Hopes rose that potash prices had, after plunging by
one-quarter, reached a bottom as China signed a long-awaited import deal with
Uralkali, the Russian fertilizer giant which kicked off the market tumble.
Uralkali revealed it had agreed to sell 700,000 tonnes of
potash at $305 a tonne to a Chinese consortium headed by CNAMPGC, the domestic distributor
of fertilizer, agrichemicals and plastics.
The price compared with $400 a tonne Chinese buyers paid a
year ago, before Uralkali sent prices tumbling by in July breaking up the
Belarusian Potash Company cartel through which it and Belarusian peer
Belaruskali marketed export supplies – and was responsible for more than 40% of
Prices have since dropped to some $300 a tonne on the
Vancouver export market, as buyers delayed purchases in the expectation of
yet-lower values, a trend that spread into other fertilizer markets, such as phosphate
and nitrogen, too.
However, Chinese deals are viewed as typically setting a
market floor, with the country, as the top importer, negotiating the lowest
prices, and second-ranked buyer India generally paying a little more.
Monday's deal "achieves price discovery, and likely
signifies the bottom of a potash price decline", said Cantor Fitzgerald
analysts, forecasting a "slow recovery [in prices] in the months and year ahead".
"It is a positive development for the industry," the broker
said, adding that the potash value achieved was a little above the $300 a tonne
that analysts had predicted, and raising to $35.00, from $31.00, its target
price for shares in PotashCorp, the Canadian potash giant.
Uralkali - which in July, as it announced the BPC break-up,
foresaw prices falling to $300 a tonne or lower - said that the Chinese order "clearly
testifies to growing demand and the beginning of market recovery".
'Better price discipline'
In fact, Chinese buyers' willingness to settle for $305 a
tonne comes amid other signs of a market bottom too, with Uralkali earlier this
month announcing a rise from March to $350-360 a tonne, from $320-330 a tonne,
its sales price for potash in the important Brazilian market.
Uralkali has also allied with Canpotex, the North American
consortium which includes PotashCorp among its members, in pledging to defend
$300 a tonne as a price floor.
This agreement "is a clear signal of better [price] discipline",
Credicorp Capital said.