Sinochem extends deal to buy North American potash

Fri Dec 13, 2013 11:53am EST
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Dec 13 (Reuters) - China's state-owned conglomerate Sinochem Corp said on Friday it has extended an agreement to buy potash from North America's Canpotex Ltd by one year, setting the stage to negotiate a global floor price for the slumping crop nutrient market.

Sinochem said that Canpotex - owned by Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc - would supply the greater of 1 million tonnes of potash, or a third of China's seaborne potash imports in 2014. Under the agreement, Canpotex will continue to sell potash in China exclusively to Sinochem.

BMO Nesbitt Burns analyst Joel Jackson said that the term is intriguing, since such Sinochem agreements have typically been for three years.

"Really, Canpotex's market in China hasn't really grown in the last few years," Jackson said. "It would seem that they're keeping their options open over the mid term."

Potash Corp Chief Executive Bill Doyle has mused this year about potentially selling to multiple Chinese buyers in the future.

Among the companies controlled by Sinochem is Sinofert Holdings Ltd, China's largest fertilizer supplier and distributor.

The actual price at which Canpotex will supply potash to Sinofert has yet to be negotiated, and Potash Corp's Doyle said this month that he expects a Chinese supply contract by the end of January.

A spokesman for Potash Corp, which accounts for the largest share of Canpotex shipments among the three partners, was not immediately available.

The price Sinofert pays for potash usually establishes a global floor price, on which contracts for Indian buyers and spot sales to other countries, such as Brazil, are based.   Continued...