Canpotex’s surprise China potash supply contract splits MOP market

LONDON (ICIS)–Canadian muriate of potash (MOP) fertilizer marketing firm Canpotex has signed a just-over six-month standard-grade MOP supply contract with China’s potash buying committee at $307/tonne CFR (cost and freight) China.

In a press release issued on Tuesday, president and CEO Gordon McKenzie says Canpotex – which markets MOP for Canadian powerhouse producers Nutrien and Mosaic – “[looks] forward to continuing our support of food security in China by providing our customers there with a reliable and stable supply of potash.”

The new agreement runs to 31 December 2023, and is $115/tonne below a key bellwether contract agreed with Indian potash importers in early April at $422/tonne CFR India.

The India and China long-term agreements are typically seen as trend-setters for potash price movements across the world, due to their sheer volume requirements.

UNEXPECTED NEWS
The news of a $307/tonne CFR China settlement has come as a surprise to many MOP players, who assumed China may not sign a long-term contract agreement at all due to steady supply via rail from Russia and Belarus, and otherwise bearish pressure on pricing seen around the world since early in the year.

Belarus, whose MOP industry has been placed under strict sanctions by the West, has considerably increased its exports into China, upping its shipped tonnage from 1.37m tonnes in 2020 to a total 1.90m tonnes in 2022.

Top six MOP suppliers to China, January-April 2021-2023 (tonnes)

Nation	2021	2022	2023
Canada	1,059,282	578,462	578,712
Russia	905,013	798,466	869,681
Belarus	890,399	832,236	1,115,571
Israel	274,512	330,252	171,730
Jordan	223,090	177,315	344,052
Laos	163,021	215,437	445,237
World	3,541,250	2,934,631	3,529,455
*Source: Chinese customs

“[Canpotex] just beat BPC at dumping the market,” said one major European MOP producer’s Asian sales chief, referring to Belarus Potash Company’s (BPC’s) perceived cavalier approach to annual contract settlements – typified by a $247/tonne CFR India settlement in January 2021, which was described by competitors at the time as “disconnected”.

Canpotex – which handles the world’s largest MOP export volumes – is not typically known in the market for bold approaches to contract pricing – leading to market talk as to the company’s thinking.

“[The lower settlement] is to kill future producers – at this level no new mines are viable,” the Asian sales chief said, adding: “[It’s a] risky strategy.”

The source highlights EuroChem’s trio of Russian potash projects as new mines, with EuroChem Usolskiy – in the Perm region – the most productive currently.

The company’s VolgaKaliy unit is also operational, while its SaratovKaliy site is still in the early stages.

Nezhinsky – a new MOP project in Belarus expected online in 2025 – may also face pressure.

Russian billionaire Mikhail Gutseriev’s company Slavkaliy is behind the Nezhinsky project, with assistance from 10 Belarusian firms.

A POSITIVE MOVE?
Conversely, a source at a second European producer saw the agreement of $307/tonne CFR China as positive news for the current MOP market, which has seen CFR landing prices in key markets including southeast Asia and Brazil slipping lower since late 2022.

“It’s good news for the market,” the source adds. “At least [buyers] will start moving.”

By setting a “floor” at $307/tonne CFR China, Canpotex may help halt the slow decline in MOP offer prices, and “now everyone knows a three-to-four month silence on the MOP market is very dangerous”, the source adds.

The $307/tonne CFR China agreement may be the rock on which the global MOP market will rebuild, and “will see $300/tonne CFR moving all around the world”.

“There was no reason to delay [an agreement in China] further. [Canpotex] just set the floor for the market,” concurs a third source at a European MOP producer.

“I think it’s for the better… set the floor and bring back demand hopefully,” concluded a distributor in southeast Asia.

Focus article by Andy Hemphill