OREANDA-NEWS. December 21, 2009. O. Petrov, Sales Director of BPC (exporting trader of Uralkali and Belaruskali), announced that the potential for a contract settlement with Chinese importers by YE09 is very high. He also stated that the price will likely be closer to the current Chinese domestic potash price of US430/t, reported the press-centre of OTKRITIE FC.

View: A contract settlement in December would be in line with our optimistic scenario and would act as a catalyst for other markets to renew potash consumption. However, a domestic market of US 430/t, which corresponds to US 360/t FOB for Uralkali, since Chinese importers pay for freight by themselves, is approximately 10% lower than the price in our DCF model. Our forecast was for China to settle at the same price as India (US 460/t CFR, which corresponds to US 400/t - US 410/t on a FOB basis).

A contract settlement with Chinese importers lower than the prices set with India would be seen as somewhat negative for Uralkali and Silvinit. A more disappointing development is the drop in Brazilian spot prices from US 480/t to US 400/t (CFR). If this is not simply a one-off occurrence, it could trigger a downward adjustment on the US, European, and SEA spot markets. In this case, 2010 prices would be 20% lower on average than we have estimated.

On the positive side, BPC reiterated its prior view that it anticipates a 50% YoY rise in sales volume and projects volumes on the global market to amount to 45mt (versus just 25 mt in 2009).