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21 March 2017

Published by Profercy Potash Editor Tom Jago

Profercy Potash: This Week

International price postings P2

From opposite: Spot markets in Asia are

slow, with most buyers casting an eye on

China talks, and further ahead to the

balance between China potentially running

short of imported potash by June. The

other concern in Asia is Chinese MOP

import affordability, which despite some

recent erosion in local re-sale prices,

remains at some $27pt above last year’s

contract price.

Indian inland MOP S&D stays tight as

per the latest data (for April’16 -Feb ‘17).

The government is expected to let

subsidy postings slip a few weeks, so as

not to arm sellers with fresh data. The

DBT subsidy and sales-to-farmer

tracking plan is to be fast tracked, but

will 200,000 terminals be enough for all

of India’s growers P3

K+S Canada: K+S has taken delivery of

about one-third of all MOP railcars to

support logistics from Legacy P4-5

sMOP solid, gMOP firm; Legacy logistics advance;

India DBT fast-track to spot light nutrient ratio

MOP prices are holding solid at current levels for standard-grade, but are

firming for gMOP in Latin America. Sellers are projecting confidence in an

achievable increase for June shipments of gMOP Brazil and other South

American markets at $270pt cfr plus. So far, April/May shipments are at

$256-258pt cfr Brazil, but commitments to load for the next 60 days are

now tight. From June, headed into the strongest part of the year for Brazil

import demand, producers keep aims for a further increase on the front-

burner. On the back-burner, are sMOP prices for Asia and Europe for

loading May/June onwards, but the outlook depends almost exclusively on

China. The top majors have all concluded 2016 contract volumes to China,

signalling the last wave of arrivals there from mid-April. One fresh cape-

size shipment from Belarus to North China just loaded in late March is

heard to be for re-export from China bonded warehouses to Far East

contract and spot markets from end May/early June. Continues opposite

One-minute briefing

• Brazil gMOP import targets still at $265-270pt cfr, but spot gains achieved..

• …so far restricted to $256-258pt cfr; Buyers aim for deferral as on N, P

• USA domestic markets hold flat into April, also with N & P contagion

• Europe demand continues gradual for Q2, April loads heard rolled over

• India subsidy on MOP, NPKs and other NBS ferts seen delayed, as..

• ...buying/seller cat-and-mouse game-theory develops. DBT on fast-track

• Executions continue strong to India from most origins, bar Canada

• China contract MOP talks re-engaging. Affordability levels in focus

• SE Asia prices for sMOP and gMOP holding gains, buyers look to China

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Potash vs Crops: MOP spot and contract spreads still at the narrowest in modern times

China 2017 contract talks in first stage; No return bid as yet to meet supplier increase targets ranging $25-30pt

gMOP cfr Brazil gMOP cfr NOLA metric equ. Spot sMOP cfr Malaysia, Indonesia China contract India cfr contract

World MOP prices are still crammed into the narrowest range since the last days of market cartelisation.

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China Contract 2017: Contract negotiations remain in deadlock, with no new

rumours of fresh moves on either side. This leaves the current position

- pending a second round of talks in late March – unchanged with

suppliers seeking a $25-30pt increase against a roll-over bid

indication on the buyside.

Local market: Port resale MOP prices continue flat with 1H March at

RMB1,910-1,925pt fot ex-port warehouse, around the mid/high

$270s. Activity is still on minor volumes, with port sales dispatches

being managed to maintain port warehouse levels around the 2

million tonne mark. Going forward, the port stock levels should not

start to fall until into late April after the final wave of 2016 contract

arrivals are discharged.

Import break-even: Basis the local pricing above, importer break-

even is reckoned in the mid $220s pt cfr net all handling and on-

shore costs, import tax and VAT. This gives a margin of around $25-

27pt on the 2016 contract pricing of just under $200pt cfr net

rebates/discounts on full contract completion. Back at the local

market peak in January, the margin was in the mid/high $30s pt. This

is likely the basis of the supplier target aims of $25-30pt increases,

aiming for a compromise at lower increase levels.

Imports pending: The final big arrival wave of 2016 contract

shipments are due to arrive from next week through mid-April. These

include 4 cape-size shipments from Belarus due into 3 Chinese ports

for a total 290,000t MOP (both sMOP and gMOP. It is understood to

have one further lot to execute in mid-February, making a total around

290,000t both grades pending. From Canada, the major final wave of

imports has now arrived, leaving one lot for Mosaic due into Yantai in

end March and one further lot of around 62,000t MOP into Zhanjiang

for mid-April arrival. One shipment from Israel is heard due into South

China by late March.

• April & May arrivals: BPC has dispatched a 2H March capsize to

North China for May arrival – outside the 2016 contract, but aimed

for trans-shipment into several minor cargoes for Japan, South

Korea and Philippines. Business to Taiwan is shipping directly.

Far East, Pacific Taiwan: BPC is being linked with a recent 25,000t combination cargo

sMOP and gMOP import cargo said at average pricing on the two

grades in $240s pt cfr from earlier business. This cargo is reckoned

shipping now for end April arrival, direct from Baltic (i.e. not in a

series of re-export lots).

Japan: Baltic re-export sMOP, both from Belarus and Russian

origins, is heard shipping being committed from Chinese bonded

warehouses to load during Q2. Pricing is heard a shade under the

Canadian import price “umbrella” around $280pt cfr.

World Potash Prices 21 Mar

MOP standard bulk US $pt

Vancouver fob spot 189-250

fob contract (2H 2016)* 185-188

Russia spot fob 205-237

fob contract (2H 2016)* 165-173

Belarus contract / spot 165-239

Jordan fob 185-245

China cfr (base & headline levels) 199-219

Russian/China rail DAF** 218-220

China fot bgd port store 276-278

India cfr (180d base & headline levels) 207-227

SE Asia, Far East cfr 240-262

W Europe cfr (€) 238-240

E Europe del Danube (€) 237-240

Russian local $ fot mine 150-155

*China, India ** DAF Zabaikalsk

MOP granular bulk US $pt

Vancouver fob 237-255

Russia fob (excl US) 233-250

Baltic fob on US sales 238-239

Belarus fob (excl US) 230-252

Brazil cfr 255-258

NOLA pst fob barge 225-226

Brazil local fot port store* 297-307

South America cfr (non-Brazil) 258-260

USA cfr (metric equiv NOLA) 238-240

West Africa cfr 255-260

USA Midwest ex term. pst 260-265

W Europe cfr (€) 260-262

E Europe del inland (€) 255-257

*$ bgd fot Paranagua, Vitoria

SOP Standard bulk €pt, $pt

NW Europe €/t fob 445-452

NW Europe €/t fob (US netback) 625-635

Russia $/t fob (container) 485-490

North Africa €/t cfr bulk 478-482

China fot ex wks ($ equv) 340-342

China fob st/grn $/t (cont.) 480-485

USA ex store Florida $/st 615-618

NOP Standard bulk US$ pt

Jordan, Chile fob 810-830

China fob 765-785

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Southeast Asia Malaysia, Indonesia: Local resale sMOP

prices remain flat in both Malaysia and

Indonesia around import equivalent levels at

$240pt cfr net taxes and local handling.

There are growing concerns that suppliers

are gaining the upper hand on talks in

China, with (as per our recent reporting)

Chinese import stocks of MOP likely to top

out from April onwards.

Palm oil: Malaysian CPO futures have

rebounded from the mid-March lows, the

first increase for around 6 weeks to regain

values around the MYR2,870s pt. This is

still well below the January highs just over

MYR3,100 pt in January.

Philippines: sMOP prices are heard firming

into the $260s pt cfr. This is said to be in

connection with lower volumes of Baltic

origins re-exports from China. The next-

round avails of Belarus sMOP pencilled in

for re-export out of China is reckoned to be

for end-May/early June loading. Fresh

Canadian export avails are also tight in that

window.

Vietnam, Thailand: Standard MOP import

values are heard building on early-March

gains, with spot activity on Israeli and

Belarus material heard into the low $260s pt

South Asia

India: Continued Rupee forex strength gives further support to Indian

import margins basis the current contract that is just under $210pt cfr

net all contract discounts & rebates. Local forecasts are now for a

subsidy cut to be announced later this week.

• Big subsidy payment mechanism changes: With the landslide

BJP victory in the decisive farm state Uttar Pradesh, India prime

minister Narendra Modi is heard keen to fast-track the direct

benefit transfer (DBT) system designed to track every tonne of all

fertilizers purchased by the final buyer. Subsidy will still be paid to

the industry (not direct to farmer), but tracking the fertilizers direct

to usage will be a major departure. The current system means

subsidy is (eventually) paid basis delivery by producers and

importers to inland rail points, and state storage hubs.

• Timing: It will probably take most of this season for 200,000

registered fertilizer outlets to house the DBT data-entry terminals

that are to be installed across the country. And the usage

process remains to be seen, with an estimated 200-210 million

individual farms/small holdings in India and some 350 million

growers/grower families (not including labourers), to be catered

for by the 200,000t DBT terminals.

• Consequence for nutrient imbalance: Give or take some

probable issues in the start-up process, (targeted for 1 June this

year), the DBT system – with its digital data feed will immediately

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Potash vs Crops: Onus still on suppliers to push 2016 spot gains through into 2017 contracts

Corn softens; CPO rebounds; Spot MOP levels hold up in tight grouping

gMOP cfr Brazil Spot sMOP cfr Malaysia, Indonesia

CPO rebounds from early-March low now back up into mid MYR2,780s pt

Corn inching lower, May into high $3.50s/bu

Spot gMOP & sMOP prices hold in tight range

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Europe Northwest Europe: Spot gMOP prices

are holding at €258-265pt fca/fot ex-port

store. Inland prices are also heard

holding in the mid/high €270s pt delivered

inland on truck and barge lots. Local

distributors are now evaluating if this

season, the ultimate aim should be to end

with low potash stocks. Given the events

in Latin America, importers are not sure

on this (see below).

• In context: The market in Europe is

now trading at a relatively slim

premium to the big Latin America

markets that are now coming into

peak season.

put into sharp focus the imbalances in Indian fertilizer usage that

have becoming even more unbalanced in the latter years of the

NBS system – headed this season about to end at a ratio around

9.8-2.8-1. This shows the steps backwards taken since the best

ratio in modern times at 6.7-3.1-1 achieved in 2011-12 (Year 2 of

NBS), from 5.9-2.4-1 a decade ago in the 2006-07 season.

• Local direct-use sales: The local market for direct-application

MOP continues on the charge noted in our last report, continuing

showing a 12% y/y sales boost. Excluding movement into NPK

sector, local sales for direct were 3.47 million tonnes in the 11

months to February 2017, vs 3.10m tonnes a year earlier.

Significant stocks decline: Inland MOP stocks continues to slide,

with year-on-year comparisons pointing to a light carryover. As with

our earlier comments on the late January position, even with MOP

usage falling marginally into NPK use, there is still a big stock decline

visible 204,680t at 1 March 2017 with 346,020t a year earlier. This

continues the position a month earlier (389,000t at 1 February 2017

vs 484,000t a year earlier). These totals are for MOP stored for direct

use at state-level.

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Potash vs Crops: gMOP holds Q1 gains in Western markets; Corn slips, Beans flatten out

gMOP cfr Brazil gMOP cfr NOLA metric equ.

Corn inches down into high $3.50s/bu

Atlantic spot MOP prices consolidate

Beans (dotted line) hit interim floor at $10.00/bu headed into Q2.April/May have been bullish for beans in 4 of the last 5 years, usually in the wake of the usual USDA end March US planted area call.

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Latin America Import prices: May-load granular MOP

business is settled for Brazil at $256-258

pt cfr from various suppliers including

Canpotex, which has new apparent spot

business - despite the earlier comments

about being sold out until June. The new

business is thought to be for incremental

volumes on big cargoes already planned.

• Local market: Aside from producer

offers from captive unsold material in

port warehouses, importer re-sale

offers are holding in a range either

side of $300pt fot ex-port warehouse.

This is up $5-9p from re-sale

February levels, thus pricing in part of

the recent run-up. +

• Local NPK bulk blend prices are all

firm, despite the import price dives on

N and P inputs. NPK 4-30-10 is heard

at $338-340pt fot ex warehouse

Paranagua.

North America Canada supply & logistics: K+S Potash Canada has taken delivery

of the first unit-train quantity of 177 of 531 custom built rail cars at its

Legacy Project mine site. This is enough to complete one of three

trains that will transport MOP to its export terminal at Port Moody,

near Vancouver.

• Shipment to Port Moody: The rail cars will travel the 30km of

Canadian Pacific’s recently constructed Belle Plaine subdivision,

which connects CP’s main line at Belle Plaine, Saskatchewan to

14km of newly constructed industrial rail line, owned and will be

operated by KSPC.

• ...and also to the US: Part of the rail fleet will also be used to

transport product to the US, where K+S sales are to be handled

by Koch.

• More rail cars later this year: K+S said 531 rail cars will be

sufficient to meet initial requirements for weekly transportation of

potash to Port Moody, but additional cars will be required as

production starts to ramp up later in the year.

• Quote: “The arrival of these rail cars demonstrates how close we

are to production, which is expected to begin in the second

quarter this year,” said Dr. Ulrich Lamp, KSPC President and

Chief Executive Officer. “To see them here, branded with our

company name and ready to carry our first marketable product, is

really exciting.”

US domestic: NOLA gMOP barge values for April are consolidating

gains in the mid $220s pst fob. Inland gMOP business is also holding

in the post-fill range at $260-265pst fot Midwest.

• Contagion from N, P: With the big declines in N and P pricing

(DAP, not really MAP), locals are worried about contagion in to

potash. There is, however recognition that US MOP prices are

already among the lowest worldwide, in the mid/high $230s pt cfr

US Gulf equivalent. As such a big spread is starting to open up to

between US prices for granular MOP and those in Europe and

Latin America.

• US import: The next big-cargo gMOP cargo to the US ex Baltic

is understood to be for around 60,000t Belarus material shipping

on the MV Kypros Sky from BPC for early April arrival into

NOLA.