FocusPotash markets suffer from buyers' lack of confidence

10 September 2009 14:30  [Source: ICIS news]

By Carl Roache

LONDON (ICIS news)--An overriding lack of confidence among buyers has seen the global potash trade fail to pick up despite lower prices being offered in several regions, market sources said on Thursday.

In the past three months, potash prices have fallen in key markets as producers slashed offers in a bid to stimulate flagging demand.

In southeast Asia, a decline of $225/tonne (€155/tonne) was recently announced by potash suppliers, taking targeted standard potassium chloride (MOP) prices to $510/tonne CFR (cost and freight).

Nonetheless, southeast Asian buyers said they have continued to shun large-scale potash purchases, as they are unsure that a floor price level has yet been reached.

“The market is quiet and people have a lack of confidence. People want to buy small quantities – just hand to mouth,” said a southeast Asia-based potash producer.

The producer said that some of its customers expected prices to fall. On top of this, in many parts of the region, domestic inventories were ample.

“Right now, I believe the market is in [the buyers’] hands,” the producer said.

This situation was mirrored in several other markets, including the US.

MOP barge prices have fallen from around $530-535/short ton FOB (free on board) Nola (New Orleans) in early July, to around $450-460/short ton FOB Nola in early September.

Sources have continued to report few US sales.

“There is no demand,” said a US trader. “The prices are too high and growers are not going to pay it.”

The source suggested that barge prices would need to be around $350-360/short ton FOB Nola to see sizeable quantities move.

In Europe, the situation was similar. Back in June, the official European granular MOP price was cut by €120/tonne to €435/tonne CIF/CFR (cost, insurance and freight/cost and freight).

Now, however, certain regions in Europe have seen offers fall below €400/tonne CFR, but there was still very little trade taking place.

“In the UK, people are just taking by the lorry load domestically, as and when they need it,” said a UK trader.

“We do not know ourselves whether the price will hold up where it is at the moment, so just take by the lorry load and don’t expose yourself.”

An Italian importer echoed this view.

“All Italian importers think there will be another evolution in price. The producers need to reduce the price to get demand,” the source said. “The product is too expensive.”

The importer added that, at present, granular MOP was being offered at around €380/tonne CFR Italy.

But the importer said it felt prices would have to be nearer to €300/tonne to generate notable buying interest, considering current crop prices.

A European producer conceded that there was some hesitation in the market, and buyers were unwilling to sit on stocks.

“People are buying only what they really need. There is only very little going into pre-storage,” said the producer.

“There might be a certain lack of confidence as [buyers] still speculate that maybe the potash price will go further downwards.”

One of the only markets willing to buy sizeable quantities at present was India, but even there signs of uncertainty were evident.

Last week, India’s Rashtriya Chemicals and Fertilizers (RCF) opted to buy only around 55% of its total 410,000-tonne requirement, as it expected that prices may soon fall, according to local sources.

In Brazil, sources said there was demand, but signs of uncertainty pervade as buyers object to paying the August price of $525/tonne CFR for September shipment.

As a result, producers conceded that delivered volumes would likely be down sharply this month.

($1 = €0.69)

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By: Carl Roache
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