Potash Corp. Expects Extended Chinese Talks After Import Surge
January 29, 2016
January 29, 2016 by Bloomberg
China, the world’s largest consumer of potash, has boosted imports as it hunkers down for extended negotiations over 2016 supply contracts, according to Potash Corp. of Saskatchewan Inc. The country imported 1.3 million metric tons in December, bringing the 2015 total to more than 9 million tons for the first time, Stephen Dowdle, Potash Corp.’s sales president, said Thursday on the company’s fourth-quarter earnings conference call. Annual contract talks between China and foreign suppliers are closely watched because they set a price benchmark used globally. The country typically buys millions of tons of potash from Canpotex Ltd., the Canadian joint venture that represents export sales from Potash Corp., Mosaic Co. in the U.S. and Agrium Inc. in Canada.
"It was clear, I think, to the Chinese that with the market being the way it is, that this negotiation would not be a quick negotiation," Dowdle said. A deal won’t be reached until after the Chinese New Year on Feb. 8 at the earliest, Potash Corp. Chief Executive Officer Jochen Tilksaid in an interview. It’s difficult to forecast how far into the planting season China can go before it will need to sign a new contract, he said. Prior talks have sometimes extended into early summer, according to Tilk, who’s serving a two-year term as chairman of Canpotex but doesn’t get personally involved in the negotiations.
Spot potash prices in the U.S. are currently at an eight-year low as weak crop prices erode farmers’ incomes, deterring spending. Saskatoon, Saskatchewan-based Potash Corp., the world’s largest fertilizer producer by market value, is curtailing output, in part to help stem the price slide. Potash Corp. on Thursday announced it will cut quarterly payments to shareholders by 34 percent amid declining fertilizer revenue. It’s fourth-quarter sales and earnings trailed analysts’ estimates, as did its 2016 profit forecast.