K+S lifts potash price despite signs of slowdown

Date:09-21-2011

K+S has, for the second time in three months, raised potash prices – to their highest in three years - despite signs of a slowdown in the nutrient's rebound in the important North American market.

The German-based fertilizer group lifted by E12 to E375 a tonne its price for granulated potash, citing the high level of demand for the nutrient "in Europe and worldwide" as farmers clamoured to raise yields and cash in on high crop prices.

Meanwhile, the group's potash production rates had risen to "the upper end of possibilities", a K+S spokesman told Agrimoney.com.

The price rise takes K+S's increase in potash output this year to E42 a tonne, or 11.9%, and leaves values, the spokesman said, "at their highest since early 2008", before the world economic recession set in.

Stocks rebuild

However, it comes in the face of some signs that the rebound in the potash market may be seeing something of a pause, after a recovery in prices by some 40% from lows last year.

Data from Canada-based PotashCorp, the world's biggest potash group, on Thursday revealed that the rise in prices of the nutrient at Vancouver, the industry standard, stalled at just under $500 a tonne last month.

And potash inventories held by North American fertilizer groups, such as PotashCorp and rivals Agrium and Mosaic, rose by more than 166,000 tonnes in August – a month when inventories typically decline.

'Prices stagnated'

The "deceleration" in the rise in potash values was flagged on Friday by UralSib, the Moscow-based broker, which said that "after bottoming out in 2010, potash prices recovered 39% and have stagnated at current levels throughout July and August".

A price of $535 a tonne, including freight, that Russian producer Ukralkali agreed last month for deliveries to South East Asia "was up 5% from the original price for the third quarter, but less than we expected".

This price will set "target levels for markets through the rest of the year", UralSib said.

* Separately, Uralkali revealed that it had refinanced a $1bn loan from Sberbank, the Russian bank, with a facility from Italy's Unicredit and Dutch-based ING.

The "very favourable" rates on the facility, used to finance the acquisition of a licence for a fresh mine development, will cut the average interest rate to "about" 4%, Viktor Belyakov, the Uralkali chief financial officer, said.

 The deal was a fruit of the group's takeover of Silvinit to form a larger enterprise more attractive to lenders, a person close to Uralkali told Agrimoney.com.