Uralkali predicts China will shift to spot potash market

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OAO Uralkali has predicted that China could switch to the spot market for potash supply. Uralkali made the prediction based on China’s seemingly reluctant attitude toward signing any supply contracts for potash for the next growing season.

“The Chinese market is moving in the direction of becoming a spot market,” Oleg Petrov, director for sales and marketing at Uralkali told Bloomberg in an interview. “It may even happen next year.”

China has been stockpiling supplies of potash. It was reported that China’s stockpiles increased 11 percent through the end of August from the previous year to 4 million metric tons. This stockpile has kept China from signing any contracts with any of the large potash producers, including Uralkali, PotashCorp and others.

As a result of China’s actions, potash supplies on the global market are plentiful and prices are being pressured. China is not expected to sign any contracts until its domestic inventories fall below 3 million to 3.5 million tons, Petrov said. Based on the supply the country has, that is not expected to happen before the first quarter of 2013.

Despite the lackluster sales and movement, Brazil is anticipated to jumpstart some demand in January before its winter season begins, Petrov predicted.

“The market will buy early again in order to avoid heavy costs and logistical” issues such as bottlenecks at Brazilian ports before the summer season, he told Bloomberg.

As China continues to drag its feet for potash, Uralkali is more optimistic regarding a supply contract from India. Petrov said a long-term contract could be signed in January or earlier for one year or six months.

“We expect the market to come back to the previous level of 6.5 million tons after 2014,” Petrov said. “Indian farmers have been disproportionately applying big volumes of heavy subsidized nitrogen fertilizers in the past several years, while potash and phosphate consumption has dramatically declined,” he said.

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