Iron ore price flirts with key $100/T level on firm demand, China stimulus hopes
Analysts say near-term demand for iron ore remain strong, supporting prices.
In July last year Uralkali CEO Vladislav Baumgertner blasted the global potash market wide open sending stock prices in the sector tumbling and projects back to the drawing board.
Baumgertner’s breakup of the Belarus-Russia potash bloc – which cost him his job and some jail time – was supposed to move potash from a clubby system of tightly controlled global supply and set prices to an open market where volume and cost-based pricing is key.
Baumgertner forecast at the time the price of potash would fall 25% to below $300 a tonne in short order.
Fast forward 12 months and it seems Baumgertner’s big move is playing out as predicted.
According to the latest commodity price index from Canada’s Scotiabank global shipments of the soil nutrient rebounded significantly this year while prices are also creeping back up.
According to Scotiabank economist Patricia Mohr buyers have been making the most of lower prices and global potash deliveries could be on the high side of expectations at 58 million tonnes (+7%), boosted by strong
sales in North America, record fertilizer application in Brazil — linked to higher soybean plantings and robust coffee prices — and a modest pick-up in demand from palm oil growers in Malaysia and Indonesia.
At the same time spot potash prices (FOB Vancouver) edged up from $302.50 in June to $310 per tonne in July, after bottoming at $295 in January
Granular potash — preferred in Brazil — is in short supply, as is all grades of SOP (potassium sulphate, non-chlorine potash fertilizer). Brazilian potash imports surged by 26% to a record 4.6 mt in 2014:H1, though aggressive pricing by Uralkali probably contributed to this strong demand.
Source: Scotiabank
China will exercise a large amount of optional tonnage from Canada in 2014:H2 and Canpotex, the North American marketing and distribution arm of the big three producers & Potash Corp, have announced that they are sold out this quarter.
Granular prices in Brazil may increase from the current $355 – $360 to $380 CFR, given strong seasonal demand in the third quarter.
However, broad-based price increases may await negotiation of a new contract price with China for early 2015 — widely expected to be a 10% hike on today’s $305 CFR China price — setting a new higher floor.
Potash is currently priced well below phosphate fertilizers, which are strengthening. Sulphur prices, used to make DAP fertilizers, rose to $155 at Metro Port Vancouver in July. That’s up a whopping 18% month-on-month.
Uralkali expects global potash shipments to climb to 60 million tonnes in 2015, though this may be optimistic given softer crop prices and weaker farm economics, concludes the report.
$310 a tonne is of course a long way away from the $950 touched in 2009, but most metals and minerals producers today would settle for a rising price environment, however modest. Just ask any iron ore or copper miner.
