March 21, 2012


Global potash shares rise on surprise China deals


Following the unveiling of a surprise export deal with the top buyer, China, shares in potash group gained on global stock markets, raising hopes for a revival in international demand.


Canpotex, the North American potash marketing consortium, revealed it had signed a contract to supply up to 700,000 tonnes of the nutrient to Chinese fertiliser group Sinofert in the April-to-June quarter, at a price "unchanged" from that charged for deliveries in late 2011.


This implies a price of US$470 a tonne, a little below the Vancouver spot price of about US$500 a tonne, according to PotashCorp data revealed last week, although China, as the biggest buyer, usually negotiates a discount.


The Canpotex announcement came shortly after Belarusian Potash Company (BPC), which sells Russian and Belarusian potash, revealed it had signed a deal to supply Sinochem, Sinofert's parent group, with up to 500,000 tonnes of potash.

The deals defied expectations voiced last week by K+S, the world's fifth-ranked potash group - which is not a member of either BPC or Canpotex that imminent agreements did not appear likely either with China nor India, the other major Asian importer.


"The fertiliser trade sector has been acting more cautiously since the beginning of the fourth quarter of 2011, and the potash producers mainly involved in the contract negotiations with China and India do not expect contracts to be concluded soon," K+S said.


But BPC said that its deal on Tuesday (Mar 20) came amid a "favourable period for the international potash market", helped by "decreasing" macroeconomic risks


"Buyers' activity is gradually rising in the key potash markets," the company added, while noting that inventories of the nutrient were "gradually declining".


The comments tally with a report from PotashCorp, the Canada-based potash giant, last week thatNorth America's bloated inventories shrank in February by 16,400 tonnes, in what is typically a time of rising stocks ahead of the spring sowing season.


K+S also cheered markets by saying that its own sales volumes in 2012 looked set to come in "about the level of the previous year", when analysts have been factoring in widespread volume declines.


PotashCorp shares closed on Tuesday up 3.9% at Can$46.40 in Toronto, where stock in Agrium - also involved a deal with Glencore in carving up grain merchant Viterra added 2.2% to CAD87.60 (US$88.57).


In New York, shares in US giant Mosaic gained 1.0% to US$58.05, and in Tel Aviv, Israel Chemicals ended up 2.3% at 41.42 shekels.


The gains contrasted with falls in major stock market indices. The Dow Jones Industrial Average closed down 0.5%, and London's FTSE 100 down 1.2%.

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