China Looks to Cash in on FSU Breakup

August 15, 2013 05:09 AM
 

The breakup of the Belorussian Potash Company (BPC) last month initially had industry watchers convinced global potash benchmark pricing would fall sharply. Upstream potash producers saw the bottom fall out of their stock on the news of the split and they have yet to recover. Chinese and Indian buyers are optimistic they can influence the FOB price below $300 based on FSU oversupply.

"Prices above $300 will not be accepted by Chinese buyers, who are now facing high inventories at home and sluggish sales," Wei Chengguang, chairman of China Potassium Salts Industrial Association, told Reuters.

In the final months of 2012, China held out on Canpotex tenders for a FOB price reduction from the already reduced price of $470/tonne to $400/tonne. The result was an oversupply in Saskatchewan that led to production curtailments and factory shut-downs.

PotashCorp CEO Bill Doyle was adamant in a conference call last week that no single entity has the power to dictate global pricing saying PotashCorp would not chase Uralkali's bargain basement price. But India and China are among the biggest consumers of potash in the world, and that fact holds a certain amount of influence over the industry. Uralkali and Belaruskali -- former BPC partners -- have both made it known that they will pursue a course of production aimed at marketshare-over-price.

So while declines are expected in North America for potash pricing, Canadian exporters have publicly refused to attempt to match the FSU oversupply price -- remember, China has yet to post the price they and Uralkali recently agreed upon when an offtake agreement was tendered for 500,000MT.

Demand in India has slumped under the weight of a declining currency and a fertilizer subsidy that favors urea over P&K applications. Discounts may not help this struggling economy at any price as farmers cannot afford nutrient even at subsidized pricing.

Discounts to China and India will influence pricing, but we do not expect North American pricing to follow FSU pricing 25% lower based on Uralkali's sendouts to China. But between corn futures with a $4 handle and a tsunami of potash expected out of FSU producers, potash pricing has some downside action in store, likely just in time for fall applications.


Back to news


Comments

 
Spell Check

No comments have been posted to this News Article

Corn College TV Education Series

2014_Team_Shot_with_Logo

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by QTInfo.com
Brought to you by Beyer
Close