Canpotex announces contract
Potash sold to India at $370 US per tonne
By Cassandra Kyle, The StarPhoenixFebruary 20, 2010
The sale of Saskatchewan potash to India at a price of $370 US per tonne may set the standard for upcoming provincial revenue projections.
Energy and Resources Minister Bill Boyd said Friday the government -- which is in the midst of budget preparations -- is looking at the new contract as an indication of what potash prices will average this year.
Boyd expects the province will base potash revenue projections for its 2010-11 fiscal year on a price in the range of $350 to $400 US per tonne.
"Somewhere in that neighbourhood would be a safe indication of where we think prices are going to be," Boyd said in an interview.
Canpotex -- the marketing agent for Saskatchewan potash -- announced Friday a new contract with a consortium of Indian buyers for the shipment of 600,000 metric tonnes of the plant nutrient through June at $370 US per tonne.
In July 2009, Canpotex sold India 850,000 metric tonnes of potash for $460 US per tonne.
Earlier this month, Canpotex announced a sale of 350,000 metric tonnes of potash to China. The company did not disclose the sale figure; however, Boyd believes it to be similar to the new India deal.
The province projected it would bring in $1.9 billion in potash revenue in the 2009-10 fiscal year on sales of potash at $550 US per tonne.
After a calamitous year for potash, the government conceded earlier this week its revenue from potash sales for 2009-10 will now ring in at less than $100 million.
Boyd said potash markets for the 2010 calendar year are off to a much better start than 2009. In addition to the contracts with China and India, Boyd said Canpotex is running at full capacity this quarter.
"Essentially they're exporting at the maximum capacity they can for the first quarter, which indicates to (me) that I've think we've seen the turnaround," he said.
The minister said the government bases potash revenue projections for its fiscal years on the best information it can get about the outlook for the industry -- usually from the potash companies themselves. Discussions with company CEOs, he added, are a regular part of the process.
"We ask the industry for their views on what the prices and volumes of potash are going to be, we look at various agencies that forecast this type of thing as well, and, of course, this provides additional support for the numbers we are looking at for the upcoming budget," he said.
Boyd looks to the deal with India as another signal 2010 will be a turnaround year for potash.
"This is further encouragement that we've seen the start of the recovery of the potash sales," he said.
