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Uralkali Expects China to Cut Back on Potash Imports After Devaluation of Currency

Bloomberg reported that Uralkali expects Chinese potash imports to slow down after the Asian nation devalued its currency. The Russian producer also said that China’s introduction of a fertilizer tax will probably hurt imports this year.

As quoted in the market news:

The yuan depreciation and China’s introduction of a fertilizer tax will probably hurt imports this year, the company said in a first-half earnings statement on Tuesday. Demand from other key markets in India and Brazil is also declining, according to the potash producer.

China’s decision to devalue its currency to aid exports also makes importing commodities more expensive. The potash market is oversupplied and prices in Brazil, one of the largest spot markets, dropped about 15 percent this year. Fitch Ratings Ltd. last month said it expects potash to remain low over the next five years as new production from low-cost factories exceeds demand.

While China’s tax won’t create a “big strategic drama” for the market, along with a weaker yuan it won’t help global producers get the best price for the next contract in China, Oleg Petrov, chief of sales, said on a conference call on Tuesday. China is buying potash at $315 a metric ton this year from global suppliers under a contract.

Lower crop prices don’t encourage farmers to increase potash application rates, Uralkali said. “In the absence of adverse weather over the coming months, ample supplies for major crops will keep downward pressure on prices,” it said.

In India, a weaker rupee versus the dollar will help limit the nation’s potash imports this year, Uralkali said. Inbound shipments into India will probably total 4.3 million to 4.5 million tons compared with 4.5 million tons last year, the company estimated.

Click here to read the full Bloomberg report.

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Belarusian Potash Company Inks Five-Year Supply Deal with China

Reuters reported that China and Belarusian Potash Company have signed a deal that will see BPC supply 4 million tonnes of the fertilizer over five years at a price tag of approximately $1.3 billion based on current industry prices, as well as extended a loan totaling $1 billion to Belarusian banks.

As quoted in the market news:

A potash supply memorandum, also signed after the bilateral meetings, agreed shipments of 4 million tonnes over five years and was worth around $1.3 billion based on current prices, Belarussian Potash Company said in a statement.

“The concrete price level will be the subject of further negotiation,” it said.

Cash-strapped Belarus reached an unexpected agreement with China in March over 2015 prices for the crop nutrient potash, undercutting Russian and North American rivals, who were negotiating for higher rates.

One loan, worth $700 million over 15 years, is to Belarus’s state-controlled Development Bank with an effective interest rate of no more than 4.7 percent. The second loan went to state-owned Belarusbank.

Click here to read the full Reuters report.


China Expands Stake in Uralkali

Mining.com reports that the Industrial Commercial Bank of China (ICBC) and China Construction Bank have acted as lenders of a $530 million loan deal between China and potash miner Uralkali (LSE:URALL), the world’s biggest producer of the commodity.

As quoted in the market news,

The news comes less than a month after Belarusian Potash Company (BPC), Uralkali former partner, finished setting supply prices with Beijing, which came below the target sought by both the embattled Russian miner and the North American Canpotex consortium.

ING Bank, Societe Generale, Nordea Bank, Commerzbank, IKB and Natixis also took part in yesterday’s deal as lenders.

Click here for the full Mining.com report


Uralkali Agreed to $10 Per Tonne Increase in Potash Sales to China

Reuters reported that the world’s largest potash producer Uralkali (LSE:URALL)  has agreed to a less than planned $10 per tonne increase in sales to China this year.

As quoted in the market news:

The potash market came under pressure as competition between producers strengthened sharply after Uralkali broke away from a trading venture with Belarus in 2013.

Uralkali agreed to supply 850,000 tonnes of potash at $315 per tonne on a cost and freight (CFR) basis in 2015, the company said in a statement, equal to the price agreed by Belarus with China in March.

The contract agreed by Belarussian Potash Co has set a benchmark for other producers despite being criticised by Uralkali as it had been negotiating an increase of $30 per tonne.

Uralkali’s main rival Canpotex Ltd, the offshore potash sales arm of North America’s Potash Corp of Saskatchewan (TSX:POT,NYSE:POT), Mosaic Company (NYSE:MOS) and Agrium Inc (TSX:AGU,NYSE:AGU), signed a contract with China in late March, but did not release price terms.

Click here to read the full Reuters report.


Belarusian Potash Co. Agrees to Supply Potash to China for $315 Per Tonne

Bloomberg reported Thursday that Belarusian Potash Co. has signed a deal with China and will supply the country with potash at a price of $315 per tonne which includes shipping costs. Russia’s Uralkali (LSE:URALL) reportedly said the price was “significantly” less than possible, despite it being up $10 per tonne from last years price.

As quoted in the market news:

The price China pays for potash has been the market benchmark for more than a decade and is usually set at the start of the year. This year, China’s higher inventories and falling prices on the domestic spot market allowed buyers to stretch negotiations well into March, raising concerns that the biggest potash consumer would drive down prices worldwide or settle for spot purchases over contracts.

The Belarus contract “underscores the newfound competitive intensity in global potash markets,” Goldman Sachs analysts said in a note. “We believe news of a $10 per metric ton price increase will be viewed negatively by the market, where major producers had been publicly aiming for up to a 10 percent increase.” Goldman Sachs had used a Chinese contract price of $320 per metric ton in its models, according to the note.
Elena Kudryavets, head of Belarusian Potash Co., commented:

Signing the contract later than March would be disastrous for the market. The agreement will serve as a positive signal to the market, help to make it more active, boost stability and confidence of all participants.


Canpotex Looks to Raise Price of Potash in China Deal

Reuters reported that Canpotex Ltd., a North American company owned by The Mosaic Company (NYSE:MOS), Potash Corporation of Saskatchewan (TSX:POT,NYSE:POT) and Agrium Inc. (TSX:AGU,NYSE:AGU), is requesting an 8 percent increase in its 2015 potash supply contract with China’s Sinofert Holdings. This would increase the price by $25 per tonne, but Mosaic CEO Jim Prokopanko said that Sinofert wants to pay the same $305 per tonne rate as the 2014 contract. Contracts between Sinofert and major potash producers generally set a global price floor for the fertilizer, meaning this price increase is an important one for the industry.

Prokopanko stated:

China’s holding firm. As one shareholder, my advice to Canpotex is, ‘just hold firm.’

Sinofert’s argument for a price freeze is partly based on a 35 percent year over year reduction in freight rates from Vancouver, British Columbia to Asian markets, cutting the producers’ costs. From the producers’ standpoint, potash is already moving smoothly to other buyers, he said. Agrium said on Tuesday that its potash production is fully committed for the first half of the year.

Click here to read the full Reuters article.

 


Uralkali Looks to India for Supply Deal Ahead of China

Bloomberg reported that Uralkali (MCX:URKA,LSE:URALL) may opt for a supply deal with India ahead of China for the first time since 2008, which may mean a price increase. China, being the biggest consumer of potash, usually makes the deal first, providing a benchmark price for the year and with India paying a premium.

As quoted in the market news:

China’s potash demand was 14 million metric tons last year, when the market hit a record 62 million tons, Uralkali’s press service said today, updating last-month estimates. The country last signed contracts at $305 per ton in January 2014 covering the first half of the year, later prolonging them to year-end.

Potash imports by India, the world’s second-largest producer of sugar, rice and wheat, may jump as much as 22 percent to 5 million metric tons in the year starting April 1 from a year earlier, P.S. Gahlaut, managing director of Indian Potash Ltd., said in an interview on Feb. 4. That would be the highest since 2010-11, according to Fertiliser Association of India data.

Oleg Petrov, chief of sales for Uralkali, commented:

China may have around 4.5 million tons of stockpiles now. We saw higher levels in the past but still this is far from the 2.5 million-ton level which is seen as more comfortable for the new contract. On top of this we saw Belarus shipping four cargoes in January to China. Some of those volumes went to the market, some stay in the port, but still this is delaying the opportunity for the new deal.

Click here to read the full Bloomberg report.


Uralkali to Sell Potash to China for $305 per Metric Ton

Uralkali to Sell Potash to China for $305 per Metric TonThe new potash benchmark price for the first half of 2014 has been set. Uralkali (MCX:URKA), Russia’s top potash producer, has hacked 24 percent off its potash price in a new semi-annual supply deal with China, the world’s largest potash consumer. The deal will see Uralkali ship 700,000 metric tons (MT) of the crop nutrient to China for $305 per MT. 

Since Uralkali’s split with Belaruskali last July, the potash market has been at a standstill. But the latest contract prices suggest that the Russian producer is looking to set a new floor for global prices. The new benchmark is significantly lower than last year’s contract price of $400 per MT. However, according to Reuters, the price is “not far removed from the levels prevailing in the spot market since July.”

“The contracts between Uralkali and the Chinese companies clearly testify to growing demand and the beginning of market recovery,” Oleg Petrov, Uralkali’s head of sales, said.

On the subject of the latest transaction price, Peter Prattas, a Toronto-based analyst at Cantor Fitzgerald, told Bloomberg that “[i]t’s a definitive price point that people can look at and use as some sort of floor price,” adding that “[b]uyers have been waiting for something like this as a catalyst so they can start buying again.”

The Globe and Mail reported that in the past, both China and India have played hardball when it comes to squeezing the best price out of the major potash producers, typically by delaying their purchases. Up until last year, the countries didn’t see much success with that strategy, but since the fall of the potash market, it seems that they might finally get their way. The collapse of BPC, according to Michael Levshin, an analyst with Veritas Investment Research, weakened the potash cartels and increased China’s bargaining ability significantly. That in turn could mean that price increases could be difficult to come by in the future.

“This was a very good deal for the Chinese,” Levshin told The Globe and Mail, “[i]t’s the least China has paid for potash in more than half a decade,” he said.

On the other hand, the deal is also a good one for the Russians. Speaking with the Bloomberg, Konstantin Yuminov, a Raiffeisenbank analyst in Moscow, stated that “[t]he deal is very positive for Uralkali as the volume is good and price is good,” adding that “[i]n this deal, the Chinese buyers took 70 percent of what was negotiated last year together with Belarus, and Uralkali can sell additional volumes by rail on top of that.”

Potash prices

As far as potash prices on the whole are concerned, the supply deal between Russia and China gives producers and buyers a benchmark price that could result in reviving global demand for potash.

However, it seems that at the moment, the feeling on where the market could go is still up in the air. According to Reuter’s market sources, whether the benchmark is good news or bad news is unclear because “this price is not very different from the current reality.” However, the feeling is that the new price will create a benchmark that could spark momentum.

According to the source, India could be looking at a premium to China’s contract price of $15 to $20 per MT or more for potash when its contracts wind up in the next few weeks.

Towards the end of 2013, the Chinese spot price for potash was between $303 and $305 per ton.

 

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned. 


India Buys Low-Priced Phosphate From China

The Economic Times of India reported that India has purchases 160,000 tonnes of diammonium phosphate from China at the lowest price in over six years, marking what could be a price benchmark for other purchasers.

According to the source,

Indian Potash LimitedParadeep Phosphates Limited and Chambal Fertilisers and ChemicalsBSE 2.37 % bought the crop nutrient at $410 per tonne on CFR basis in deals done last week, sources with knowledge of the deals told Reuters.

Prices paid by India, the world’s top DAP importer, were as much as $520 per tonne in May.

Click here for the full report. 


India, China Seek Cheaper Potash as Cartel Breakup Softens Market

Reuters reported that both India and China are working to take advantage of market upheaval by seeking price cuts of 25 percent or more.

As quoted in the market report:

China wants to pay less than $300 a tonne for new contracts for the second half of 2103 and 2014, down sharply from $400 a tonne in the first half and $470 last year, pointing to its high stocks of the fertiliser and rising domestic output.

To view the whole Reuters report, click here.


Migao Corporation, EuroChem Join Forces for Potash Production in China

Migao Corporation (TSX:MGO) announced that they intend to create a joint venture with EuroChem for production of up to 60,000 tonnes of potassium nitrate and up to 200,000 tonnes of chloride-free NPK fertilizers in Yunnan in China.

As quoted in the press release:

 EuroChem and Migao Corporation plan to begin the construction of a plant in 2013 and launch production in 2014.

To view the whole press release, click here. 


Western Potash Closes China Blue Deal

Western Potash (TSX:WPX) finalized its previously announced strategic investment with China BlueChemical and Benewood Holdings though joint venture company CBC Canada Holding Corp. Through the investment, CBCHC now holds a 19.9% non-diluted ownership in Western.

As quoted in the press release:

Upon completion today of CBCHC’s strategic investment and pursuant to the Subscription Agreement, the parties will form and jointly staff three working committees within 30 days. A Technical Committee and a Finance Committee will be formed, both of which will be made up of three members from Western and three members from CBCHC. In addition, the Chief Executive Officer and an individual holding a senior management position in each of the Parties will form a Supervisory Committee.

Mr. Patricio Varas, President and CEO of Western commented:

After two years of working together with China Blue we have reached what we believe is a comprehensive strategic investment as it strengthens our financial position and provides a vision for the path forward. The Transaction has involved a significant amount of due diligence and long hours of work from both our teams. We are very happy to welcome Mr. Yang to the Board and we will definitely benefit from his extensive plant building and operating experience both at China Blue and CNOOC. In addition, Mr. Varas stated, “With the Subscription Agreement, I believe CBCHC and Western have created a formidable alliance and we can now look to completing the work already underway in arranging and putting together the financial pieces that will make the building of the Milestone Project a reality.

Click here to view the full press release. 


Canpotex Deal with China Pushes North Amercian Potash Exports up 13 Percent in January

Reuters reported that North American potash exports surged in January after the signing of the Canpotex Ltd with China.

As quoted in the market report:

Potash exports by the North American producers jumped 13 percent in January from the previous month to 657,000 tonnes and were 38 percent above the pace set a year earlier, according to data posted on Potash Corp’s website on Thursday.

To view the whole Reuters report, click here. 


Uralkali Says China to Switch to Spot Market

Bloomberg reported that Uralkali believes that China is reluctant to sign long-term contracts, and may switch to the spot market.

As quoted in the market report:

China will only be interested in signing a new contract when domestic inventories of the crop nutrient fall below 3 million to 3.5 million tons, Petrov said. That’s unlikely before the first quarter, he said.

To view the whole Bloomberg report, click here.


Potash Price Likely To Rise For China: Mosaic

Bloomberg reported that the rise of grain prices due to drought in the US will likely cause the price of potash to go up for China, the world’s largest potash consumer, according to Mosaic Co.

As quoted in the report:

Corn futures have jumped 52 percent in Chicago in the past month and soybeans have climbed 21 percent as the worst U.S. drought in a generation damages crops. Mosaic Chief Executive Officer Jim Prokopanko said that will influence talks currently in progress between China and North American potash suppliers about a six-month supply accord.

Mosaic CEO Jim Prokopanko commented:

That strengthens our hand. The more grain is worth, the more fertilizer is worth.

Click here to read the full Bloomberg report.


Remaking China’s Phosphate Industry

By James Wellstead — Exclusive to Potash Investing News

Remaking China's Phosphate IndustryWith the prices of corn, soybeans, rapeseed, and canola rising to levels not seen since the 2007 to 2008 food crisis, the Chinese government and its farmers are searching for ways to stabilize domestic food supply. As a strategic national resource in China, phosphate has taken on greater importance as farmers scramble to boost fertilizer application rates and local governments try to control food price inflation.

Though inflation has eased off of last summer’s 6.5 percent to a more manageable 3.6 percent price increase, the recent surge in soybean prices has been a major cause of fears about rising food inflation rates within China

China’s farmers have been overwhelmed by Chinese consumers’ growing demand for everything on the menu, from pork and milk to grains and corn. While international suppliers are eager to satisfy demand in the near term, China is looking for longer-term food independence.

Livestock farmers have taken the well-worn path of adopting foreign technologies and repurposing them for application on their home soil. Borrowing decades of cutting-edge American agricultural research, Chinese farmers have started buying up genetic material and live animals raised by US farmers as breeding stock for Chinese farms.

A similar domestic attitude toward phosphate – a key input for under-fertilized Chinese farm fields – is taking place in earnest as government officials try to kick start production.

In the past four months, phosphate ore prices have climbed by ten percent to US $98.40/tonne on the back of strong demand, Industrial Minerals reported.

Over the past decade, domestic phosphate rock production has increased dramatically in China, jumping from 30 million tonnes (MT) in 2000 to an expected 80 MT in 2011. The quality of phosphate rock processed domestically has also increased during this period, shifting from lower-grade single super phosphate to higher-level diammonium phosphate and monoammonium phosphate.

But with a farming population that remains a cornerstone of the country’s economy, China’s Ministry of Commerce listed phosphate as the third most important national strategic resource and imposed new export quotas at the beginning of 2012.

A phosphate reserve system has also been established across the country’s five main phosphate producing provinces (Hunan, Yunnan, Sichuan, Guizhou, and Hubei). It is intended to safeguard pricing and supply at times when oilseeds are sparking fears of food inflation, the Financial Times reported.

China’s phosphate plan also includes reducing the number of phosphate producers operating in these provinces by shutting down operations under 150,000 tonnes and decreasing access to phosphate mining rights by extending application approval periods to between five and eight years.

Domestically that has meant that smaller producers are being bought out by larger ones, reducing the overall number of companies in Hubei from 146 to 80 following last year’s “Suggestions on Phosphate Exploration Management” report issued by local governments.

But despite the challenges, foreign companies like Vancouver-based Sterling Group Ventures Inc. (OTCQB:SGGV), which recently signed a contract to have a Chinese mining contractor operate its Hunan-based Gaoping phosphate project, are still able to gain access to China’s phosphate industry.

International engagement remains

Despite the strong role the government has chosen to play in developing domestic capacity, there is still a clear role for international markets. In early February of this year, officials from Sinofert Holdings Ltd. (HKG:0297), a unit of China’s largest chemical trader, said the company is interested in purchasing international phosphate and potash mines directly.

“We are looking at assets both inside and outside China,” Senior Vice President Harry Yang said in an interview in February. “So far we haven’t found anything economically workable. We’ll continue to keep our eyes open.”

As the direction of China’s phosphate strategy brings its producers toward greater consolidation in production, it is likely that Chinese fertilizer groups will come into international markets with bigger cheques and a more cohesive strategy for moving forward.

 

Securities Disclosure: I, James Wellstead, hold no direct investment interest in any company or resource mentioned in this article.