Analyst Lowers Assumption on China Potash Contract After Brazil Pricing (MOS, POT, AGU)

In potash-land it has been all about the pricing of the China contract. Well today an analyst at Canaccord Adams commented on a new Brazil potash pricing and its implications for China.

The firm notes that following rumors and unconfirmed reports on Friday, December 11, of potash being sold into Brazil at US$400/t cfr, it was confirmed to them this morning that sizable tonnage that was provisionally priced has been sold at that level. While the sellers and buyers were previous unknown, the firm said they now know that the sellers include K&S, Fertipar (with ICL material), Vale, as well as BPC, albeit reluctantly.

Regardless of what is transpiring around the various spot markets though, it is the China price that will signal the bottom according to the firm.

The firm said they had been expecting for months a Chinese price of US$355/t fob Vancouver, but in light of the new Brazil landed price, they lowered their assumption for China to US$325/t.

Related to the Chinese contract, Mosaic (NYSE: MOS) and Potash Corp. (NYSE: POT), and others have recently stated that they believe a contract could occur by year end. According to the firm, BPC (currently in discussions with the Chinese) re-confirmed today that talks are very active and that an agreement can be reached in the next two weeks, with shipments possible for January. On this the firm said, "We still believe that it is possible for a conclusion by year end, but it also may be drawn out into January or February. That being said, when this agreement is settled, we believe it will mark the bottom of the cycle in pricing for potash, months after the phosphate and nitrogen markets hit their cyclical bottom."

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