Stung by weak prices, potash miners look to specialty products

By Rod Nickel
WINNIPEG, Manitoba, Nov 18 (Reuters) - Potash miners, facing
another round of tough negotiations with big buyers in China and
India, are looking to support sinking profits by boosting sales
of higher-margin specialty products, according to top
executives.
The pink fertilizer's price has fallen sharply this year,
under pressure from bloated capacity, soft grain prices and weak
currencies in Brazil and India, spurring Potash Corp of
Saskatchewan POT.TO , Mosaic Co MOS.N and Belaruskali to
slice output.
Miners face further pressure as they start talks in coming
weeks with China's Sinofert Holdings Ltd 0297.HK for a 2016
supply contract, which generally sets a global price floor.
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But with few expectations of a rebound soon, potash
executives are looking beyond production cuts.
ICL Israel Chemicals Ltd ICL.TA plans to tap more
profitable products, Chief Executive Stefan Borgas said in an
interview.
The company will accelerate production of premium-priced
polyhalite, a mineral with several nutrients, at its United
Kingdom potash mine, he said. ICL is targeting production of 1
million tonnes of polyhalite, also called polysulphate, by 2020,
up from its previous target of 600,000 tonnes.
"We are trying to accelerate this switch because
polysulphate is so much more profitable than MOP (common muriate
of potash)," Borgas said.
ICL is also redrawing plans to develop an Ethiopia deposit
to first produce sulphate of potash (SOP), a premium potash
suitable for fruits, instead of MOP.
For Mosaic, low potash prices could lead it to boost sales
of specialty products that combine micronutrients.
"The more we can de-commoditize our product offering, yes,
the better off we'll be," said Chief Executive Joc O'Rourke.
Potash Corp is also looking at less-explored options. Chief
Executive Jochen Tilk said he is open to diversifying into new
products, including some unrelated to fertilizer.
He did not specify which products, but Potash recently made
an unsuccessful attempt to buy Germany's K+S AG SDFGn.DE ,
which produces salt and SOP along with conventional potash.

NO EASY ANSWERS
On the surface, diversifying looks appealing, said Daniel
Manuel, potash analyst at consultancy Fertecon.
But the premium SOP commands in its sliver of the overall
potash market would evaporate if production jumped, he warned,
adding that diversifying into other commodities comes with high
costs of takeovers or developing projects.
In the meantime, buyers are taking a hard line.
Two Indian potash importers, speaking on condition of
anonymity, said they have demanded discounts for this year's
contracted sales, although sellers have balked.
In the U.S. Midwest, where potash is used extensively to
fertilize corn, dealers are reluctant to stock up.
"They had this feeling that potash is right across the
street in (Canada). I don't need to worry about it," said Joe
Dillier, director of supply and merchandising at Growmark Crop
Nutrients.
However, potash demand in Brazil began to recover late this
year, said Carlos Heredia, supply chain director at Yara Brasil
YAR.OL , although the pace remains below 2014.
While times are bleak, agricultural price cycles turn
suddenly, Mosaic's O'Rourke noted.
"When all the pundits are saying 'the cycle will never end'
is normally when there's a change."