BHP entry threatens creaking global potash duopoly
Even without the extra output from Jansen, annual capacity is set to grow to 91 million tonnes in 2017 from about 68 million in 2012, outstripping average annual demand growth of 3 percent, according to Burnside.
Average potash prices have fallen from $450-$520 a tonne last year to $400-$430, as a long delay in supply contracts with China and India, which account for around 15 percent of global demand, pushed producers to compete in other markets.
"The rosy picture painted in the past of continued growth of 3 to 5 percent doesn't seem to be valid any more as some countries including China seem to have reached a saturation point in demand," the senior official said.
The recent months' slowdown has pitted Canpotex against BPC and member against member within the two groups.
"The market has changed significantly during the last year and a half. Now everyone is battling with each other, the market is not disciplined anymore," a source familiar with Uralkali and Belaruskali said.
According to industry sources, BPC was caught off guard when Canpotex signed a six-month seaborne supply contract with China on New Year's Eve 2013, slashing prices to $400 a tonne, $70 a tonne below the previous contract.
"Canpotex sacrificed price for volume. They were under pressure from investors after long delays in the contracts with China and India," one source said.
Though a disgruntled BPC followed suit, as usual, with its own contract on the same terms, Uralkali opted to use its exclusive land access into northern China to pump supplies on top of BPC's sea-borne shipments, upsetting both Canpotex and BPC partner Belaruskali.
Uralkali exported around 2 million tonnes of potash to northwestern China via rail in 2012, according to industry sources, accounting for 20 percent of the country's needs.
Taking the Long View
Sensing the threat, Canpotex has sought to expand its share in other markets, focusing on Malaysia and Indonesia, where the palm oil industry requires heavy potash application.
Over the past eight months, Canpotex has offered potash at reduced prices, biting into BPC's share of the Malaysian and Indonesian markets, which has shrunk from around 40 percent to 15 percent over the past year, the sources said.
Smaller players K+S and Israel Chemicals Ltd and Jordan's Arab Potash Company have also broken away from their traditional alignment with BPC and Canpotex pricing by offering competitive prices in Asia and Latin America.
Belaruskali is also rumored to have sold potash cargoes outside BPC.