Sinofert FY potash sales seen hit by Belarus

27 July 2006 11:36  [Source: ICIS news]

SINGAPORE (ICIS news)--Sinochem Hong Kong Holdings’ (Sinofert’s) potash sales volume is expected to fall 10% to 5.13m tonnes this year due to prolonged negotiations with supplier Belarus Potash Company (BPC), Deutsche Bank said in an analysis on Thursday.

 

ICIS news reported earlier that BPC and the Chinese fertiliser major agreed on a $25/tonne increase for shipments of muriate of potash (MOP). BPC initially asked for a $40/tonne increase, which the Chinese rejected, and the two sides have spent seven months haggling over the price.

 

Despite the 12% hike, Sinofert is expected to be able to fully pass on the higher costs as the government allows for a 3% import margin and a 7% distribution margin, the bank said.

 

Sinofert will also benefit from the government’s agricultural push as the bank expects its potash sales to rise 21% in 2007.

 

The lower-than-expected hike would also have a positive impact on the market as a steeper increase would affect margins of compound fertilisers and possibly lower demand, it said.

 

Prices were expected to be stable in the long term as the market was dominated by three countries, Russia, Belarus and Canada, it added.

 

“In response to China’s resistance to price increases, both BPC and PotashCorp had cut back on production in the first half. The oligopolistic supply structure should ensure stable long-term potash prices,” it said.

By: Florence Tan
+65 6780 4359

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