Bloomberg News

Uralkali Delay May Damp Canpotex’s China-Price Growth, VTB Says

May 24, 2013

OAO Uralkali’s plan to skip a second-half potash contract with China reduces the scope for rival supplier Canpotex Ltd. to raise prices for the Asian country in the last six months of 2013, a VTB Capital analyst said.

Uralkali, the biggest producer by volume, has no plans to sign a six-month deal with China replacing the one ending in June because of its customer’s high stockpiles and low prices, Chief Executive Officer Vladislav Baumgertner told Interfax. The Berezniki, Russia-based producer may instead send the crop nutrient to China for sales in the spot market, VTB Capital’s Elena Sakhnova said.

Baumgertner’s company has an advantage in that its location makes it the only global potash supplier able to deliver to China by rail. Canpotex Ltd., which exports for Potash Corp. of Saskatchewan, Mosaic Co. (MOS:US) and Agrium Inc (AGU), relies on seaborne cargoes, which are bound by long-term contracts.

“Should the company really skip signing a contract for the second half with China, Uralkali is very likely to boost rail shipments, as the spot price in China is close to the first half-contract price,” VTB’s Sakhnova said by phone in Moscow. “As a result, Canpotex may be forced to roll over the first-half contract price of $400 per ton to the rest the year just to be able to sell its potash to China.”

Baumgertner expects a new deal with China to be signed in November or December covering shipments in 2014, Interfax reported. Uralkali’s press office confirmed his comments.

Very Possible

China and India, the two largest buyers, put off purchases of the fertilizer last year as stockpiles grew. Belarusian Potash Co., which trades the nutrient for Uralkali and Belaruskali, signed an accord with China in January for first-half shipments, agreeing to a $70-a-ton discount on the previous price of $470 after Canpotex reached a similar deal in December.

A scenario that sees Uralkali supplying China with spot cargoes in the second-half of 2013 is “very possible,” Konstantin Yuminov, an analyst at Raiffeisen Bank in Moscow, said by phone.

China imported about 3.4 million tons of potash in the first half and needs to buy about 3 million tons more from overseas producers this year to cover its needs, according to VTB Capital’s estimates.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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