SASKATOON — Saskatchewan potash exporter Canpotex Ltd. has agreed to supply Chinese agricultural company Sinofert Holdings Ltd. with 630,000 tonnes of the fertilizer at higher prices during the second half of the year.
The offshore marketing company owned by the province's three potash producers will receive a $70 per tonne increase over what the Chinese customer paid in the first six months of the year.
The contract is the second concluded under a three-year memorandum of understanding signed with Sinofert last October.
The contract volumes are at the low end of the agreement's range, reflecting Canpotex's tight potash supply position, Canpotex said in a news release Wednesday.
Canpotex said it is fully committed for sales in the third quarter of 2011, and has significant volumes confirmed for the fourth quarter.
John Redstone of Desjardins Securities said the estimated price of around US$470 per tonne including freight compares with what is believed to have been the price settled between Belaruskali and China, and the current spot price in the Brazilian market of roughly US$550.
“We expect the potash market to be finely balanced between supply and demand through 2012. Consequently, we expect prices to move up to a level that sustains the industry — a long-term average forecast price of US$600 per tonne,” he wrote in a report.
Operating since 1972, Canpotex is owned by Agrium Inc. (TSX:AGU), Mosaic Canada Crop Nutrition, a subsidiary of The Mosaic Company (NYSE: MOS), and Potash Corporation of Saskatchewan (TSX:POT).
The contract with China's largest integrated agricultural company comes more than two months after Canpotex announced plans to build a $55 million maintenance yard to clean and service thousands of rail cars used to carry potash to the West Coast for export.
Potash is a main ingredient of fertilizer and is used around the world to boost crop production.
Demand for Canadian-mined potash has grown rapidly, especially from China and other parts of Asia.