Fertilizer and farm retailer Agrium said Feb. 19 that Chinese potash price negotiations could stretch into July, two months longer than rival Canadian fertilizer producer PotashCorp of Saskatchewan is targeting.
“I have dealt with the Chinese on other commodities. They are good at brinkmanship; they will hold right to the end. They could hold until June or July if they wish,” Mike Wilson, Agrium’s CEO, said during an industry investment forum in Whistler, B. C. “I think it would be a mistake, but they can do it.”
Wilson said key to the Chinese talks will be how Russia fares with its price talks. If Russia reaches an agreement, China will quickly follow, using the price as a guideline for its negotiations.
Wayne Brownlee, the company’s chief financial officer, told the conference that he expects the Chinese talks to wrap up by April or May.
“The negotiations will evolve over time. As everybody knows, they can be concluded very quickly or they can drag for a long period of time,” he said.
Late last year, Korea and Japan settled on increases of $200 a tonne, boosting the price to $900. Meanwhile, China’s current accepted price is about $600, so if it accepts the same increase that would boost its fertilizer price to $800 a tonne, Brownlee speculated.
PotashCorp expects the Chinese to import some seven million to nine million tonnes of potash in 2009, up from 5.1 million tonnes last year.
Fertilizer prices soared in early 2008 on surging demand, tight inventories and record grain prices. But the global credit crunch and deepening economic downturn have weighed on the agricultural sector, and grain and nutrient prices have fallen as farmers have deferred fertilizer applications.
However, fertilizer companies expect a quick turnaround in demand as farmers begin applying crop nutrients to their fields later this spring.