Potash, fertilizer prices soaring

Increased imports from China and a curb on exports has global fertilizer prices booming

By Dave Hannon -- Purchasing, 4/17/2008 9:40:00 AM

Dramatically increased demand for already limited potash supplies in China and India have resulted in sky-high export prices for the fertilizer product.

China’s largest fertilizer distributor, Sinofert, agreed this week to a 220% price increase for potash being exported by Canadian marketing venture Canpotex, which is owned by three companies in the U.S. and Canada: Potash Corp. of Saskatchewan, The Mosaic Co. and Agrium.

The Mosaic Co. said in a statement the $400/metric ton increase puts the new contract price at $576/metric ton.

Potash Corp. CEO Bill Doyle said, “With the intense pressure on global food production and continued growth in potash demand, this is the reality for our industry for the foreseeable future.” Potash Corp., which supplies more than half of Canpotex’s potash, also said that because of the deal's timing and "unprecedented demand" in other markets, Canpotex can commit only 1 million tons to Sinofert through the rest of this year.

 “Just given the scarcity [of potash] right now, it doesn't matter how much clout you have in terms of volumes purchased. There is just simply not enough to go around," said Morningstar analyst Ben Johnson in a Reuters report.

In March, Canpotex signed a deal in India to supply 1.3 million metric tons of potash to Indian customers at $625/metric ton, a price increase of $355/metric ton from the prior year contract. According to news reports, Russian potash exporters negotiated similar potash price increases in a deal inked between marketer Belarusian Potash Corp. and importer CNAPGC Shanghai.

With demand for fertilizer products exploding in China, the Chinese government announced this week it will increase export duties on all fertilizers and some related raw materials by 100% to ensure domestic supply for its farmers. But that move could strangle supply on some materials that other markets, including the U.S., may need.

JP Morgan Chase analysts said in a recent brief that prices for Tampa diammonium phosphate rose $100/metric ton on the suggestion that China would scale back exports. In a Bloomberg report, Xu Hongzhi, a Beijing-based fertilizer analyst at Beijing Orient Agribusiness Consultant, said that if China effectively restricts exporting fertilizers, it could be “fatal” to global supplies of some products, such as ammonium phosphate, as it supplies between 20-30% of global trade volume of the plant feed.

According to a report in Investor’s Business Daily, China is the world's largest potash importer, consuming 21% of the global potash market. The U.S. buys 18%, and Brazil takes 15%. Last week, Purchasing.com reported that, according to Patricia Mohr at Scotiabank Group in Toronto, potash demand in Brazil for growing soybeans and sugar cane has been unusually strong in the first quarter.

See also: Sulfuric acid prices explode