Canpotex Ltd., the export marketing arm of the Saskatchewan potash producers, will meet with the Chinese next week, according to PotashCorp President and CEO William Doyle, and it will not agree to $350/mt CFR, as has been done by Belarusian Potash Co. and Israel Chemicals Ltd. Other buyers have been paying $385-$400/mt CFR.
Doyle, speaking to analysts about PotashCorp earnings, said the $350/mt CFR for the whole year would have been a mistake for Canpotex, and he feels the other two suppliers will feel the same way come the second half. Doyle said that he believes the Chinese will move to quarterly contracts. “I don’t know what kind of contract it is when the customer doesn’t take anything for the whole year…That’s zero performance. That’s not much of a contract.” He called the annual contract “nonsensical,” leaving everybody exhausted – and stupidly so in terms of what it means for a serious issue like global food production.
He said it may be the second half before Canpotex concludes a deal with China. “We did learn to live without China last year,” said Doyle. “That was instructive.” He noted that so far only BPC and ICL have come forward, and that China will also need potash from other international suppliers.
“We do see our issues with China being short term in nature,” said Doyle. “China’s potash consumption will start to recover this year, but it will grow considerably in 2011 and beyond. China will be at least 75 percent dependent on imports of potash going forward, and will need our new capacity to fill their needs in the not-too-distant future.” He cited International Plant Nutrition Institute forecasts that China will go from 10 million mt to some 26 million mt in 15 years.
As for BPC, which has been leading the way on negotiating with China in recent years, Doyle said they’ve proved to be a bit of a panic seller, selling too high in 2008 and too low in these recent negotiations with China.
Doyle said inventory levels of other major buyers – Brazil and India – are low, and he expects India may begin new negotiations as early as March.