UPDATE 2-Canpotex signs China potash supply deal at discount

Mon Dec 31, 2012 11:04am EST
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* North American supplies piling up well above average

* Lack of contracts with China and India hurt sales

* Shares rise on large volume deal

By Rod Nickel

WINNIPEG, Manitoba, Dec 31 (Reuters) - Three North American potash producers have struck a six-month agreement to supply the crop nutrient to a subsidiary of China's Sinofert Holdings Ltd at a steep discount of US$70 per tonne from the last contract price.

Shares of the potash companies - Potash Corp of Saskatchewan , Mosaic Co and Agrium Inc - rose in morning trading, even though the discount was larger than some analysts were expecting. The sales will help reduce a massive potash stockpile from mines in the Western Canadian province of Saskatchewan.

Canpotex Ltd, the offshore sales agency for the three companies, said on Monday that it would supply Sinofert Fertilizer Macao Commercial Offshore Ltd with 1 million tonnes of potash for the first half of 2013.

In its brief statement, Canpotex released the size of the discount but not the price itself. However, the previous contract price, established in March, was believed to be $470 per tonne. That would mean the new contract represents a 15 percent discount to supply Sinofert at $400 per tonne.

"It looks to be a tradeoff between price and volume," said Raymond James analyst Steve Hansen. "Canpotex prefers price first. I was surprised by the magnitude of the cut, but it's a large volume commitment."   Continued...