By James Wellstead — Exclusive to Potash Investing News
Recent potash contract placements by some of the world's largest buyers have rai sed h opes of a resurgence in the fortunes of potash companies and their investors. Earlier this week, Israel Chemicals Ltd. (TASE: ICL), a fertilizer and specialty chemical maker, announced that it signed a deal to sell 550,000 tonnes of potash to Chinese customers in the second quarter of this year. The contract includes an option for an additional 120,000 tonnes, and is said to have been settled at around the same price of ICL's 2011 contract with China at US $470/tonne. The ICL contract was a continuation of purchases made by Chinese firms Sinofert Holdings Ltd. (HKG: 0297) and Sinochem in late March, which have brought optimism to the otherwise dour potash market. Japan has also agreed to contracts delivering 550,000 tonnes of potash, while Indian purchases remain in a holding pattern on hopes of falling prices. Bank of America Merrill Lynch analyst Andrew Stott has provided some analysis that may prove Indian buyers right, noting that "[w]e continue to see a slower season in Europe than last year and expect lower Indian imports." India's reduced nutrient-based subsidy, down more than US $30 to $294/tonne, came into effect earlier this week and will make it more expensive for individual farmers to buy the fertilizer. As a result of this darker outlook and high stockpile levels, FOB Vancouver potash spot prices have fallen in 2012 from around US $500/tonne in January, settling at the end of March at US $483/tonne. Granular potash prices in Brazil have also fallen by about US $30 to $520/tonne for large purchasers.