SDIC Xinjiang Lop Pot Potash Co., Ltd. production plant area. (photographed by Zhao Ge)

Australian mining giant BHP Billiton’s aggressive mergers and acquisitions with the world’s number one potash producer, Canadian Potash Corp, are still confusing. What would be the result? No one can give a bold prediction, but this together with tens of billions of dollars in mergers and acquisitions The case has set off a wave of global potash fertilizer market. China is the second largest potash fertilizer importer in the world after India. The Chinese potash industry is staring at everything that is happening.

What are they fighting for?
On August 12, BHP Billiton approached Canada Potash Corp on the acquisition issue, but was rejected on August 17. Soon, on August 18th, BHP Billiton promptly issued a hostile takeover bid value of $39 billion to its shareholders after being rejected by Canada Potash Corp. for only one day. The Canadian potash company actively contacted third parties to dismantle the BHP Billiton offensive, and a bloody battle was intensifying.

There is an old saying in China that a strong twisted melon is not sweet. BHP Billiton, which has always been good at ore mining operations, puts a bully on the top of the bow, because they believe that this time backhanded melons are also sweet.

Everyone knows that in the international market, potassium fertilizer is closely linked with large-scale food commodities. Although there is information showing that the current potash fertilizer production capacity in the international market is in surplus, its market prospects are generally optimistic. The potash fertilizer industry has a high threshold of entry. Currently, only 12 countries in the world have discovered potash mines, and it takes at least seven years for each new mine to be completed and put into operation. Canada Potash Corp. is currently the world's largest potash fertilizer producer. At present, Canada Potash Corp has at least 10 million tons of potash fertilizer capacity per year. This quantity is equivalent to 20% of the world's potash fertilizer consumption in 2008, and its acquisition is basically equal to control. International Potash Fertilizer Market's Leading Power and Controlling Power.

With demand and good control, it's no wonder that BHP Billiton, which is rich in money, has an ambition to Canadian potash companies. It seems that the expansion of multinational companies is essentially a battle for scarce resources.

In fact, BHP Billiton, which started with iron ore and gained huge monopoly profits in this market, did not start today with the ambition to control the international potash market.

As early as four years ago, BHP Billiton began to allocate potassium mineral resources globally. In July 2008, BHP Billiton acquired an area of ​​7,400 square kilometers of exploration in the potash basin of Canadian Potash Corp., Saskatchewan, Canada, and subsequently increased to 14,000 square kilometers. At the end of January 2010, BHP Billiton acquired Athabasca Potash Corp., located in Saskatchewan, Canada, at a price of $8.35 per share and a total value of $341 million. After completing this acquisition, BHP Billiton's potash production capacity will reach around 10 million tons per year. This figure is already 20% of the global potash fertilizer production, and it is China's demand for potash fertilizer throughout the year. If the merger is successful, BHP Billiton's potash production capacity will likely reach nearly half of global production capacity. In this way, BHP Billiton will achieve its goal of changing the global pricing of potash fertilizers - from annual pricing to market pricing, just as iron ore pricing patterns change.


Whether China will be more subject to people Canada and Russia are the world's two major potash fertilizer producing areas, and their international monopoly management has caused the prices of potash fertilizers to rise significantly. Even if the world was affected by the financial crisis in 2008 and the world's potash fertilizer demand decreased, China's import of potassium chloride (the largest potash fertilizer) price was US$600 per ton, which was still higher than the 2007 US$200 per ton. More than twice. Affected by this, China had to spend more than US$3 billion on imports of potash. The same amount of funds can be used to build a potash fertilizer company with an annual output of 4 million to 5 million tons.

Earlier this year, China received the world's lowest price of potash fertilizer at US$350/ton, which made many people laugh. However, this was obtained after nearly a year of hard work. Even once the resistance was stopped by interrupting the import of potash fertilizer, this was only a relatively reasonable price, and no one was allowed to kill it.

In view of the lessons learned from the import of iron ore, China is highly sensitive to this merger. Tian Yudong, Chief Analyst of China Post Securities, said that if BHP Billiton successfully acquires Canadian Potash Corp, it will definitely affect the potash price in the domestic market, and within 3 to 5 years, the global potash pattern will not change, and the monopoly situation of iron ore may be It will also happen again in the Chinese potash market.

However, some experts are calm about this situation. China International Minerals Industry Association, Potassium Salt (Fertilizer) Sub-Committee Deputy Director General Zhao Zhaoying recently stated at the 5th annual meeting of the China Inorganic Salt Industry Association Potassium Salt (Fertilizer) Branch that China has a mature negotiation model and comparison of potash fertilizers. Strong bargaining power, and with the increase in the self-sufficiency rate and the pace of going out, China's potash fertilizer supply pressure will become smaller and smaller. With the gradual commencement of production of some large projects, the self-sufficiency rate of potash fertilizer in China has been continuously rising. In addition, with the acceleration of the pace of going global, the supply capacity of potash fertilizer in China has formed its own scientific scale and the layout has become more reasonable. The situation is in line with the previous years. Compared with what has been improved, the production, market and demand have become more rational.

China Inorganic Salt Industry Association statistics show that after the conversion of potassium oxide, the output of potash fertilizer in China in 2009 was 3.207 million tons (refine, the same below), and the import volume was 1.249 million tons. The annual consumption was about 6 million tons, which was self-sufficient. The rate exceeds 51%. With the steady increase in domestic production and the increase in self-sufficiency, compared with other potash importers, the price of imported potash obtained through negotiations in China is at a relatively low level. Cinda Securities researcher Guo Jingyi predicted that the self-supply rate of potash fertilizer in China will continue to increase, reaching about 60%, and import pressure will further decrease. Although the supply of potash fertilizer in China is in short supply, but from a global perspective, the supply of potash fertilizer is in excess of demand, and there is no need to worry about a significant increase in the price of potash fertilizer.

On the other hand, industry experts also believe that China has a good terrestrial border trade with Russia and imports from Russia account for 40% to 50% of China's imported potash fertilizer. Therefore, the dependence on this typical seawater potash fertilizer in Canada is not Especially large.

Qinghai Salt Lake Group is the largest potash fertilizer producer in China. The picture shows the company's potash fertilizer loading site. (Photo by Wang Shijun)

The fundamental way out for potash fertilizer in China is where many people in the industry believe that Chinese companies should actively participate in preventing BHP Billiton from fully acquiring Canadian potash companies. They believe that the Canadian potash company is not only a potash supplier in China, but also the second largest shareholder of Sinochem Fertilizer, a subsidiary of Sinochem Group. If China Chemical Fertilizer does not want to fall into the hands of BHP Billiton, and to avoid repeating the mistakes of iron ore, China should consider joining the bid. If Sinochem Group can win the Canadian Potash Corp, it will not only bring benefits to China's potash resource protection, but also benefit Sinochem Corporation itself.

Li Qiang, a spokesperson for Sinochem Group, also told the media that the company is evaluating the acquisition.

However, some industry insiders believe that with more than US$40 billion in acquisition capacity, it seems unlikely that any Chinese company will purchase Canadian Potash Corp. On the one hand, BHP Billiton has erected a financial barrier with a bid of nearly $40 billion. If China participates in bids, prices will rise even higher, making the overall acquisition cost soar. On the other hand, if China's state-owned enterprises participate in the bidding of all shares, there are still variables in the Canadian regulatory authority's approval. Therefore, the most fundamental thing for China is to speed up the global potash distribution.

It is understood that the current domestic enterprises' exploitation of potash has achieved initial results. Chinese companies have four projects in Laos, one of which has already produced output; there are two projects in Canada; and two projects in Congo (Brazzaville). One of them is still negotiating. In addition to buying resources, domestic companies have adopted the form of purchasing equity to go abroad and share risks with foreign companies. However, it also faces various problems. For example, although Africa has mines, its infrastructure is poor. How to transport it after mining is a problem. Even mining in countries like Canada, companies may not be able to obtain real control rights because the relevant transportation routes are controlled by a handful of large companies.

Wang Xiaofeng, deputy director of the Industrial Development Department of the China Petroleum and Chemical Industry Federation, stated that we should step up the deployment of our potassium resource base abroad. If we develop in the base of potassium resources in Laos, if we extend through the railway line in the future, we will connect with the country. By then, Laos's potash fertilizer products are no less competitive than the potash fertilizers in Canada that are far away.

Yan Zhaoying pointed out that in view of the current status of China's potassium resources, we must: First, domestic potassium fertilizer production must remain scientific, stable, orderly and reasonable; Second, the potash projects that will go out, through the strong national policy support; It is actively developing new potassium resources. The general layout principle of China's potash fertilizer industry should be that through orderly competition and global competition, a domestic and imported, overseas three-in-one and three-point world chess pattern will be formed to woven into the market of China's potash fertilizer market, which can enter and retreat, Achieve long-term sustainable development. From the current data, the potash fertilizer produced by domestic enterprises in foreign countries has not yet formed a sufficient scale, and enterprises need to accelerate the pace of going out. If this goal can be gradually realized in the next 10 years, domestic production pressure will be reduced. For the potash deep processing industry, by adjusting the industrial structure, increasing technological transformation and mergers and restructuring efforts to form a large-scale large-scale enterprises, the product can meet the needs of the domestic market, but also occupy the high-end share of the international market. (Author: Ma Shougui)

BHP Billiton intends to acquire Canada Potash Corp., the world's largest potash fertilizer company. (Gang Hui photo)