China signs overdue deal with Belarusian Potash Company

China signs overdue deal with Belarusian Potash Company

China, the world’s largest buyer of potash has signed an overdue deal with the Belarusian Potash Company (BPC) at US$219 per tonne, 30% less than what they paid in 2015.

The annual agreement with China has traditionally been a benchmark for producers as the contract sets a global floor for prices. The lack of such a deal during the first half of 2016 critically hit demand and sales volumes.

Russian potash miner Uralkali said in June that the absence of a supply contract with China, was a component behind the “cautiousness among customers who took a wait-and-see approach, delaying purchases.”

Prior to that, Canada’s PotashCorp (TSX:POT) blamed the “deferral of new contracts in China” for cautious buying in other regions.

India, which normally signs its yearly potash deal after China was unable to wait this long and last month signed a $227 a tonne agreement with the BPC. Israel Chemicals also signed a deal this week to sell potash to India for the same price, the lowest price in a decade and around a third less than last year’s level.

Analysts anticipate other top producers including Uralkali and Canpotex will soon sign their own agreements with China.

Potash demand is set to improve for the last six months of 2016, despite a slower first half of the year.

Adverse weather conditions affecting planting in Asia will make overall consumption fall again this year, compared to 2015. Analysts predict that potash prices will stay in the $200-$300 range for the next several years as a result.