Delays in Chinese potash deals underscores industry troubles – by Ian McGugan (Globe and Mail – April 13, 2016)

The most important thing happening in the potash industry right now is what is not happening. Producers from Canada, Russia and Belarus have yet to sign 2016 contracts with Chinese importers. The price China pays for potash is considered a key benchmark for the commodity and deals in past years have often been concluded in January, setting the tone for the year ahead.

Last year, when negotiations dragged into March, it was considered a worrisome portent for potash producers. This year’s even longer delay underscores the growing strains on the industry. Swelling supply of the crop nutrient and slumping demand continue to drag down spot prices, while ample customer inventories provide little reason for Chinese buyers to rush into a contract.

In a report entitled “It just feels like another leg down is coming,” Joel Jackson of BMO Capital Markets predicted this week that Chinese contracts will settle around $240 (U.S.) a tonne, a steep fall from $315 a tonne last year.

A major step down in the Chinese potash price would increase pressure on Potash Corp. of Saskatchewan Inc., which cut its dividend in January for the first time in company history. The company’s “dividend seems at risk again,” Mr. Jackson said in an interview, although he does not expect any action from the company until late this year or next year.

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