A new deal to sell potash to Chinese buyers at a price dramatically lower than last year is being taken as good news by investors in Canadian potash stocks – a sign of just how far expectations for the sector have fallen.
Belaruskali, the major Belarusian producer, signed a contract to deliver potash to Chinese buyers for $219 (U.S.) a tonne, according to several industry observers on Thursday. Although the reported price is nearly one-third less than the $315 a tonne that was agreed upon last year, it is better than analysts had feared.
Still, the size of the decline demonstrates how much the market for the crop nutrient has deteriorated in recent months. It also underscores concerns about whether Potash Corp. of Saskatchewan Inc., one of this country’s most-followed dividend stocks, will be able to maintain its generous payout.
Potash isn’t traded on public commodity exchanges, so deals between large potash producers and Chinese buyers serve as key indicators of buying trends.
The Chinese contracts are usually signed at the beginning of each year and set the tone for other negotiations around the globe.
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