In a sign the potash market may be turning around after months of steady decline, major distributor Belarusian Potash Co. is raising some of its prices by 6 per cent.
"Global demand for potash is hardening, and we expect prices will continue to rise," the company's head of sales Oleg Petrov said in a statement yesterday. "We are seeing a strong return of confidence to the market and the outlook remains very positive."
Belarusian Potash Co. (BPC), which accounts for about 30 per cent of global potash sales, has increased the price for its standard grade of potash to $410 (U.S.) per tonne from $385 for major customers in Brazil and Asia. The Minsk-based company, which is the exclusive export agent for Russian potash miner Uralkali, also expects overall sales to jump 50 per cent this year.
The price hike is the latest signal that farmers have started buying potash and other fertilizers after holding off for much of 2009. Demand has also picked up since BPC signed a deal with China last fall at $350 per tonne.
Many customers had been waiting for the Chinese deal to be announced knowing that it would set a price floor.
Last month, officials from Plymouth, Minn.-based producer Mosaic Co. said the company had signed some potash contracts at $430 per tonne and added that they also expected prices to climb this year.
Mosaic and Potash Corp. of Saskatchewan Inc. are so confident prices are moving up that they have refused to sign a deal with China on the same terms as BPC.
Mosaic, Potash and Calgary-based Agrium Inc. are the members of an international marketing agency called Canpotex, which is still negotiating with China.
Last week, Potash chief executive officer Bill Doyle called the BPC's deal "too low" and said the Russians are "inexperienced marketers" who have "proved to be a bit of a panic seller."
Potash prices and sales fell sharply last year after hitting a high of around $1,000 a tonne on the spot market in 2008. Last week, Potash Corp. said its sales volumes hit a 20-year low in 2009.
Throughout 2009, farmers cut back on fertilizer purchases, hoping prices would fall. Now with prices rising for many fertilizer-intensive crops - such as sugar, palm oil and corn - farmers have started buying potash to boost production.
"Current crop prices in the United States and abroad support fertilizer application," Bank of Nova Scotia economist and commodity market specialist Patricia Mohr said in a recent report. "We view 2010 as a transition year for potash, with dealers restocking modestly given the reduced 'risk' of holding inventories, on the way to stronger market conditions in 2011."
Mosaic and Potash Corp. estimate that global potash production will reach 50 million tonnes this year. That is up from less than 30 million tonnes last year.
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POTASH CORP. (POT)
Close: $114.77 (Cdn.), up $4.29
AGRIUM (AGU)
Close: $65.17, up $1.59
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Potash market snapshot
12
Number of countries with significant potash production
50
Percentage of global potash reserves that are located in Saskatchewan
2/3
Amount of global production accounted for by Canada, Russia and Belarus
50 million
Amount, in tonnes, of expected global potash production in 2010, up from 30 million last year
95
Percentage of Canadian potash that is exported
4,000
Number of people employed in Canadian potash industry
Staff
