October 5, 2016 / 8:57 PM / in a year

Lower potash inventories seen prodding Canpotex-China deal sooner

WINNIPEG, Manitoba (Reuters) - Dwindling inventories of the crop nutrient potash held by Chinese buyers could lead to an earlier 2017 sales contract with Canpotex Ltd, the offshore sales arm for Canadian mines operated by Potash Corp of Saskatchewan (POT.TO), Mosaic Co (MOS.N) and Agrium Inc (AGU.TO), the chief executive of Canpotex said.

A Canpotex rail car waits to be loaded with potash at the Rocanville Potash Corp mine in Saskatchewan September 30, 2010. REUTERS/David Stobbe

“Will (buyers) be compelled to get to the negotiating table earlier in the year? Perhaps that will be the case, which will mean our deliveries will be more evenly distributed over the year,” Canpotex CEO Ken Seitz said in a phone interview from Saskatoon, Saskatchewan on Wednesday.

“On the supply side, (there is) perhaps a better situation than the start of 2016.”

Seitz said he returned two weeks ago from China where he had preliminary talks about 2017 sales. He declined to predict prices, but said it is hard to imagine them falling below this year’s price, reported to be $219 per tonne.

Potash prices fell this year to decade lows amid oversupply. A delay in settling potash supply contracts with China added to price weakness, as it typically sets a global price floor.

A supply contract between Canpotex, one of the world’s biggest potash sellers, and buyers from China, one of the world’s biggest fertilizer consumers, expires at the end of 2016.

One of the buyers, Sinofert Holdings Ltd (0297.HK), could not be immediately reached during a Chinese holiday week. Other suppliers, Belaruskali and Uralkali (URKA.MM), typically settle on Chinese contracts before Canpotex.

Canpotex expects 2017 shipments of 61 million to 63 million tonnes by all sellers combined, up from 60 million in 2016, Seitz said.

Two of Canpotex’s three members, Potash and Agrium, have agreed to merge, but Seitz said he does not expect the role of Canpotex to change. Canpotex will still focus on transportation logistics and sales, Seitz said.

The merger has raised questions about how much influence Mosaic will have in the organization. Currently, the three companies each control one-third of the Canpotex board.

Seitz said he expects the merged company and Mosaic to have equal voices, echoing recent comments by Potash and Agrium CEOs.

Editing by Alan Crosby

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