Potash may be the subject of a "flurry of buying", driving a "strong rebound"
in sector share prices, after China agreed a second import deal for the
fertilizer, this time with former Soviet Union producers, AltaCorp analysts
Belarusian Potash Company - the marketing consortium for Belarus-based
Belaruskali and Russia's Uralkali - revealed it had agreed to sell up to 1.0m
tonnes of potash to Chinese buyers for $400 a tonne in the first half of the
The deal followed a similar agreement with Canpotex, the
North American potash marketing consortium, two weeks ago - for 1.0m tonnes
also at $400 a tonne for the January-to-June period – a contract which followed
months of wrangling on deal terms.
And, even if the prices of the deals was below market
expectations, the elevate volumes evident in both contracts should boost sentiment,
Canada-based broker AltaCorp said.
'Strong rebound in demand'
"Given the large size of these two contracts, we suspect this
should start a flurry of buying as concerns about securing sufficient supply
for the spring planting season may start to emerge," AltaCorp analyst John Chu
"We believe these two contracts will set the stage for a
strong rebound in potash demand and put a halt to sliding potash prices."
Evidence of a pick-up in demand, and restocking of inventories,
should "see a strong rebound in the sector's share price performances", Mr Chu
BPC's last agreement with China, unveiled in March last
year, was for 500,000 tonnes, with Canpotex winning orders for 700,000 tonnes.
Tuesday's deal was welcomed as "a positive signal for the
global potash market" by Oleg Petrov, the Uralkali director for sales and marketing,
who said it would set a floor price for the nutrient, and heralded "significant
China, as the top potash importer, typically wins the
keenest prices for its deals, with second-ranked India - which sent a
delegation to Belarus last week, but is believed to have failed to strike a
deal - now expected to settle for about $420 a tonne.
Canpotex has issued prices for South East Asian spot markets
of $450 a tonne for standard grade potash, and $460 a tonne for granular grade,
Meanwhile, China is expected soon to settle deals with Israel's
ICL, whose last contract was for 670,000 tonnes, and Jordan-based APC.
'Good buying opportunity'
The BPC contract comes the day after Uralkali unveiled
production figures for last year of 9.12m tonnes of potash, a fall of 15.8%,
and reflecting "lower capacity utilisation at the beginning and at the end of the
Many potash producers took downtime at mines in an effort to
marry better output with demand which proved depressed for much of the year,
reduced in latter months by uncertainty ahead of the sealing of the Chinese
Uralkali's output figure was "immaterially below our 9.43m-tonne
forecast", analysts at VTB Capital said, forecasting that 2013 would be "much
better" for Uralkali, following the deals.
"We continue to see Uralkali as a good buying opportunity at
the $35-36 level" for its depositary receipts, the broker said, restating a "buy"
rating, and a price target of $46.60.
The receipts closed in London at $37.66, a decline of 1.3%
on the day.