BELARUS NEWS AND ANALYSIS

DATE:

28/01/2010

Belarusian May Regret Chinese Potash Deal, Doyle Says

By Frederic Tomesco

Jan. 28 (Bloomberg) -- Belarusian Potash Co. and Israel Chemicals Ltd. should have negotiated a better deal with their Chinese clients because fertilizer prices will rebound later this year, Potash Corp. of Saskatchewan Inc. Chief Executive Officer William Doyle said.

BPC, as the company is called, agreed to sell potash to Chinese importers for $350 a metric ton last month, and Israel Chemicals on Jan. 17 struck a deal with China National Offshore Oil Corp. Ltd. for as low as $355 a ton. Potash climbed to a record of more than $1,000 a ton in some parts of the world in 2008 before collapsing as farmers cut purchases because of slumping grain prices.

Potash Corp., the world's largest producer of the soil nutrient, is part of a Canadian export group called Canpotex Ltd. that is negotiating with the Chinese. Canpotex has refused to sell to the Chinese at terms similar to those that BPC and Israel Chemicals accepted, Doyle said.

"From the BPC and maybe even the ICL point of view, I think they will both come to regret their contracts with China by the time the second half of the year rolls around," Doyle said today on a conference call with analysts. "These settlements will go down as absolutely the low point."

Potash Corp. accounts for about 20 percent of global capacity for the fertilizer, according to a Jan. 27 report by Bank of America Corp. China accounted for 22 percent of global potash consumption last year, according Fertecon, a Tunbridge Wells, England-based fertilizer adviser.

Saskatoon, Saskatchewan-based Potash Corp. was "surprised" by the Belarus agreement, Doyle said.

'Panic Seller'

"The settlement with China was too low," he said. "To tie in at this pricing level for the whole year would have been a mistake for us. BPC have proved to be a bit of a panic seller. They are basically inexperienced marketers. They have panicked in both directions."

Spokesmen for BPC and Israel Chemicals couldn't immediately be reached for comment.

Discussions between Canpotex and China are set to resume next week and the two sides may not reach a deal until the second half of the year, Doyle said. He didn't elaborate on terms of a potential agreement. Mosaic Co. and Agrium Inc. are the other members of Canpotex.

"China doesn't have its order book filled," said Doyle. "They're going to need Canadian potash. There is no doubt about it."

China may consume as much as 26 million tons of potash annually within 15 years, according to a forecast by the International Plant Nutrition Institute that Doyle cited on the call. Potash's forecast calls for China to consume 8 million to 9 million tons of the fertilizer in 2010.

Source:

http://www.bloomberg.com/apps/news?pid=20601082&sid=asz265wirdak


Partners:
Face.by Social Network
Face.by