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China Business
Apr 30, 2009 German potash finds growth in China
By John Helmer MOSCOW - In the global marketplace for potash - one of the vital nutrients for plant growth, food production and fertilizer fortunes - no one is sharper at spotting a bargain than China, whose farmers and state fertilizer distributors comprise the world's largest consumers and importers of potash. When the Chinese fix their annual contract price for potash imports, they set the marker for counterparts in India, Southeast Asia and Brazil, the next-biggest potash markets, to follow. China's demand has been supplied in recent years by several sources, including Canpotex of North America, representing Canadian and US mining companies such as Potash Corporation; the Belarusian Potash Company (BPC), representing potash China caught in potash crunch
(Apr 22,'09)

Russian potash in suspended animation

(Jan 14,'09)

1. Swine flu over cuckoo markets 2. G-8's first bankruptcy 3. A new order emerges in Lebanon mined in Belarus and Russia; and Israel Chemicals Ltd (ICL). The China market grew steadily during the past four years of strong demand for potash and the commodity price boom, and so did potash prices. That is now history. In the last half of 2008, the crash of all commodity prices and the shortage of farm credit led most potash producers to curtail production dramatically and it also prevented the accumulation of unsold stocks. In the first quarter of 2009, Russian producer Uralkali, for example, cut potash production 63% to 459,000 tonnes, from 1.3 million tonnes. Saskatchewan, Canada-based Potash Corp, the world's largest potash producer, has reported that in the same period it cut sales volumes to North American customers by 86%, and to the rest of the world by 78%. But it's spring in China; and after an unusually rainless winter, farmers preparing to plant must have more potash than usual to improve their yields out of the dry ground. This is also the time that China's big-volume buyers usually meet with the major producers and suppliers to fix the volume of deliveries of imported potash for another six to 12 months. But if the China National Agricultural Means of Production 4. Volcker punctures the nonsense 5. US and Iran stuck at pre-dialogue 6. Pakistan goes its own pace on militants 7. Many paths to Colombo's victory push 8. US promotes Iran in energy market 9. Unhealthy inflation 10. Profits mask coming storm
(24 hours to 11:59pm ET, Apr 28, 2009)

Potash Mining

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26/08/2010 12:31

Corporation (CNAMPGC), the China National Chemical Construction Company (CNCCC), and Sinochem - the three major Chinese import buyers - keep their pens in their pockets, and their contract orders off the table, what exactly is happening? The answer is that a relatively big German company, with a relatively small share of the Chinese market for imported potash, is making a quiet play, with an offer on the table the Chinese cannot resist. That company is K+S Aktiengesellschaft of Kassel, Germany. K stands for kali (potash, potassium) and S stands for salz (salt). Five years old in the present corporate structure, K+S is Europe's largest producer of salt; its well-known package trademark is Morton's little girl shielded by an umbrella, losing her salt, with the slogan: "When it rains, it pours". This was a US-owned trademark for almost a century until Dow Chemical sold it along with the American company's food and industrial salt products, to K+S for US$1.7 billion; Morton's little girl became K+S's on April 2 of this year. The wind blowing the umbrella for K+S has been potash demand. During the commodity boom, salt worth 619 million euros (US$816 million) in 2008, up 14% on 2007, lost proportional value in the group's total revenues of 4.9 billion euros. This is because the growth of potash prices drove the K+S group's potash and magnesium division to 2.4 billion euros, up 70% for the year. K+S says it lifted 8 million tonnes of potash and magnesium last year from six German mines; it counts itself the fourth-largest potash producer in the world, with an export market share of one tonne traded in seven. The latest Chinese import statistics for potash in the quarter to March 31 reveal that China imported more than 170,000 tonnes of German-origin potash; that is more than a threefold increase on the same period of 2008 and almost as much as was imported from Germany during all of last year. Asked by Asia Times Online to confirm that the Chinese customs data indicate that this German potash came from K+S, the company declined to say. The company is also unwilling to acknowledge that the price at which these shipments from Germany have been delivered to China is less than $570 per tonne CFR (cost and freight delivered to Chinese port). According to analyses issued this month by Scotia Capital in Toronto, and drawn from a variety of Chinese and foreign industry sources, K+S has been selling into China within a price range of $540 and $565 per tonne CFR. This is more than $100 per tonne below the price at which supplies of potash are reported in the trade to have landed in China late last year. Although K+S has in the past made relatively small sales of potash to Chinese importers, and the new number remains small - in total, Chinese import volumes of potash have been between 7 million and 9 million tonnes per annum between 2006 and 2008 - the significance of the K+S move is its timing and its price. At the end of 2008, all the major international potash suppliers to China, including Canpotex, BPC and ICL, wound up their contracts, and halted fresh deliveries to China. The suppliers then proposed re-opening contract negotiations for this year with the Chinese, but there was no response. Not until this month have the Chinese announced the formation of a "buying consortium", including Sinochem, CNAMPGC and CNCCC, and contract talks have officially commenced. Sources close to the table say the Chinese side is in no hurry to make a deal. BPC and Canpotex do not comment on contract negotiations or price targets. Oleg Petrov, sales chief for BPC, said this week that while India's potash inventories have become very low, China has enough inventory for several months, making it less anxious to come to a contract agreement. That's what makes the tactics of K+S significant and its intentions worth investigating. In March, Canpotex sold two cargoes of North American potash into Malaysia and Indonesia at $735 per tonne (CFR). This was the first price reduction from that exporter since last year. In April, Canpotex followed with the sale of two cargoes to Brazil, at $750 per tonne. BPC had already announced in March that it was offering a 25%
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discount off the spot price of Russian and Belarusian potash on the Brazilian market from $1,000 per tonne to $750-$765 per tonne, good for two months to the end of May. But the downward trend of prices hasn't aroused the buying interest from the Chinese, either for the Russian or the North American product. Only K+S has signed new orders, at an even deeper discount. Chinese buyers acknowledge that the K+S sales to date of 170,000 tonnes, even if they are repeated in the current quarter, are a drop in the bucket by China's import standards. But they are having a much bigger psychological impact, Chinese trade sources claim. This is because K+S sales agents around China are convincing the domestic market that they will keep up supply volumes and keep down price growth. If another 100,000 tonnes of K+S potash land before May 25, when the International Fertilizer Association holds its annual conference in Shanghai, Sinochem and CNAMPGC may decide to keep talking past deadline and wait for a further drop in price. India, the next largest global importer, appears to be delaying renewing its annual contract until it sees what the Chinese do. Chinese buyers are also reported by Scotia Capital in Toronto as saying that right now the spring planting requirement for potash has been met, and that 3 million tonnes of potash remain in inventory. The Chinese are claiming they have enough potash in stock to last for another three months. But they will have to conclude the new contract negotiations in time for deliveries to be made by the time the autumn planting season begins. Market analysts in Europe and North America say they have only recently seen the evidence of the K+S move in China. "In general," one told Asia Times Online, "everyone is waiting for [BPC and Canpotex] to negotiate." How long the talks will last is anyone's guess. One Canadian analyst said he is sure they must be concluded, and new volumes and prices agreed, in time for deliveries to reach China before September. Roydel Stewart, the fertilizer specialist at Alfa Bank in Moscow, told Asia Times Online that the market had been taken by surprise by the K+S initiative in the China market. He said that when asked, K+S "vehemently deny that they sell to China at below-market prices. K+S never reports its potash production or sales. They group it with other products, so we don't know exactly how much potash they produce and sell. So it is possible, I suppose, that they are sending some volume to China ..." K+S spokesman Katja Seeger was asked what sales strategy K+S is keeping under the famous umbrella and whether it is K+S's aim to undercut the supply and price controls of its international rivals, and improve its potash sales to China. She replied: "China is the biggest potash market in the world. K+S KALI GmbH traditionally supplies this market and will go on doing so. The quantities we ship are considerably smaller than those of some competitors. We ask for your understanding, that at this point we won't discuss the strategic orientation of our business." John Helmer has been a Moscow-based correspondent since 1989, specializing in the coverage of Russian business. (Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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