Potash, a mineral vital to farmers worldwide, has been a very unpredictable industry in recent past. Priced at $1000 a ton in 2008 during its peak years, Potash is now being qouted at $350 in the settlement of a Chinese contract. It is this contract, however, which might just save the industry from recent woes.
On Tuesday, Fertilizer producer Moasic, a major potash company, said its fiscal second-quarter profit fell 89 percent. The company reported a net profit of $107.8 Million (24 cents per share) for the end of November 2009, compared to $959.8 Million ($2.15 per share) in November 2008. Mosaic blamed falling potash prices for their problems, and said that sales volumes were 40% less than they were the year before.
The industries recent troubles have left some companies desperate. BHP Billiton just announced that it will go ahead with plans to develop what will be the world’s biggest mine of Potash. However, some companies fail to see the light in this possible Chinese contract. Instead, they see China’s low price offer as an insult and some even plan to just move on to other countries.
Negotiating from Vancouver based marketing consortium Canpotex, Canadian fertilizer giants Potash Corp. Agrium joined U.S. Mosaic to form the holdouts seeking a higher price. Mosaic CEO, Jim Prokopanko took things to a next level when he told the Chinese that that the fertilizer demand revival is expected and the company is very happy to find better paying customers if the Chinese buyers wont agree to their terms.
However, it may be Mosaic who could feel the repercussions of this, as it is simply the Chinese who could seek out different producers, such as companies in Russia who would have more amicable negotiations.
Potash prices have fell from $1000 a ton in 2008 during global food shortages, a time when Potash traders were the darlings of the day. It was prices like those which attracted many companies to the industry. Companies like BHP, an Anglo-Australian company who entered the Potash market during its golden days. Times are more rough now and Potash companies must now look in the long run to what is in the best interest of their company, and the failing industry.
Filed Under: Commodities
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