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A manager examines a pile processed potash at the Mosaic Potash Colonsay mine storage facility in Colonsay, Sask.

For years a handful of the world's biggest potash producers, including Canadian companies Potash Corp. of Saskatchewan Inc. and Agrium Inc. , enjoyed such a dominant position they could almost dictate the price of their product.

But that market dominance is fading, analysts say, and the major players are facing several challenges that are expected to keep potash prices low for the next couple of years.

"We remain very concerned regarding the long-term status of the potash market and its ability to fully retain the power of its oligopolistic structure," Charles Neivert, an analyst at investment bank Dahlman Rose & Co. in New York said in a report yesterday. Mr. Neivert and other analysts say several factors are weighing on potash prices. They include tougher negotiating by the Chinese, an abundance of supply and the potential entry of new producers, including Australia's BHP Billiton Ltd. and Brazil's Vale SA.

In his report, Mr. Neivert said "we see potash as a weaker product than it once was on a secular basis over the next two to three years."

Potash prices soared in 2007 and 2008, reaching close to $1,000 (U.S.) a tonne after averaging $145 a tonne during the previous seven years. Big producers such as Potash and Agrium were able to keep the price high in part because of an export association they created with another big producer, Plymouth, Minn.-based Mosaic Co. .

The association, called Canpotex, operates out of Vancouver and negotiates the price of potash outside North America (the companies compete against each other within the continent). Canpotex is a legal cartel and accounts for about 30 per cent of the world's potash production.

The association was set up largely to offset the negotiating power of China, which is by far the world's largest potash buyer. In recent years, Canpotex has also joined forces with an association of European potash producers, called Belarusian Potash Co. or BPC, to negotiate with the Chinese. Typically Canpotex or BPC leads the talks and the other follows the set price. This year BPC led negotiations.

China has grumbled about the arrangement before and this year the Chinese held off signing a new agreement for months.

Mr. Neivert said the power of Canpotex and BPC is coming under pressure. "What we've seen in the last few weeks, and going backwards through this year, is a change in the way certain buyers have been able to work against this group of sellers," he said in an interview.

For example, earlier this year India signed a potash deal at about $460 a tonne, far less than the $625 it paid a year earlier. Other countries such as Brazil, Sri Lanka and Vietnam have also recently reached deals below the global price.

Yesterday there were reports China has finally signed a potash deal with BPC at $350 a tonne, almost 50 per cent less than the 2008 agreement. That price will likely set the tone for potash prices in 2010.

Mr. Neivert said Canpotex and BPC are almost in the same position as OPEC was in the 1980s. That organization nearly collapsed when oil prices soared so high that new players, including Canada and Russia, boosted production and undercut the cartel.

The same thing could happen in potash if BHP and Vale were to develop their significant potash resources, Mr. Neivert said. Vale's project alone could produce as much as three million tonnes annually, he said (global production is expected to be around 50 million tonnes next year).

Other players, including Germany's K+S AG, have also aggressively moved into markets. Yesterday, that company also said it doesn't see a rebound in potash prices any time soon.

"From today's perspective, we cannot expect a normalization of the fertilizer business in the near future," the K+S board of managers wrote in the December issue of its employee magazine.