ICL Inks Potash Deal With China in Sign Market Is Stabilizing

  • Israeli potash miner to sell 700,000 tons of fertilizer
  • Contract a ‘sign of relief,’ sets price floor: Excellence

Israel Chemicals Ltd. signed long-awaited contracts to supply potash to customers in China, the world’s largest consumer of the fertilizer, an indication that the free-fall in prices for the commodity could be ending.

ICL, owned by billionaire Idan Ofer, will sell 700,000 metric tons this year at prices “in line” with recent transactions in China, according to a Tel Aviv Stock Exchange filing Tuesday. Belarusian Potash Co. agreed two weeks ago to sell potash at $219 per metric ton, the first contract China signed this year.

“It’s a sign of relief,” said Gilad Alper, a senior analyst at Excellence Nessuah Brokerage Ltd. in Petach Tikva. “It puts a floor on prices, which at one point looked like they could have been a lot worse. There were whispers that prices could have fallen below $200, which would have been a disaster for the industry.” Alper has a neutral rating on ICL’s stock.

The string of contracts with Chinese customers could ease the global glut of unsold potash that has sparked a prolonged slump for mining companies. Chinese demand remains weak and prices are far off their 2008 highs of $950.

Decent Volumes

The prices agreed upon by ICL are “still about 40 percent less than they were last year,” Alper said. “Obviously they will still have issues in terms of profitability, but the volumes are decent and that should stabilize share prices.”

ICL did not immediately respond to telephone and e-mail requests for comment.

ICL shares rose 2 percent, the most in 12 days on a closing basis, to 16.05 shekels at 4:01 p.m. in Tel Aviv.