Belarussian Potash Company heralded a thawing in the global potash market freeze as it confirmed it had struck a potash supply deal to China at a rate well below market expectations.

The joint Belarusian-Russian trade consortium said it had agreed to supply China's Sinochem and China National Agricultural Means of Production Group with 1.2m tonnes of potash, of which 200,000 tonnes is optional, at $350 a tonne including freight costs.

The deal equates to a Vancouver free-on-board price, the benchmark metric which excludes freight charges, of $305 a tonne more than $50 a tonne below current market prices, analysts say.

It is also a little over half the $575 a tonne, excluding freight, that China paid in July last year as the market was peaking.

The contract is expected to be followed by further deals totalling about 3m-4m tonnes, at the same price, with other major suppliers, including Europe's K+S, the North American Canpotex consortium and Russia's Silvinit.

'Crucial step'

BPC said its contract was a "crucial step" towards a recovery in the global potash market.

Potash shipments have slumped by an estimated 60% to 30m tonnes this year as relatively high prices of the fertilizer - compared with nitrogen and phosphate, the other main nutrients – have deterred farmers sapped by low crop prices and tight credit.

Many potash groups have long viewed a China deal as a catalyst for revival by setting a floor for prices, so dissuading farmers from hanging on for ever-greater discounts.

China, as the world's biggest potash consumer, typically negotiates favourable terms.

'Outmanoeuvred'

Indeed, analysts at Sterne, Agee & Leach said that Wednesday's deal laid bare the inability of the BPC and Canpotex export consortia to keep prices high.

"The cartels [have] one again miscalculated their negotiating position," the US broker said.

"China has outmanoeuvred Canpotex and BPC several years in a row."

The consortia's negotiating position had been "dramatically weakened" by rival producers breaking the tough line on pricing.

In July, Russia's Silvinit, which is member of neither consortium, broke a deadlock on Indian supplies by forging a $460-a-tonne deal which set the benchmark for follow-up contracts.