BELARUS NEWS AND ANALYSIS

DATE:

22/12/2009

Belarusian Potash May Agree China Sale at $350 a Ton

By Maria Kolesnikova

Dec. 22 (Bloomberg) -- Belarusian Potash Co., a trading company representing Russian and Belarusian producers, may sell the fertilizer to China at $350 a metric ton including freight costs, according to two people familiar with the matter, below analysts' forecasts.

The trader will sign a supply contract with China tomorrow, said the people, who declined to be identified as discussions are private. The company plans to start deliveries early next year and supply 1 million tons in 2010, they said. Belarusian Potash spokesman Filipp Gritskov declined to comment.

"These prices are at least $50 below current market and probably $100 below where a deal could have been done six months ago, suggesting that the cartels once again miscalculated their negotiating position versus China," Mark Connelly, a New York- based analyst at Sterne, Agee & Leach Inc., wrote in a note.

The global financial crisis slashed demand for potash after prices rose to more than $1,000 a ton in some parts of the world last year. China made up 22 percent of world consumption in 2008, according to Fertecon, a Tunbridge Wells, England-based fertilizer adviser. Producers agreed to cut Indian contract prices in July by 26 percent to $460 a ton including shipping.

OAO Uralkali, Russia's second-largest potash company and part-owner of Belarusian Potash, fell 79 cents, or 3.7 percent, to $20.50 by 2:32 p.m. in London. OAO Silvinit, Russia's biggest producer, fell 889 rubles, or 3.6 percent, to 23,611 rubles.

Lowers Curve

The latest China rate is equivalent to $300 a ton excluding freight, known as the free-on-board price, Renaissance Capital analyst Marina Alexeenkova wrote in a research note today.

"The market expected $340-400/tonne FOB, much higher than the level at which the contract might be fixed," she wrote. The rate "lowers the price curve for potash globally," she said.

The market expected a contract rate of between $300 and $350 a ton, according to Troika Dialog and VTB Capital.

China may use 8 million to 9 million tons of potash next year, with 4 million to 5 million tons produced domestically, Oleg Petrov, sales chief at Belarusian Potash, said last week in an interview. The company is a joint venture between Uralkali and Belarus's state-owned Belaruskali.

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

Source:

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


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