Reports from Uralkali have surfaced that China may move toward spot markets to fill its potash orders in the future. Uralkali is among the world's largest producers of potash and has been supplying China and other Asian markets via rail.
Stockpiles of potash increased in China by 11% through the end of August year-over and experts suggest China is waiting to pull the trigger on a potash purchase until domestic supply falls below 3 million tons. China was holding out for a price point of $470/ton, but let the negotiations lapse, failing to contract Canadian potash late in the summer as was expected. As a result, PotashCorp and Mosaic have initiated production shutdowns through the first of the year.
In a comment to Bloomberg, Oleg Petrov, director for sales and marketing at Uralkali said, "The Chinese market is moving in the direction of becoming a spot market. It may even happen next year."
At present, domestic Chinese potash goes for around $400/ton. Bank of America Corp has set Chinese contract potash prices for 2013 at $420/ton. If China waits for its domestic inventory to fall before shopping the spot market they may be in for a rude awakening. India and Brazil are rumored to be considering booking K in China's absence, hoping to beat the rush in the spring, but India has a fertilizer subsidy quagmire to tend to, and Brazil is having trouble just getting nutrient out of the Port of Paranagua.
If all three happen to show up at the same time, potash could be subject to seller's market pricing, pushing K prices to the upside in the coming spring.
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