February 3, 2010 / 2:59 PM / in 8 years

Potash Corp shares gain as BPC raises potash prices

* BPC raises potash spot pricing by more than 6 pct

* Shares of Potash Corp, Mosaic and others rise

By Euan Rocha

TORONTO, Feb 3 (Reuters) - Shares of Potash Corp of Saskatchewan POT.TO and those of its North American peers rose more than 3 percent on Wednesday morning after Russian potash exporter BPC raised spot prices of the crop nutrient by more than 6 percent. [ID:nLDE6120XC]

Potash Corp is the world’s largest fertilizer company and the world’s largest producer of potash, accounting for more than 20 percent of global potash production capacity. The company typically plays a key role in acting as a swing producer, reining in production in times of oversupply, and raising output when demand is high.

However its recent efforts to maintain pricing were undermined when BPC slashed its contract price to Chinese potash importers in December to $350 a tonne, well below the prevailing contract price of $460 a tonne with Indian buyers.

BPC, or Belarussian Potash Co, is the exclusive export agent for Russian potash miner Uralkali URKA.MM and its peer Belaruskali. Potash Corp, along with Mosaic Co MOS.N and Agrium Inc AGU.TO export their output through a joint venture called Canpotex.

The two export consortiums, which account for more than 60 percent of global potash exports, usually mirror each other on pricing.

However, over the last year pricing and production discipline within the oligopoly crumbled as farmers, stung by the credit crunch and steep prices, deferred potash application. The price of the potash ballooned to more than $1,000 a tonne on the spot market in 2008, but it has steadily declined to $380 to $400 since then.

BPC said it has increased its spot price for standard material to $410 per tonne from $385, while the new price for granular potash is $425 per tonne, up from $400, reflecting growing world demand for the soil nutrient.

This move will give Canpotex additional leverage in its negotiations with Chinese potash importers. Canpotex typically sells potash to China at the same contract price level set by BPC, but this year it has balked at the $350 price level and negotiations between the two sides are ongoing.

Potash Corp Chief Executive Bill Doyle was critical of BPC’s move to ink a deal with Chinese buyers at the $350, arguing that BPC would come to regret this contract given signs of a rebound in potash demand.

Doyle said on Jan. 28 that his company sold more potash in North America in the first three weeks of 2010 than in the first eight months of 2009. [ID:nN28243688]

Shares of Potash Corp were up 3 percent at C$113.80 in early trade on the Toronto Stock Exchange, while those of its peers Mosaic, Agrium and Intrepid Potash IPI.N also rose on Wednesday.

$1=$1.06 Canadian Reporting by Euan Rocha; editing by Peter Galloway

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