Uralkali PJSC, the world’s largest potash producer, expects Chinese imports of the the crop nutrient to slow after the country devalued its currency.
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, without being more specific. Demand from other key markets in India and Brazil is also declining, it said.
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.
Uralkali sees global demand falling to 58 million metric tons from a record 63 million tons in 2014.
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.
Tighter credit in Brazil, falling crop prices, currency volatility and inventory drawdowns reduced demand from South American farmers and pushed potash prices lower, Uralkali said. Consumption of the nutrient in the region is expected to fall to as low as 9.8 million tons this year compared with 11.8 million tons in 2014, it said.
The “challenging market” and Uralkali’s lower production capacity cut first-half revenue by 9 percent, Chief Executive Officer Dmitry Osipov said in the statement. Net profit still climbed 50 percent to $556 million because of a weaker ruble.
The company said a sinkhole that opened up near its Solikamsk-2 mine last year measured 122 meters by 125 meters at the surface by Aug. 24. Average brine inflow there for the last 10 days totaled 310 cubic meters per hour. That’s almost the same as the company reported in June.