* BPC says China could sign spot deals from 2011
* India, Brazil catching up as major importers
* Chinese domestic production growing
* China 2010 deal could be below spot price (Adds details, quotes, background)
By Robin Paxton
MOSCOW, Dec 17 (Reuters) - Major potash exporter BPC may look to settle deals with China on a spot basis from 2011, replacing annual contracts, to reflect the growing influence of Brazil and India in world markets, a company executive said.
When Belarussian Potash Company signs a market-making Chinese deal to resume supplies in 2010, it could potentially be the last one-year contract between the major exporter and the world’s biggest potash consumer, the firm’s sales director said.
“The role of China as the price-setter for the world is changing. This could be the last year,” Oleg Petrov told Reuters in an interview. “With domestic production growing, it will not buy as much potash as India or Brazil.”
Minsk-based BPC, the exclusive export agent for Russian potash miner Uralkali (URKA.MM), expects to increase sales by 50 percent next year. It sees global demand jumping 80 percent from a barren 2009, when cash-strapped farmers ran down inventories.
“The increasing role of Indian and Brazilian markets might prompt BPC to give up long-term contracts with China and switch to spot deliveries, starting from 2011,” Petrov said.
“China will always lack material. It will continue to buy potash, but it will not be the biggest market for imported potash. It is already going head-to-head with Brazil and India.”
BPC, which accounts for over 30 percent of global potash sales, estimates global potash consumption in 2010 at 45 million tonnes, much more than the 25 million tonnes consumed in 2009 but below last year’s 53 million tonnes.
Petrov said talks with Chinese buyers would take place next week and that a deal could still be struck by year-end.
“It’s important to have a contract with China in place, because the first quarter is the most active period of consumption in China,” he said.
He declined to specify a target price, but said it could possibly be lower than the current global spot price.
Industry publications Fertecon and FMB say spot prices for potash in Brazil are currently at a level of around $400 per tonne, on a CFR basis.
Petrov estimated Chinese potash inventories had fallen to about 3.0 million tonnes from between 4.5 million and 5.0 million tonnes a year ago.
“There is a shortage of some specific products in China,” he said, referring to products of which BPC itself is a supplier.
In peak years, China consumed 10-11 million tonnes of potash annually. It can now produce about 5 million tonnes domestically and could potentially raise this to 6-7 million tonnes, he said.
Brazil, on the other hand, expects a demand boom in 2010. Of the approximately 7 million tonnes that could potentially be consumed, about 6.3 million tonnes may be imported, Petrov said. BPC traditionally supplies 32-33 percent of Brazilian imports.
“Brazil will really explode,” Petrov said, adding that total Brazilian imports may reach 1.2 million tonnes in the first quarter of 2010. “We are currently selling to Brazil at $400 per tonne CFR and we see no reason why this price should erode.”
India had also raced through volumes contracted between July 2009 and March 2010, Petrov said, meaning it would restart contract talks earlier than usual.
“Almost 90 percent of this contract has already been executed. By the end of January, India will have fully completed its contract,” he said. “We expect deals in March with deliveries in April.”
BPC hopes to sell between 4.8 million and 4.9 million tonnes of potash in 2009 and to raise volumes by 50 percent next year.
“There will not be a full recovery in 2010, but the market will be much better than this year. The Chinese contract will be extremely important for this recovery, as it will help restore market confidence and help to boost volumes.” (Editing by Michael Urquhart)