Sinofert sees potash price fall lifting Chinese demand amid low farmer use
Sinofert, China's largest fertiliser producer and distributor, expects a lower potash price resulting from the disintegration of a marketing oligopoly in Eastern Europe to stimulate demand in the mainland.
"Chinese farmers' potash consumption level is less than half the optimal level for crop growth, so there is plenty of room for it to rise," said chief executive Feng Zhibin.
But he would not comment on how lower prices of potash, or potassium fertiliser, would impact its overall profit margin, which fell to 5.4 per cent in the first half, from 6.5 per cent in the year-earlier period.
Gross margin from potash sales, its biggest gross-profit contributor, accounting for 39 per cent of the total, dropped to 6.5 per cent from 7.3 per cent.
The Beijing-based state-backed firm said its first-half net profit dropped 35.5 per cent year on year to 352.3 million yuan (HK$443 million) as prices fell.
Turnover slid 8.7 per cent to 20.58 billion yuan, with a 9.6 per cent drop in its average selling price more than offsetting a 1.1 per cent rise in sales volume, to 9.14 million tonnes.
Russia's Uralkali early this month said it was leaving its potash marketing venture with Belarussian firm Belaruskali. Uralkali has predicted as much as a 25 per cent decline in the price of potash in the second half.
The marketing venture and another partnership, Canpotex, controlled some 77 per cent of global potash supplies. Canpotex comprised Canada's Potash Corp of Saskatchewan, Agrium - North America's third-largest producer - and the Canadian unit of American firm Mosaic.
Feng said the depressed market conditions would bolster its bargaining position when making acquisitions.