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China agrees to pay triple for potash fertilizer

(Agencies)
Updated: 2008-04-17 09:57

Chinese fertilizer importers agreed on Wednesday to pay more than triple what they did a year ago to get hold of tight supplies of potash, sending the shares of global fertilizer makers to record levels.

China, the world's biggest import market for the nutrient, which is used to boost crop yields, will pay $650 to $670 a ton for product delivered to its ports, analysts estimated.

"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," Bill Doyle, chief executive of Canada's Potash Corp, the world's top producer, said in a statement.

Potash producers have found it hard to keep up with demand as farmers around the world, flush with returns from record grain prices, rush to produce more grain to feed people, livestock and the burgeoning biofuel sector.

The 2008 contract prices were higher than expected, and volumes were far below last year's levels, said Mikhail Stiskin, an analyst at Moscow-based brokerage Troika Dialog.

"China will be kept on a short leash by producers that are keen not to allow for a possible restocking," Stiskin said.

Major producers from Russia and Canada said they each sold China only 1 million tons of potash. The market typically imports at least 8.5 million tons, David Silver, an analyst with JP Morgan, said in a research note.

"Just given the scarcity 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.

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