OAO Uralkali (URKA), the world’s largest potash producer by output, cut its 2012 production target by 7 percent because the signing of agreements to supply the fertilizer to China and India may be delayed.
Uralkali will reduce output by 700,000 metric tons from planned volumes this quarter because of an “unfavorable situation” in markets including China and India, it said in an e-mailed statement today. Full-year production is expected at 9.3 million tons, down from 10 million tons projected earlier.
“We hope the contracts with China and India will be concluded by the year end, at least with India, as consumption there was better than we had expected and they will need new potash supplies in January,” Oleg Petrov, Uralkali’s head of sales, said in an e-mailed response to questions. Uralkali had previously given guidance that agreements with China and India may be signed in October or November.
Plentiful stockpiles of potash, a form of potassium used to strengthen plant roots and protect against drought, are undermining efforts by Uralkali, Potash Corp. of Saskatchewan and other producers to renew contracts with buyers in China and India, Jason Miner, a Princeton, New Jersey-based chemicals analyst for Bloomberg Industries said Oct. 17.
Mosaic Co. (MOS) said earlier this month China may not sign a supply agreement with North America’s largest producers until next year as it holds out for a lower price than the one agreed in the first half.
Petrov declined to elaborate on contract prices, saying that Uralkali “will use the current contracts as a benchmark.” China is “very determined” to pay less than the $470 ton it negotiated for the first six months of 2012, Mosaic Chief Executive Officer Jim Prokopanko said Oct. 2.
“I believe that this is a temporary market slowdown and starting from the end of first-quarter 2013 the market will become robust again as soft commodities prices are very high now, so the farmers’ profitability is healthy,” Petrov said.
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