Canpotex aims for ‘material’ potash price bump from China

Winnipeg | Reuters — Canadian potash exporter Canpotex is pressing Chinese buyers to pay a “material” price increase for the fertilizer in their annual supply contract, as spot values in other markets rise off multi-year lows, Canpotex’s chief executive said on Monday.

“We’re not interested in some kind of ratcheting down. That is for sure,” CEO Ken Seitz told Reuters in a telephone interview from Saskatoon, where Canpotex, owned by miners PotashCorp, Mosaic Co. and Agrium, is based.

Global potash prices remain weak due to excessive capacity and sagging farm incomes but a modest price rebound since late last year and lower year-over-year Chinese potash inventories suggest buyers there should pay more, Seitz said.

Canpotex sells potash produced by the companies in Saskatchewan to offshore markets.

“If you look at the global market compared to a year ago, it’s much improved,” said Seitz, a former uranium mining executive. The price gains and supply cuts by some producers “allow us to have an expectation for a material price increase in China,” he said.

He declined to clarify what price increase Canpotex is seeking.

In an April 4 note, BMO analyst Joel Jackson factored in $5 per tonne price increases from Chinese and Indian buyers, to $224 and $232 per tonne respectively.

Those prices would fall “well below” Canpotex’s expectations, Seitz said, but he added that ultimately the price is set by rivals who agree to terms first with Chinese purchasers Sinofert Holdings and CNAMPGC.

Contracts with China by global suppliers Canpotex, Belaruskali and Uralkali usually set a global price floor.

Canpotex, whose owners account for about one-third of global potash sales, is not prepared to cede market share to rivals starting new mines, Seitz said.

German’s K+S AG will open a Saskatchewan mine this year, while EuroChem is building two Russian mines. Turkmenistan opened a potash plant last month.

Canpotex companies Potash and Mosaic, meanwhile, have made production cuts even as they expand their biggest mines.

“We believe we can maintain our market share and not have to sacrifice a bunch of price,” Seitz said, noting that some competitors have higher costs.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.