Sinofert Holdings, the mainland's largest fertiliser importer and a leading producer, is in talks to acquire potassium fertiliser assets in Central Asia as part of efforts to control more upstream resources and boost profits.
The company hopes to take advantage of international fertiliser companies' value declines of 60 to 70 per cent amid the financial crisis, chief executive Du Keping said.
'Fertiliser companies in the former Soviet Union nations do not have debt problems. But it doesn't mean we can only discuss investment when they are short of cash,' he said. 'Possibilities for such talks are much greater now.'
He cited Aluminum Corp of China's (Chinalco) proposed investment in Australian mining giant Rio Tinto Group as a case in point, saying the company is very profitable but has huge capital expenditure, and would be able to reduce debt servicing costs with Chinalco's investment.
Sinofert accounted for 55 per cent of the mainland's potassium fertiliser imports last year. The country imported 70 per cent of its needs last year.
The product is the biggest contributor to Sinofert's net profit of 1.91 billion yuan (HK$2.17 billion) last year. With a market share of 18 per cent on the mainland, it sold 16.22 million tonnes of potassium, nitrogenous, phosphate and compound fertilisers last year.
The United States, Canada, Russia, Belarus and Germany account for 91 per cent of global reserves. Having some control over resources will help tighten relationships with suppliers and hedge sales price and volume risks.