EDITOR: | January 30th, 2013

The Pulse: India’s potash crisis; China’s rare earth exports; Upbeat on uranium

| January 30, 2013 | No Comments

the-pulse-300x25412India is now seriously under-applying potash, accord to the latest commodity bulletin from Scotiabank. This is leading to an imbalance in nutrient application which is of increasing concern to the country’s domestic fertilizer association. It is, not unsurprisingly, contributing to low crop yields – at a time when the government in New Delhi is urging India’s farmers to lift harvests to feed the ever-increasing number of mouths. It is expected that by 2050 there will be 1.6 billion people living in India.

Scotiabank says the nitrogen to potassium ratio of fertilizer application is now 10:1 – the optimal is 2:1. “If India is to improve its yields – important for food security – it must step up potash application again,” says Scotiabank’s Patricia Mohr. She expects India to resume buying potash in the coming months, although the order pick-up may be modest. Mohr expects world potash demand to rebound in 2013 to about 54 million tonnes as many buyers restock.

Spot potash prices inched lower from $456/tonne in November to $452.50 in December and to $445/tonne in early January. They were $500/tonne a year ago. Mohr says prices likely moved lower still in later January with Canpotex’s new spot pricing for South-east Asia being $450/tonne. These figures do not include contract prices, mainly to China.

In 2012, world potash shipments fell to an estimated 48 million to 49 million tonnes, down 13% on the 54.8 million tonnes in 2011. While China’s imports rose in the first 10 months of 2012, China deferred contracts in the second half.

As noted above, India has been deferring potash purchases with farmers preferring urea fertilizer. Urea is produced within India while potash and phosphate have to be imported. In addition, a 25% depreciation in the rupee against in the US dollar from mid-2011 to mid-2012 forced up domestic potash prices.

Scotiabank notes that delays in orders from India and China encouraged others – including Malaysia and other South-east Asia customers – to hold off in expectation of lower prices.

RARE EARTHS: Japan’s Nikkei news service has put its own calculation on China’s rare earth export story. Those exports “fell off a cliff” in 2012, the report says, confirming other reports filed here on ProEdgeWire. The Nikkei calculations, based on data from China’s General Administration of Customs, show China earned $906 million from rare earths last year, a decline of 66% on 2011 (due to a combination of falling volumes and plunging prices).

The figures are a little different from those supplied to ProEdgeWire by China correspondent Hongpo. The Japanese calculations put the export volume at 16,265 tonnes, roughly half the 30,996 tonne ceiling imposed by Beijing. This represented a third consecutive annual drop.

The Nikkei puts it down mainly to Japanese efforts at what we here have termed “reduce, replace and recycle” policies to cut the amounts of REE used in new technologies. This all began after China halted sales to Japan after the 2010 Senkaku Islands dispute.

Meanwhile, Chinese companies are pinning their hopes of the recent cutbacks of production to bring prices back. Yet, says the Nikkei, the speculative investors in the REE sector have disappeared. “Speculative investors that had bet on further demand increases for rare earths have pulled out, cutting their exposure even as it meant selling at a loss,” it reported.

URANIUM: If the comments out of Australia’s uranium sector are any guide, the optimism is spreading (even though the price now is well below what would justify most new mine developments).

Bannerman Resources (ASX:BMN / TSX:BAN) owns the Etango project in Namibia, located close to the two operating mines, Rossing and Langer-Heinrich. Etango contains an estimated 263,000 tonnes of uranium, the seventh largest undeveloped deposit in the world.

In his latest quarterly report, CEO Len Jubber sets out why 2013 will be a positive year for uranium. In China, Unit 1 at the Ningde nuclear power plant was commissioned in December with three other reactors under construction. Construction has begun on a third reactor for the Tianwin power plant. China is building five or six reactors a year.

He sees the election of the pro-nuclear Liberal Democratic party in Japan as a positive. He’s hopeful about India getting its nuclear act together, notes the nuclear plant development in the United Arab Emirates along with plans by Saudi Arabia to green-light nuclear power.

His words echo those of other emerging players. Jubber writes: “As a result of long lead-times of bringing new uranium mines into production, and low uranium prices over recent years, new production sources are unlikely to come on stream at the anticipated costs and to the extent currently anticipated by market participants. Existing uranium producers are also experiencing production and economic challenges,” he writes.

In other words, supply squeeze ahead.



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