Potash producers rejoice — China likely to pay more for it this year

China, the largest potash consumer, is likely to pay more for the fertilizer this year as talks with Russian provider Uralkali, which wants to lift annual 2015 contract prices by about 10%, are proving to be particularly difficult this year.

While Uralkali, the world’s biggest potash miner, and other top producers such as North America's Canpotex consortium are aiming for a price hike, Chinese importers continue to press for a discount.

This, Agrimoney reports, has meant that an annual deal usually settled in January or February is yet to be signed in mid-March, which has triggered "widespread speculation over when a deal might be agreed, and at what price."

According Credit Suisse’s latest analysis (subs. required), Chinese importers are likely to end up agreeing on a price increase, though they estimate that the 10% sought by providers is a bit too optimistic.

"We believe record high level of inventories and relatively weaker discipline among potash producers should help China get a more favourable price level,” Credit Suisse research note says.

The experts add they believe Chinese buyers will settle at $320 a tonne, versus $305 a tonne a year before, and about 10-15% lower volumes, with a deal signed next month or even in May.

Potash producers rejoice — China likely to pay more for it this year

Total demand for the nutrient reached a record high of about 62 million tons last year as farmers in Brazil, China and North America increased consumption. But inventories held at Chinese ports are rising as a slowing economy has hurt potash and other commodities consumption.

According to Sinofert Holdings Co., the Hong Kong-traded unit of Sinochem Group, which is leading Chinese buyers in the price talks with overseas suppliers, potash stored at the country’s ports may climb to as much as 1.6 million tons this year, compared with estimated imports of 6 million tons.