China should not fear Potash monopoly: Experts

Updated: 2010-11-22 13:48
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BEIJING - As mining giant BHP Billiton has withdrawn its takeover bid for fertilizer group Potash Corporation of Canada, China, a major agricultural nation, can be assured that industry talk of a BHP potash monopoly would not become a reality.

However, domestic researchers and industry insiders said, even though it did not occur, China should not fear a so-called monopoly, as China's domestic supply also plays an increasingly important role.

China Sinochem Group, a state-owned chemical group, said in late August that it is "paying close attention" to BHP's bid. Extensive media reports also added fuel to the thorny issue as reports claimed the take-over, if completed, could threaten China's grain security.

Further, BHP announced on Nov 14 that it had abandoned the take-over bid due to its failure to convince the Canadian government of the deal's merits, despite "unparalleled" pledges on jobs and investments.

"Even if BHP monopolized potash pricing, it would be exaggerated to say it would put China's grain security at stake, as more than half of China's potash supply is self-sufficient," Wei Chengguang, director of the Shanghai sylvite engineering and technology research center (SSETRC), told Xinhua News Agency. "China has sped up domestic sylvite exploration, while falling imports over the past three years is also evidence of China's less reliance on overseas supply," he said.

China's sylvite resources, a major source of potash, is concentrated in the nation's Northwest Qinghai province and Xinjiang Uygur autonomous region's Lop Nur.

The two major Chinese potash production bases turned out 5.5 million tons of potash in 2009 while domestic consumption during the same period was 6.7 million tons, according to data provided by SSETRC.

Although China has not officially released its concrete figure for its domestic sylvite resources, a 12-year survey conducted by the Ministry of Land and Resources in early October indicated that the amount of the country's prognostic sylvite resources could be double or triple its current proven reserves of the mineral.

According to SSETRC's data, imports are declining each year with 9.4 million tons for 2007, 5.3 million tons for 2008 and 1.98 million tons for 2009.

An unnamed official with the Qinghai Salt Lake Potash Company Ltd, the nation's largest potash producer, told Xinhua that BHP's attempted take-over has prodded the company to accelerate exploration and utilization of resources. The Qinghai company has planned to boost annual output to 3.5 million tons by the end of 2013, from this year's 2.3 million tons.

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According to SSETRC's forecast, new potash plants scheduled for operation in southwest China's Sichuan and Yunnan provinces will add three million tons of potash by production capacity in the next few years. That will boost China's annual production of potash to eight million tons nationwide, which is enough for domestic demand.

Wei Guangcheng also said the so-called China demand is overstated. "We can not simply say the more fertilizer, the greater output of grains. Since China's farmland will not expand in the future, the demand for potash will not grow significantly,” he said. More use of alternative elements, such as straw and other organic fertilizer, will also lessen the demand for potash, notably when potash prices have already risen to a high level, he added.

Wei said the talk of a potash monopoly, though it has failed to occur, has sent a signal about possible price hikes. This has pushed up the share prices of many fertilizer producers.

Although the monopoly talk has proven to be a false alarm, experts said China should make early and thorough preparations in the accumulation of resources. A few Chinese enterprises have moved to purchase overseas sylvine assets.