The potash market is primarily controlled by Canpotex and Belarusian Potash Company (BPC). Canpotex is the marketing arm for North American potash producers, responsible for negotiating the long term contracts with potash consumers such as China and India.
Potash producers continue to struggle in today’s economic climate. Analysts are confident in the long-term health of the sector, but in the short-term pressure will remain.
Potash shares plunged this week; as risk adverse investors abandoned their positions in the agricultural sector.
According to Goldman Sachs, over the next few years global potash demand will grow around 4 percent per annum with emerging market food requirements playing the key driving factor in fertilizer demand.
Dmitri Rybolovlev’s recent sale of 53.2 percent of Uralkai stock to an investors group, led by Mr. Kerminov, has led to rumours of a significant merger in the potash industry. About $11 billion of fertilizer and agricultural-chemicals mergers and acquisitions have been announced or completed since the end of 2008.
Potash has attracted a lot of attention from analysts since the nutrient rose from relative obscurity, worth around $150 per tonne, to a hot commodity that rapidly rose to hit $1000 per tonne. As the price of the crop nutrient skyrocketed, some bold investors profited handsomely.
Potash is taking its time to jump aboard the commodity rebound. The most recent deal for potash was settled between Canpotex and China to sell the crop nutrient for $370 per tonne, just $20 per tonne more than what the crop nutrient was fetching six months ago.
Potash Corporation of Saskatchewan, the globe’s largest potash producer, believes that for the potash industry, the best is yet to come.
China’s recent growth slowdown put a huge dent in the commodities rally- but how will threats of stalling Chinese growth impact the potash market? Fortunately for potash, demand is not a China-only-story.
The underlying structure of the potash market is changing to reflect the new world economy, but one thing will stay the same; people need to eat. The long-term fundamentals of the potash market are supported by increasing populations around the world, and decreasing arable land.
Wednesday, July 28, 2010