* Uralkali to sell potash at $305/t to China, vs $400/t in
* The new benchmark could revive demand for potash -
* India's contracts may see a premium of $15-$20/t - source
By Polina Devitt and Ron Bousso
MOSCOW/LONDON, Jan 20 Russia's Uralkali
, the world's top potash producer, slashed prices by 24
percent in a new semi-annual supply deal with China, hoping to
set a new floor to global prices that collapsed after it quit a
powerful sales alliance with Belarus.
Global potash prices were thrown into a tailspin after
Uralkali broke away from its BPC joint venture with Belaruskali
in July, sparking competition between producers that had
previously maintained a high discipline on pricing.
Although the new benchmark represents a sharp fall from last
year's contract price of $400 a tonne, market sources said it
was not far removed from the levels prevailing in the spot
market since July.
China, the world's largest potash consumer whose contracts
are seen as a benchmark by the bulk of market participants, has
agreed to buy 700,000 tonnes of potash from Uralkali in the
first half of 2014, the Russian company said on Monday.
"The contracts between Uralkali and the Chinese companies
clearly testify to growing demand and the beginning of market
recovery," Oleg Petrov, Uralkali head of sales, said in a
Uralkali has agreed to sell potash to a consortium headed by
CNAMPGC, a leading Chinese agrochemical corporation, at a price
of $305 per tonne on a cost and freight (CFR) basis in the first
half of 2014, Uralkali said.
CNAMPGC plans to buy 600,000 tonnes of potash, while China's
state-owned conglomerate Sinochem Corp has agreed to
buy 100,000 tonnes, a source familiar with the deal told
Reuters. Uralkali declined to comment on those details.
The new supply deal will offer producers and buyers around
the world a benchmark that could revive global demand for
potash, one of three key nutrients, market participants said.
"I am not sure if this is good news or bad news because this
price is not very different from the current reality. But it
will create a benchmark that could spark momentum," a senior
source at one of the global potash producers said.
"The current physical demand is not bad and the new price
could put prices in proportion," he added.
The new Chinese benchmark is likely to maintain prices in
southeast Asia, where potash is essential to the palm oil
industry, at around $300 a tonne on a CFR basis, several market
"India's contracts end in the coming weeks so they will
probably sign new contracts at a premium of $15 to $20 a tonne
to the Chinese contracts," one source said.
Uralkali's withdrawal from the BPC trading venture, which
controlled 40 percent of the $20 billion global market of the
crop nutrient, left a group called Canpotex - owned by Potash
Corp of Saskatchewan, Mosaic Co and Agrium Inc
- as the world's top export group.
In an informal poll by Reuters before reports of the
settlement, nine equity and industry analysts on average
expected the Chinese contracts to pay Uralkali and North
American producers $305 per tonne, including cost and freight.
Expectations ranged widely, however, from estimates of $290
per tonne to $325. Analysts expected the contracts to cover 1
million tonnes of potash or slightly higher.
Potash Corp spokesman Bill Johnson said he would not
speculate on when Canpotex might settle with Sinofert,
China's largest fertiliser supplier and distributor.
However, traditionally pricing terms of major contracts have
closely followed those of Canpotex's rivals, he added.
The news about Uralkali's contract with China supported
shares of Potash Corp and Agrium in early trading in
Toronto with their shares respectively up 0.2 percent at C$37.56
and up 1.5 percent at C$104.64.
U.S. markets were closed on Monday for the Martin Luther
King Jr. holiday.