralkali, the Russian fertilizer giant which kicked off the market tumble.
Uralkali revealed it had agreed to sell 700,000 tonnes of potash at $305 a tonne to a Chinese consortium headed by CNAMPGC, the domestic distributor of fertilizer, agrichemicals and plastics.
The price compared with $400 a tonne Chinese buyers paid a year ago, before Uralkali sent prices tumbling by in July breaking up the Belarusian Potash Company cartel through which it and Belarusian peer Belaruskali marketed export supplies – and was responsible for more than 40% of world trade.
Prices have since dropped to some $300 a tonne on the Vancouver export market, as buyers delayed purchases in the expectation of yet-lower values, a trend that spread into other fertilizer markets, such as phosphate and nitrogen, too.
However, Chinese deals are viewed as typically setting a market floor, with the country, as the top importer, negotiating the lowest prices, and second-ranked buyer India generally paying a little more.
Monday’s deal “achieves price discovery, and likely signifies the bottom of a potash price decline”, said Cantor Fitzgerald analysts, forecasting a “slow recovery [in prices] in the months and year ahead”.
“It is a positive development for the industry,” the broker said, adding that the potash value achieved was a little above the $300 a tonne that analysts had predicted, and raising to $35.00, from $31.00, its target price for shares in PotashCorp, the Canadian potash giant.
Uralkali – which in July, as it announced the BPC break-up, foresaw prices falling to $300 a tonne or lower – said that the Chinese order “clearly testifies to growing demand and the beginning of market recovery”.
‘Better price discipline’
In fact, Chinese buyers’ willingness to settle for $305 a tonne comes amid other signs of a market bottom too, with Uralkali earlier this month announcing a rise from March to $350-360 a tonne, from $320-330 a tonne, its sales price for potash in the important Brazilian market.
Uralkali has also allied with Canpotex, the North American consortium which includes PotashCorp among its members, in pledging to defend $300 a tonne as a price floor.
(Source – http://www.blackseagrain.net/novosti/china-agrees-potash-deal-raising-hopes-for-prices)