China May Launch Monopoly Probe on Potash Firms

(Beijing) -- Chinese authorities are likely to launch an anti-trust investigation into two recently proposed mergers and acquisitions of major potash producers, as the deal may affect the global pricing of fertilizer.

Australian resources major BHP Billiton recently offered US$ 38.5 billion to take over Canadian fertilizer producer Potash Corp. Meanwhile, two top Russian fertilizer producers, Uralkali and Silvinit, are discussing a possible merger.

According to China Business News (CBN), China's Ministry of Industry and Information Technology (MIIT), the State Administration for Industry and Commerce (SAIC), and major state-owned fertilizer producer Sinochem have held meetings to discuss the impact of the two deals on the global fertilizer market. And the anti-trust authority under the SAIC is considering a launch of an investigation into the cases.

In 2009, the global production of potash was 43 million tons. Potash Corp.'s capacity accounts for one fourth of the global total, said CBN report. And the merger of Uralkali and Silvinit will create the world's second largest potash producer with annual capacity of 11.5 million tons.

China consumes up to 10 million tons of potash every year, with imports comprising of more than 50 percent. The two merger cases triggered Chinese concern that it would strengthen the concentration of the potash market and weaken the bargaining power of importers.

On August 23, the board of directors of Potash rejected BHP's offer, calling it "grossly inadequate." Potash president and chief executive Bill Doyle said he is confident in seeking a better price for the company.

Potash is the second large shareholder of Sinochem's listing subsidiary, Sinofert Holding. Market insiders have said that Sinochem and Brazilian miner Vale are possible buyers for Potash. Caixin reported earlier that Sinochem is currently conducting a review on Potash but it is still unclear whether the company will offer a bid for Potash.