Potash Fertilizer Fights Difficulties Shows Dilemma in Chinese Warfare

China cannot but be vigilant about BHP Billiton’s move to acquire Canadian potash fertilizer companies. Once it succeeds, China, as the largest importer of potash fertilizers, will be subject to its monopoly and repeat its iron ore accidents; and once the only potash mine China has mastered abroad, Nakagawa Mining Co., Ltd. will also fall into the hands of BHP Billiton, equaling even the only outlet. Being pinched by others, no chance to breathe. Is China participating in the bidding or is it defending?

Recently, Sun Ximing, the owner of a domestic private enterprise developing potash mines in Canada, was called upon by the National Development and Reform Commission to return home urgently to report on the operation of potash mines.

Sun Ximing’s company, Zhongchuan Mining Company, began exploration in Canada several years ago. The outbreak of the financial crisis in 2008 provided a good opportunity for the company. A total of 96 square kilometers of the KP-488 area was sold by the landlords due to the financial crisis, and Sun Ximing took over decisively, thus owning Chinese enterprises. The only potash resource overseas. However, because the company is a small business, the funds are short, and the project is difficult to operate, they frequently return to the country. However, domestic companies are not interested. When he was guilty of blasphemy, the world’s mining giant BHP Billiton came to the door and wanted to buy at a high price.

BHP Billiton’s move has aroused domestic alertness. At present, China is worried about BHP Billiton's acquisition of Canada's Potash, the world's largest fertilizer producer. Because once the Potash is taken, Canada’s resources will be controlled by it. China, as the largest potash importer, will be subject to its monopoly and repeat the iron ore mistakes; and once the only potash mine that China holds overseas will also fall into BHP Billiton. It is equal to even the only outlet is pinched by others, and there is no opportunity for gasping.

BHP Billiton is the oldest family in China. In the iron ore market, the world’s top three miners, including it, closely follow the lifeblood of the Chinese steel industry and demand whatever price they like. This has not yet finished. BHP Billiton, who has tasted the monopoly of sweetness, has to reach out into the potash field and expand its monopoly interest.

The current situation is very favorable. Prior to the acquisition of Potash, BHP Billiton has already had an early victory and bought Canada’s second-largest potash fertilizer company, Athabasca. If the acquisition of Potash is a long-term wish, it will almost completely occupy Canada’s potash resources. The remaining Potash Mine Company's potash mine does not have much for BHP Billiton. But BHP Billiton wants to include it all.

The Nakagawa Potash Mine, which is dispensable for BHP Billiton, is of great significance to China.

It is the only potassium mine currently controlled by China. The total reserves are nearly 900 million tons, while the total proven reserves in China is only 1 billion tons. The project is close to BHP Billiton's acquisition of Potash, which is in Saskatchewan, Canada, and is also one of the 14 cooperation agreements signed between the government of China and Canada this year. If this position is to be lost again, China can only butcher.

It is understood that as early as 2003, BHP Billiton aimed at Potash, and from the beginning of 2006 in the global potash distribution.

It's all money

Of course, merely guarding the Nakagawa Potash Mine will not reverse the overall situation. Stopping BHP Billiton from getting Potash is China's goal of urgent action.

Following the rejection of the purchase of the world’s largest fertilizer producer, Potash, with a share price of US$130 per share in cash, the mining giant BHP Billiton stated on August 18 that it would issue a share purchase offer of $39 billion directly to Potash shareholders.

BHP Billiton's acquisition offer shows that Potash is the world's largest comprehensive fertilizer, related industrial products and feed company, and the world's largest potash fertilizer producer. In 2009, its potash fertilizer production capacity was approximately 11 million tons, accounting for 20% of the global share.

If the successful acquisition of Potash, BHP Billiton global potash boss will no one to counterbalance. Potash's official data shows that with the development of relevant mines, its production capacity will increase to 17 million tons in 2015, and BHP Billiton's other potassium mines will have nearly 8 million tons of capacity at the end of the year. This total capacity accounts for last year's global potash production capacity. 60%.

As China is the world's largest consumer and net importer of potash, it is also one of Potash's largest customers. At the same time, Potash is the second largest shareholder of Sinofert, a subsidiary of Sinochem Group, which holds 22% of the shares. What is more, Sinofert is the second largest shareholder of potash fertilizer in the Qinghai Salt Lake, the largest potash fertilizer company in China, at 000792.SZ. Therefore, if BHP Billiton succeeds in acquiring Potash, it means that Sinofert will indirectly fall into its own hands and endanger the safety of the domestic potash industry.

Although Potash has not yet arrived, BHP Billiton has bought Athabasca at a cost of 341 million Canadian dollars and has potash interests in excess of 4,000 square kilometers. After the BHP Billiton acquisition, the planned production capacity also jumped to more than 10 million tons, reaching more than 20% of the current global potash fertilizer production.

Rio Tinto and Vale are also trying to monopolize the market. These three major miners enjoyed huge profits from the monopoly of iron ore, and they now want to monopolize potash. Once successful, the biggest victim is China.

As the largest potash fertilizer importing country, China's annual potash fertilizer consumption is between 8 million and 10 million tons, of which about 50% depends on imports. Many people believe that China will not sit in for control of BHP Billiton's control of the Canadian potash industry, which accounts for one-third of the global potash fertilizer market, and will once again be trapped in a situation similar to that of imported iron ore.

Whether China will stop BHP Billiton’s acquisition of Rio Tinto just two years ago will trigger further speculation.

According to expert analysis, in order to avoid unfavorable situations, China can adopt two approaches: one is to start blocking trading procedures, and the other is to buy control rights. Block trading procedures, need to buy 10% to 20% of the shares to stop the block. In this respect, Chinese companies have somewhat more experience: In 2008, Chinalco joined Alcoa to temporarily prevent BHP Billiton from acquiring Rio Tinto. Of course, BHP Billiton later achieved "indirect cooperation" with Rio Tinto's "cooperation" in Western Australia.

If the acquisition, although almost all of the Chinese-funded enterprises including Sinochem, have insufficient assets, they will be able to obtain the country's financial resources, including the possible soft or sovereign wealth of China's state-owned banks.** China Investment Corporation CIC support.

Stop BHP Billiton's acquisition of Potash, the key is money. Because Potash is not really not selling, but the price. After rejecting BHP Billiton’s $39 billion hostile takeover bid, Potash sought worldwide companies that could offer competitive quotes, and claimed that the “innumerable” potential competitors’ bids would be the most important factor in determining whether the company sold or not. factor.

In addition to the Sinochem Group, Chinese companies trying to join in the acquisition battle include Chinalco, Minmetals and CNOOC. It is reported that Sinochem Group has consulted the Potash company’s board of directors in Canada on the possibility of bids last month; China’s Hopu Investment ** had tentatively issued Potash’s bids at the end of August, but its price was not high. A new bidding offer is currently under study.

In addition, there is China International Finance Corporation. This is the main force of Chinese enterprises overseas in China. It has business licenses in many capital markets, including domestic and foreign countries, and it is favored by both parties in the operation of international projects.

Is the bidding alone?

However, some experts have pointed out that they must be wary of being deceived. Taking into account that the current purchase price is actually very high, China's participation in the acquisition will also push the price higher, even if the final successful bid, the significance is very limited. In the current global food market into the stage of tension, the value of potash fertilizer has returned to fiery. At this time, whether China should be twisted with BHP Billiton and raise the price is worthy of careful deliberation. It is dangerous to keep bidding.

It is worth pondering the fact that the best time and opportunity for the acquisition of potash have been missed. Baba BHP Billiton's acquisition of the Babaska company once gave China low-cost buying opportunities. The company originally belonged to Canadian-Chinese Zhou Danyuan. Before and after last year, Zhou Danyuan once came to China to sell it twice, but no Chinese companies expressed interest.

On the contrary, the sensitive smell of BHP Billiton was driven by the wind and it was acquired on January 28 this year for 341 million Canadian dollars. The mine owns more than 4,000 square kilometers of potassium salt. BHP Billiton has acquired Potash with a capacity of 17 million tons, and US$39 billion has not been able to buy it; while Athabasca, whose purchasing capacity has jumped to more than 10 million tons, has spent only 341 million Canadian dollars. The price of cheap is known.

It is reported that in recent years, the price of potash has fluctuate greatly. In the two years from 2006 to 2008 alone, it has risen from less than US$150/ton to nearly US$1,000/ton.

Some analysts pointed out that China should calmly deal with international acquisitions instead of risking huge investments in acquisitions. It is better to invest state-owned capital in the development of domestic potash fertilizer resources and related railroad transportation and other potash fertilizer transportation. In China's potash fertilizer resources, transport capacity is a key link. Faced with drastic changes in the international market, avoiding the peak of external competition and building more internal strength, it seems relatively appropriate.

On the contrary, if the same huge investment is made, then investment in the construction of domestic potash fertilizer resources and transportation capacity will have a greater proportion of investment return and success. To be sure, China cannot be too simplistic, considering BHP Billiton's acquisition of Canadian potash as a lure to China. However, China should not ignore the negative benefits of BHP Billiton's promotion of the market at this time.

At present, the domestic potash fertilizer production capacity is mainly concentrated in Golmud, Qinghai, and Lop Nor, Xinjiang. These areas are also the focus of future development. According to the potash company’s expansion plan, the total domestic potash fertilizer production capacity is expected to increase from the current production capacity of approximately 5.5 million tons to approximately 10 million tons in the future, and will double.

Qinghai Salt Lake Potash Fertilizer Company is the largest potash fertilizer company in China. The annual output is about 3 million tons, accounting for 30% of the entire domestic consumer market. The proven liquid potassium chloride resources in Chaerhan Salt Lake are 145 million tons. Potash resources amount to 296 million tons.

In addition, all Chinese companies participating in bids are all state-owned large-scale state-owned enterprises. Compared with private enterprises, Western countries are more resistant to these companies. Canada has already made a negative statement. For example, Potash, Governor of Canada’s Saskatchewan Province, where Potash is located, said that a company controlled by one of the world’s largest potash fertilizer importing countries holds a large number of Potash companies, one of the world’s largest potash exporters. The shares do not meet the best interests of the province.

Exporter alliance

In 2007, 72% of China's potassium fertilizer consumption came from imports. Of the import sources, Canada, Belarus and Russia accounted for 70%-80%.

On the surface, there are three giant potash suppliers in the world: Canpotex (composed of Potash in Canada, Mosaic in the United States, and Agrium in Canada), IPC (composed of Russia's Uralkali, Silvinit, and Belarusian BPC) and Israel's Israel Chemicals LTD. Diversification. In fact, the three giants are enough to form a monopoly, which has been fully reflected in the iron ore inter-Korean trade.

At present, like the iron ore trade, the world's three largest potash fertilizer alliances have gradually formed a community of interests in price negotiations. If Potash was successfully acquired by BHP Billiton, Potash production will exceed 25 million tons in 2015. This figure will account for half of the current global potash fertilizer consumption, and it will inevitably squeeze the living space of other manufacturers, leading to long-term price increases.

Interestingly, the world's three largest potash fertilizer alliances have been controlled by the world's three largest iron ore alliances. Russian mineral potassium producer Uralkali sells 10%-15% of its shares to foreign investors. Rumors Rio Tinto is considering investing. It has been reported that Rio Tinto has sent representatives to visit Uralkali and may be prepared to pay a 50% premium over the current share price. Russia is home to 22% of the world's potassium carbonate reserves. The two Russian producers Uralkali and Silvinit, Belarus Belarusi joined, and the total market share of the three companies reached a dreadful 45%.

Prior to this, Vale also tried to get involved.

Some experts believe that China should seek alternatives to potash. For example, the promotion of straw returning will reduce the amount of potash fertilizer. Even if BHP Billiton acquires Potash, there are other ways for China's potash sources. It is reported that China's exploitation of potash in Laos and other places is more effective.