Predict on 2009 Potash Contract   

2008 is coming to an end, and the Chinese annual potash contract negotiations have been put on the agenda.
   China's import prices of potassium chloride was only around RMB2 000 per ton early in 2007 and increased by 150% to RMB5 000 per ton at present, causing a large potash fertilizer demand downturn of farmers. A large number of potassium sulfate producers and potassium nitrate producers use potassium chloride as raw material and have had to cut or suspend production under the pressure of the high imported price of potassium chloride upstream and limited products consumption downstream, especially for potassium sulfate sector. It struggles for survival with a whole operating rate around 20%.
   The price of Chinese domestic potassium chloride is increasing along with imported potassium chloride, but the sales volume of domestic potassium chloride this year declined compared with 2007. Quite a large margin entered into the circulation link because the price was fixed by the Chinese government.
   The international price of potassium chloride has soared since 2007 as a result of increased demand in the international market with sensational prices offered by international suppliers, and the high FOB price stayed around US$ 1 000.
   The Chinese 2008 potash contract negotiations concluded in April 2008, achieving agreements for a potassium fertilizer volume of only around 2.6 million tons. It is estimated that India and Brazil import more potassium chloride than China with volume of 5.5 million tons and 5.0 million tons respectively in 2008, which will weaken China's bargaining power in the 2009 negotiations.
   In the first half of 2008, the global financial recession is penetrating economic entities - oil price declines, the prices of commodities also are decreasing. In China, the high price led to dull sales of potassium fertilizer. In TFI (The Fertilizer Institute) Summit held in September 2008 in the USA, PotashCorp announced that its supply of potassium chloride fell short of the demand by 3.0-4.0 million tons in 2008, accounting for 8%-10% of the total global demand. Belarusian Potash Company has also announced recently that its potassium fertilizer will be mainly for Belarusian markets and will impose taxation on exports at US$ 200 per ton. As the two biggest suppliers of potassium fertilizer in the world, this situation in the two companies indicates that there will still be a tight supply of potassium fertilizer in 2009. Canada's Potash Corporation of Saskatchewan has already signed the potassium fertilizer supply contract with its Japanese customers for the first half of 2009 with the price increased to US$ 200 - 220 per ton, thus leading a price rise pressure on China.   
   As reported, Sinochem Corporation and Sino-Agri of China recently has started the second round of talks with foreign potassium fertilizer suppliers. The decreased demand of farmers, the smaller volume of imported potassium fertilizer and the lower output increase of potassium fertilizer in China puts Sinochem and Sino-Agri in a passive position in the 2009 Potash Contract Negotiations. While on November 18th, 2008 SDIC Xingjiang Luobupo Potash Co., Ltd. (SDIC) of China commissioned its potash fertilizer with a capacity of 1.2 million t/a. The potash fertilizer output of SDIC is expected to be over 1.0 million tons in 2009, which may strengthen China's position in international negotiations to some extent.