An obscure Canadian export cartel has emerged as a key negotiating issue for BHP Billiton and other potential buyers circling Potash Corp. of Saskatchewan Inc.
The 1970s-era cartel, Canpotex Ltd., lets its members negotiate prices together overseas. But BHP doesn’t want to sell through the cartel, which typically handles more than a quarter of the world’s exports of potash, a key form of fertilizer.
Canpotex’s influence has long irritated China, one of the world’s biggest potash buyers and a source of other potential bidders for Potash Corp.
However, many local Canadian interests — from the province to the miners’ unions — like the cartel, which keeps money flowing to provincial coffers to fund everything from health care to education.
‘There’s a little bit of angst and concern around this offer because we know what happens when potash sales collapse,’ said Saskatchewan Premier Brad Wall, in an interview with The Wall Street Journal. Mr. Wall said he told BHP executives last week he’s worried about what a change in sales tactics would do to the province’s income.
‘I indicated my concern is around Canpotex,’ he said. ‘My long-term concern is around revenue for the province.’
The province’s well-being will likely be a big factor in the Canadian government’s decision about whether to approve any purchase of Potash Corp. by an outside buyer.
Started by the potash producers of Saskatchewan in 1972, Canpotex handles potash sales from the province — home to an estimated 53% of the world’s known deposits — to countries outside of the U.S. and Canada. Canpotex and one other big cartel — a joint venture between producers in the Republic of Belarus and Russia — control nearly 60% of the world’s export market for potash, according to estimates from London-based commodities consultancy CRU.
If BHP or another buyer ran Potash Corp.’s mines at full capacity, this could set the stage for a price war that would make fertilizer more affordable, some farmers say.
‘Us and many farmers have been upset with the potash people,’ said Kip Tom, who buys about 1,200 tons of that fertilizer for his family’s sprawling farming operations based in Leesburg, Ind. ‘If BHP operated full out, that would be good.’
Lower-priced potash would also be of keen interest to the world’s biggest importers, China, India and Brazil.
China — which consultants at CRU estimate led the world in potash purchases over the five years to 2008 — has dragged its feet in negotiations with Canpotex recently.
The Chinese bargained hard and bought instead from independent sellers and the Belarusian sales group.
Canpotex wasn’t able to secure a contract with China last year, and this year has only been able to get small, short-term contracts.
China is taking steps to reduce its reliance on foreign potash pricing, said Wei Chengguang, a Shanghai-based division chief at the China Inorganic Salt Industry Association who says he’s participated in pricing talks.
Chinese investors, including a consortium led by private-equity fund Hopu Investment Management Co., are mulling a bid for Potash Corp., people familiar with the situation said. Sinochem Corp., a government-owned company and one of China’s biggest potash buyers, has been in contact with Potash Corp. about developing a new alliance, a person familiar with the situation said. Potash Corp. already owns 22% of Sinochem’s fertilizer unit.
But a defection of Potash Corp. from Canpotex — and a potash price war — could be damaging to Saskatchewan’s other potash producers and their workers. Potash Corp. sells between half and two-thirds of its potash through Canpotex, and its product comprises more than half of the group’s annual sales.
Phred Dvorak / Scott Kilman
在必和必拓(BHP Billiton)与其他潜在买家竞购Potash Corp. of Saskatchewan Inc.的过程中，加拿大一个名不见经传的出口卡特尔组织成了谈判中的关键议题。
知情人士说，来自中国的投资者正在考虑收购Potash公司，其中包括私募基金厚朴投资管理公司(Hopu Investment Management Co.)牵头的一个财团。国有企业中化集团(Sinochem Corp.)是中国最大的钾肥进口商，知情人士说，它在跟Potash公司就一项新的合作进行接触。Potash已经在中化集团的化肥子公司中持股22%。
Phred Dvorak / Scott Kilman