ICL Fertilizers, a division of Israel Chemicals, has sigend a long-term 3-year contract to supply 3.3 million tons of potash to China.
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The deal reinforces the company's position as a major supplier of potash to China, one of the world's three largest markets for the soil nutrient, without which crops can't grow.
The first tranche prices the potash at a rather low $400 per ton, covering 660,000 tons to be supplied during the first half of 2013. That amount is worth $264 million.
ICL Fertilizers sent 670,000 tons of potash to China in all of 2012, but at the higher price of $470 per ton. The new $400 price is identical to the price set last week in a deal by Sinofert, one of China's largest potash importers, for a 1 million-ton half-year supply from Canpotex, a marketing consortium made up of Potash Corporation of Saskatchewan and U.S.-based Mosaic and Agrium.
Under the framework agreement with ICL, the price for future shipments of potash by ICL will be determined periodically according to prevailing price levels in the Chinese market.
China also buys heavily from BPC, a marketing consortium of potash producers in the former Soviet Union.
ICL has managed to hold on on to a relatively large slice of the Chinese potash market – 14.7% in the first nine months of 2012 – despite its position as only the world's sixth-largest potash producer.
Its success can be chalked up to a 2010 company decision to change its marketing strategy for China. ICL Fertilizers subsequently ceased dealing with large importers like Sinofert, which preferred working with the larger producers from North America and Russia, and began concentrating instead on marketing directly to China's potash distributors and producers.