Report: China launching search for domestic potash sources amid concern about imports

Thursday, October 7, 2010

China launching search for domestic potash sources

BEIJING — China has launched a search for domestic sources of potash to ensure stable supplies of the mineral used in fertilizer, a state news agency said Friday, amid official concern about mining giant BHP’s bid to acquire a major Canadian producer.

China is a major potash importer and says a BHP Billiton Ltd. takeover of Canada’s Potash Corp. could boost prices and hurt Chinese farmers. A state company reportedly is considering a possible competing bid to BHP’s $39 billion offer but Canadian officials are wary of allowing Chinese ownership.

The Ministry of Land and Resources has spent 50 million yuan ($7 million) this year looking for potash in China and plans to spend 100 million yuan annually through 2015, Xinhua said, citing ministry sources.

The communist government sees food supplies and farming as a matter of national security and is uneasy about the prospect of BHP, already a key iron ore source for China’s steel mills, expanding its role in supplying materials needed by Chinese industry.

China’s potash consumption is forecast to rise 4.5 percent to 7 million tons this year, Xinhua said, citing the director of the Shanghai Potash Technology and Research Center.

Potash sources found so far in China can meet its needs for 20 to 30 years, the report said, citing the China Geological Survey.

Beijing has warned of a potential “potash monopoly” if BHP succeeds in acquiring Potash Corp. of Saskatchewan. But industry analysts say there still are enough other sources that such a change is unlikely to affect prices.

Potash has called BHP’s bid too low and says it is talking with other parties.

A Chinese business magazine said last month a state-owned chemical company has asked for Cabinet permission to make a bid for Potash but no Chinese bidder has made a formal offer.

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