Potash Corp sees Chinese supply contract settling within weeks

By Rod Nickel
NEW YORK, May 19 (Reuters) - Potash supply contracts with
Chinese buyers should be settled in two to four weeks, the chief
executive of Potash Corp of Saskatchewan POT.TO said on
Thursday, setting a badly needed global price floor for the
slumping crop nutrient.
Potash prices have fallen to their lowest in a decade,
weakened by declining U.S. farmer incomes, falling currencies in
consuming markets such as Brazil and bloated mining capacity.
The Chinese contract usually sets a floor for a subsequent
contract with Indian buyers and spot prices for Brazil and the
United States.
Chief Executive Jochen Tilk was speaking at a BMO investor
conference in New York. Afterward, he told Reuters he expected
Chinese buyers to settle first with Belaruskali and Russia's
Uralkali URKA.MM , as is typical.
A contract with Canpotex Ltd, a company owned by Potash
Corp, Mosaic Co MOS.N and Agrium Inc AGU.TO , would follow.
Contract negotiations have sometimes dragged well into each
year, raising the question for some of whether selling to China
on that basis is practical.
"We respect how China would like to negotiate, but (the
contract format) is a bit dated and it's not the most productive
approach," Tilk told the conference.
In April, the world's biggest fertilizer company by capacity
cut its full-year profit forecast on weak demand and lower
prices, raising concerns of another dividend cut.
Tilk said, however, that Potash Corp's $1 annual dividend is
sustainable, noting that the company's capital spending is set
to decline next year.
The traditional price premium on potash sales to U.S. buyers
has disappeared, after increased sales by producers outside
North America last year. A premium has emerged, however in
Europe, a market not significantly served by Canpotex.
Selling Canpotex potash in Europe is a possibility, Tilk
said, but would likely be for the short term, as increased
competition would reduce selling prices.