Russian potash producer Uralkali said on Tuesday that its former distributor, the Belarusian Potash Company (BPC), is selling the fertilizer at such low price that it may make it impossible for the company to conclude contracts
Uralkali also said the $220 per tonne set by BPC and China last week, did not reflect the current grim conditions nor the outlook for the fertilizers market.
“Potash producers incur high
investment costs in order to maintain existing production capacities and
develop new deposits,” the potash producer said. “If contracts are agreed at
the price levels agreed by BPC, in the long term this will drive producers to
cut their capital investment and, ultimately, will lead to a shortage of
potassium chloride in the market,” it said.
In October, the company signed a
supply agreement with India for this year that priced the nutrient at $280 per
tonne. Uralkali didn’t have any contracts with India or China during 2019 ,
because of low prices and oversupply of stocks. It was the first
time that happened in at least decade.
The price that major users India
and China agree with a producer is then typically used in contracts with other
suppliers.
It wasn’t the case in last week’s
deal signed between BPC, the exclusive exporter of potash produced by Belaruskali
and a consortium of Chinese companies. Those buyers included state-owned
Sinochem’s fertilizer arm, Sinofert, China National Agricultural Means of
Production Group and state-owned CNOOC.
Potash stockpiles are at a record
high and exporters will likely want to clear them as soon as possible, CRU
senior potash analyst, Humphrey Knight, told MINING.COM.
It means it will be months before
China requires significant fresh supply and, as a result, spot prices will
respond accordingly in late 2020, the expert noted.
Beijing has imported 3.2 million tonnes of potassium chloride (MOP) from Russia since October 2018 and 2.4 million tonnes from Belarus in the same period, according to data from the Global Trade Tracker (GTT).
Total global sales to China in the
period hit 13.2 million tonnes, with Canada leading the list with 5.2 million tonnes.
Russia’s export to China in the
first quarter this year were at about 690,000 tonnes, compared to about
290,000 tonnes of fertilizer the Asian giant bought from Belarus, and 1million
tonnes from Canada.