Belarusian potash marketer BPC, the world’s largest exporter of fertilizers, has inked a deal with a consortium of Chinese companies who agreed to buy the commodity for $220 a tonne, a $70 per tonne decline on the previous contract.
Supply contracts to China and India traditionally are benchmarks for the fertilizers market. Last year, however, Beijing did not any deals due to the oversupply of stocks.
“Although this underlines the magnitude of spot price erosion since 2018, it nevertheless sets a new floor for the market, CRU senior potash analyst, Humphrey Knight, told MINING.COM.
“Suppliers will now hope this finally brings stability to weak spot prices and ultimately tightens global product availability, Knight said.
BPC noted the difficult macroeconomic conditions in which negotiations took place, citing sharp devaluations in local currencies, historic collapses in oil prices and other commodities, and the ongoing affects of covid-19.
Potash stockpiles are at a record high and exporters will likely want to clear them as soon as possible, the expert said. This means it will be months before China requires significant fresh supply and, as a result, spot prices will respond in late 2020.
BPC, the trading division of state-owned miner Belaruskali, controls more than 20% of the global market.
The consortium of Chinese buyers includes state-owned Sinochem’s fertilizer arm, Sinofert, China National Agricultural Means of Production Group and state-owned CNOOC.
How does this affect potash in Canada?
The price that major users India and China agree with a producer is then typically used in contracts with other suppliers. It may mean Canadian potash producers will have to sell its output cheaper than anticipated.