Potash prices head for 20% drop after cartel disintegrates

decrease font size  Resize text   increase font size       Printer-friendly version of this article Printer-friendly version of this article

Potash prices are poised to drop some 20 percent after the surprise breakup of the world's largest producer cartel sent buyers and sellers scrambling to establish new valuations, traders said.

Global trade in the material - one of three nutrients vital for agriculture - remains largely on ice after Russia's Uralkali in July quit the partnership Belarusian Potash Co (BPC), which together with a rival North American cartel controlled some 70 percent of the market.

Belarus' retaliatory arrest of Uralkali's chief executive Vladislav Baumgertner in Minsk last week further highlighted the deep rift between the Russian and Belarusian producers.

"As a cartel, producers were able to cut supplies in order to control prices. As competitors, producers will reduce prices rapidly to gain business," an industry source said.

BPC co-founder Belaruskali appears to be particularly keen to secure new supply deals after the split left it with limited global trading infrastructure, which had been dominated by its Russian partner, traders and industry sources said.

"Many BPC staff have moved over to Uralkali, which also has much more marketing experience through UKT (Uralkali Trading). Belaruskali will have to work hard to build its relationships with customers and find trading partners," said Paul Burnside, analyst at CRU International.

According to industry sources, Belaruskali has offered India a new supply contract for the second half of this year at $360 a tonne cost and freight (cfr), down $67 a tonne from H1 2013 contract prices.

Such an accord would force rival producers to lower prices not only in India, but also in other markets, including China, which traditionally sets the lowest potash prices in the market.

Indian industry officials said suppliers have agreed to cut prices for Indian buyers on existing contracts, although the size of the discount still needs to be agreed.

In the first tangible outcome of the collapse of tightly controlled market discipline, spot prices in Brazil have plummeted to $370 a tonne for granular potash, a more expensive grade, from around $450 a tonne in early July.

Belaruskali and Germany's K+S Kali have sold cargoes at $370 a tonne, industry sources said.

Producers and buyers expect prices in Brazil to slip further to $350-$360 a tonne in coming weeks as producers fight for a share in the key spot market that imported around 7 million tonnes of potash in 2012, some 14 percent of global consumption.

"This is a very hard situation for sellers that are looking to lower prices in order to get business. The ongoing uncertainties in the market are our main concern," a senior source at a producer said.

China Leads

Chinese buyers are negotiating with producers. Canpotex, the North American cartel, has held talks with Sinofert, said Todd Coakwell, spokesman for group member Agrium Inc.

Prices in China are likely to fall to around $320 a tonne cfr after the Indian precedent and as Uralkali supplies northern China with potash by rail at similar rates, according to the sources.

In Malaysia and Indonesia, two major markets that require potash for the palm oil industry, buyers continue to sit on the sidelines awaiting a cue from China or India.

Prices in the two Southeast Asian countries are likely to drop to around $330-$340 a tonne cfr from $400-$420 a tonne prior to the cartel breakdown, sellers in the region said.

The price declines are even more dramatic compared to a year ago, when a tonne of potash in Brazil sold for $525.

The collapse of price discipline has been compounded by sharp currency weakening in Brazil, India and Malaysia that makes the dollar-traded commodity more expensive in local money.

Potash prices had been falling in the first half as high inventories in key markets reduced new sales, pressuring producers.

China's signing of new supply contracts on the last day of 2012 at a steep discount of $70 a tonne from the previous year to $400 a tonne cfr led prices down in other markets.


Prev 1 2 Next All



Buyers Guide

Doyle Equipment Manufacturing Co.
Doyle Equipment Manufacturing prides themselves as being “The King of the Rotary’s” with their Direct Drive Rotary Blend Systems. With numerous setup possibilities and sizes, ranging from a  more...
A.J. Sackett Sons & Company
Sackett Blend Towers feature the H.I.M, High Intensity Mixer, the next generation of blending and coating technology which supports Precision Fertilizer Blending®. Its unique design allows  more...
R&R Manufacturing Inc.
The R&R Minuteman Blend System is the original proven performer. Fast, precise blending with a compact foot print. Significantly lower horsepower requirement. Low inload height with large  more...
Junge Control Inc.
Junge Control Inc. creates state-of-the-art product blending and measuring solutions that allow you to totally maximize operating efficiency with amazing accuracy and repeatability, superior  more...
Yargus Manufacturing
The flagship blending system for the Layco product line is the fully automated Layco DW System™. The advanced technology of the Layco DW (Declining Weight) system results in a blending  more...
Yargus Manufacturing
The LAYCOTE™ Automated Coating System provides a new level of coating accuracy for a stand-alone coating system or for coating (impregnating) in an automated blending system. The unique  more...
John Deere
The DN345 Drawn Dry Spreader can carry more than 12 tons of fertilizer and 17.5 tons of lime. Designed to operate at field speeds up to 20 MPH with full loads and the G4 spreader uniformly  more...
Force Unlimited
The Pro-Force is a multi-purpose spreader with a wider apron and steeper sides. Our Pro-Force has the most aggressive 30” spinner on the market, and is capable of spreading higher rates of  more...
BBI Spreaders
MagnaSpread 2 & MagnaSpread 3 — With BBI’s patented multi-bin technology, these spreaders operate multiple hoppers guided by independent, variable-rate technology. These models are built on  more...


Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


Grain Storage Systems

Behlen Grain Storage Systems offers large capacity bins with diameters from 16’ to 157’ and capacities exceeding 1,500,000 bushels. All ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Feedback Form