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BEIJING/HONG KONG - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.
Analysis: Possible change in potash pricing worries China
SYDNEY/SHANGHAI (Reuters) - China's visceral response to the $39 billion BHP Billiton bid for Potash Corp -- talk abounds of a possible Chinese white knight -- show it fears a concentration of pricing power in the big miner more than the current Russian-Canadian marketing cartel.
It must seem like deja vu to China after it struggled to stop BHP gaining control of Rio Tinto and almost half its supply of imported iron ore, then got into a bruising battle with the company over the pricing of the steel-making raw material.
Though BHP is likely ditch the cartel for a market-based pricing system if its hostile bid for the Canadian fertilizer producer is successful, some China-based buyers worry the changes will be to their detriment.
"As one of the biggest importers of potash, China does not want to see more concentration in this market. The same could apply to India which relies on imports for 100% of its potash consumption," said Emilien Mazo, an analyst with Louis Dreyfus Commodities.
These two countries may have good reasons to worry about such a deal, he said.
Potash buyers currently face a duopoly dominated by two companies; Canpotex, an export organization owned by Potash and two smaller producers, Agrium Inc and Mosaic Co; and Belarusion Potash Co (BPC) which sells material produced in Russia and Belarus.
Collectively, Canpotex and BPC control 70 percent of global potash exports, in the same way Brazil's Vale, and BHP and Rio control around two thirds of the seaborne iron ore business.
While some buyers welcome idea that shaking up this cozy cartel could lower prices, China's fertilizer users aren't convinced.
"If BHP, which is infamous for monopoly, buys Potash Corp., it will make the pricing system worse for consumers," an official with a Chinese compound fertilizer maker said.
He added his company would also not be happy if China's Sinochem bought Potash, as the state-owned company was involved throughout the entire industry chain and therefore a competitor.
Chinese government officials were not available for comment.
An official at the China Inorganic Salts Industry Association, a non-government group covering the potash fertilizer industry, said the association could not comment on the issue until industry representatives met to agree on their position.
"The potash market is a little like iron ore. The Chinese want bargaining power. In a free market they worry their influence will be diluted versus the situation now where they and one or two others set the price from the buyers' side," a Shanghai-based commodities trader said.
"You also have to remember that from the Chinese perspective, they have had a difficult experience with BHP over the years -- the shift in iron ore pricing and the loss of price participation in copper concentrate deals," he added.
The split with tradition was rancorous, heightened by the conviction of a number of Rio Tinto's iron ore team in China for industrial espionage.
Chinese buyers, under the auspices of the China Iron and Steel Association, finally acquiesced earlier this year, effectively ending benchmark pricing in the key steel making raw material.
But the breakup of the Canadian-Russian potash cartel and market pricing may win favor with other buyers and with regulators.
"We think it would be a good thing if BHP went to market pricing," said Ian Ballantyne, chief executive of Canegrowers Association of Australia, whose members use more potash than any other fertilizer.
"We have seen an escalation in the price of fertilizers, particularly potash, brought about for no other reason than there is a cartel in place," Ballantyne said. "Fertilizer demand and fertilizer supply has been in our view manipulated by a range of parties for some time."
An Australian analyst, who was not authorized to speak on the record, said: "No one likes a cartel and even if someone does complain to the regulator, the benefit of a breakdown of the duopoly should trump competition fears."
Analysts familiar with BHP's strategy behind its hostile bid for Potash told Reuters BHP had already mapped out plans to push a spot market index for potash, wielding Potash's direct 18 percent control of the global market in the growth markets of China and India, traditionally buyers on annual terms.
"Wherever possible we do transform markets into pricing mechanisms where we get today's cost every day," Chief Executive Marius Kloppers said last week.
(Writing by Nick Trevethan; Editing by Michael Urquhart)
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