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| WORLD FERTILIZER |
NOVEMBER 2016
tonnes in alternative markets. As such, spot buying
regions, such as Brazil, Malaysia and Indonesia, drove
down the price of both granular and standard grade
potash.
The US, Brazil and Europe were targeted to take up
the slack when Chinese and Indian contract deliveries
halted as delays to new contracts stalled.
While European prices held up remarkably well, the US
became the most cheaply priced market in the world as
North American producers struggled to place tonnes and
inventories as warehouses grew. US import demand during
the first half of the year fell well below 2015 levels, with
the first uptick in year-on-year imports coming only in July.
Brazilian demand was a high-point in the market, with
a rise in imports of granular product, despite the country
struggling against a depreciating currency, credit issues
and wider political instability.
Finally in June, following months of uncertainty over
Chinese contract settlements, Indian buyers wary of the
upcoming kharif season moved first, securing contract
deliveries from 1 July 2016 until March 2017 at US$227/t
CFR (cost & freight). Lead negotiator Indian Potash Ltd
(IPL) struck the deal with the Belarusian Potash Co. (BPC).
IPL and BPC signed a five year supply deal from
2016 – 2020, announced in January 2016, but with no
volumes or prices.
Despite calls for greater producer discipline, the
Indian negotiations showed divergence, with Canpotex,
the North American export arm of PotashCorp (PCS),
Agrium and Mosaic, unwilling to officially announce its
commitments to India. The legal cartel was understood to
be reluctant to accept the price of US$227/t CFR and
would only agree deliveries for 3 – 6 months, with it
expected to attempt to renegotiate prices at the end of
that period.
Total tonnes agreed to Indian buyers so far according
to ICIS data is around 3.3 million t. However, as above,
Canpotex is understood to have only committed tonnes
until December, while Uralkali will deliver tonnes until
July 2017.
During the last contract period with India, (officially
April 2015 – March 2016, but including June with carryover
tonnes), BPC delivered 1.3 million t, Uralkali 1 million t and
Canpotex 0.9 million t, with the total imports at
4.4 million t, according to ICIS data.
Following the settlement of Indian contracts, BPC was
again first to reach an agreement with the Chinese buying
consortium of Sinochem Fertilizer Macao Commercial
Offshore Ltd (Sinofert), China National Agriculture Means
of Production Group (CNAMPGC) and China National
Offshore Oil Corp. (CNOOC) at US$219/t CFR China. BPC
and CNAAMPGC have a memorandum of cooperation
from 2016 – 2020.
At the time of settlement in mid-July, BPC Director
General Elena Kudryavets said: “The deal with China
logically arises from the contract with India being
previously entered into, and we are confident that the
Chinese deal will contribute to stabilising the global
potash market and secure its upward advance.”
“This price level reflects the actual market situation
and the trends prevailing in the global potash market,”
Kudryavets added.
BPC is expected to ship around 1.3 million t to China
by the end of 2016, under the new contract deal.
As with Indian contracts, Canpotex has not disclosed
its commitments to China for the current period. Its 2015
shipments were expected to be at least 1.8 million t.
Canpotex has a MoU with Sinofert from January 2015 to
December 2017, with a minimum of 1.9 million t of
standard red MOP to be delivered across the period, and
2.4 million t optional of other grades with prices to be
negotiated every six months.
Israel Chemical Co. (ICL) will supply around 700 000 t
to China for the remainder of 2016. ICL announced in
January it had agreed to supply 1.1 million t in 2016, as part
of a deal spanning from 2016 – 2018. Volumes in 2017 are
1.14 million and 1.16 million in 2018.
Uralkali concluded Chinese supply contracts for
600 000 t for delivery from August 2016 – January 2017.
Arab Potash Co. (APC) and Sinofert had agreed for
600 000 tpy from 2014 – 2016, with Sinofert the exclusive
channel for all APC sales. No new deal has been
announced yet.
Supply
Following the settlement of contracts and the resumption
of deliveries of major tonnes, the market received a boost
in news of delays to the start-up of the K+S Legacy mine
in Canada from the expected start-up in late 2016 to the
second quarter of 2017.
In July, a process vessel became detached from its
mounting during a routine test and fell to the floor
causing considerable damage. While commissioning on
Legacy went ahead in August, production will be below
the expected volume of up to 1 million t in the course of
the delayed start-up period next year. Despite this, K+S is
still assuming it will be able to reach its target production
capacity of 2 million t at the end of 2017.
The delays to K+S certainly lifted sentiment, following
months of curtailments and idling of production at PCS
and Mosaic’s Canadian mines.
PCS, the largest of the North American producers,
announced in January the indefinite suspension of its
operations at Picadilly in New Brunswick, Canada.
The Picadilly mine is the newest PCS mine, costing
CAN$2.2 billion, but it had the most expensive per tonne
Figure 1.
Potash prices have begun to stabilise.
