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8 March 2013 | Adam Leach
Buyers should capitalise on lower potash prices and secure supply deals for 2013 and ensure long-term market access, according to Rabobank.
The spot price on the Vancouver granular FOB market for the commodity, which is used in the production of fertilizers, has declined form $500 (£330) per tonne to $410 (£270) per tonne in the past year and the bank is urging buyers to take advantage. It called for buyers to secure contracts for the year as it said in the long term the balance would tip back to favour suppliers. The fall in price was attributed to lower demand and high availability of the commodity.
Rakhi Sehrawat, analyst at the Dutch bank, said: “Until recently the potash market was mired in the midst of acute demand uncertainty and piling inventory levels across key consumption regions. The near-term outlook for the potash market has shifted to favour buyers, enabling importers such as India, China and Brazil to negotiate heavy discounts on short-term prices.”
Looking to the future, the bank advised large-scale potash buyers to adopt a more “balanced potash supply mix”. It said to improve the market in the long term companies should look to invest in smaller scale suppliers to increase competition.
Sehrawat said: “It has become extremely challenging for new players in the industry to finance further progress in their respective projects, making it clear that without proactive action by the major importers, the industry structure is guaranteed to remain intact, turning in favour of consolidated suppliers once demand picks up.”