Potash turning into a buyer’s market – by Rachelle Younglai (Globe and Mail – January 22, 2014)

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The giants of the potash industry are losing their grip on the market. In a sign that the industry is shifting in favour of the buyer, Russian producer OAO Uralkali took a 24-per-cent cut in potash prices when it negotiated a semi-annual contract to supply China with 700,000 tonnes of the crop nutrient.

“This was a very good deal for the Chinese,” said Michael Levshin, analyst with Veritas Investment Research Corp. “It’s the least China has paid for potash in more than half a decade,” he said. In the past, China and India have tried to force the world’s biggest producers to reduce prices by delaying their potash purchases.

But the Asian countries had marginal success until last year when Uralkali killed the Russian-Belarus potash cartel and sent the fertilizer industry into turmoil. Before the breakup, Belarusian Potash Co. (BPC) and its North American equivalent Canpotex Ltd. controlled 70 per cent of the market.

The demise of BPC has forced producers to become more competitive as potash prices plummeted.

Although there was an expectation that Uralkali would fetch between $300 and $325 a tonne, the Russian producer got $305 per tonne, which is 24 per cent lower than the $400 per tonne price last year. Canpotex, a joint venture of Potash Corp. of Saskatchewan Inc., Agrium Inc. and Mosaic Co. that sells potash outside of North America, is expected to announce its fertilizer contract with the Chinese by February.

“The collapse of BPC weakened the cartels and increased China’s bargaining power significantly. In my opinion, that kind of power doesn’t fade easily, and I expect any future price increases to be sluggish at best,” said Mr. Levshin.

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