Potash Fertilizer "World War" &Nbsp; How To Resolve The Embarrassment Of Chinese Style

One of BHP Billiton

In August 18, 2010,

Since then, it is like a strange novel. The version of the takeover has changed from the commercial case itself to a touchstone to test the prospect of global food supply.

As of early September, dozens of enterprises and financial institutions including China, Canada, Australia, Russia and the United States were involved, and hundreds of billions of dollars were in the dark.

China, a big agricultural country, is also inevitably involved in this battle.

"Bad boy" BHP Billiton

BHP, which has been playing the "bad child" in the field of global resources, has opened potash fertilizer this time.

BHP Billiton has made two rounds of exploratory contacts before the hostile takeover bid.

In August 12th, Goris, chief executive of BHP Billiton, proposed to PotashCorp CEO William Doyle to merge the two companies, which was rejected by the latter. In August 13th, Jacques Nasser, chairman of BHP Billiton, sent a letter to PotashCorp, chairman of Dallas Howe, to reiterate the proposal, which was rejected again.

BHP Billiton, the two time that it has been rejected, has split its face and bypassed the PotashCorp board of directors. "We decided to make an offer offer directly to shareholders," Jacques Nasser said. The price offered by BHP Billiton was $130 / share, which is 32% higher than the average premium of the PotashCorp Stock Exchange on the same date 30 days.

Subsequently, BHP Billiton began to cram and merge in the Canadian potassium mine market, successively taking Jansen, Boulder, Y0ung, Burr, Melville and other potash development projects.

In just 3 years, BHP Billiton has more than 10 thousand and 17 thousand square kilometers of potash rights in Canada and Ethiopia respectively. According to the conservative estimation of China's potash fertilizer industry, BHP's annual capacity in the field of potash fertilizer has exceeded 10 million tons, while the global potash production capacity in 2009 is 43 million tons.

For BHP Billiton, PotashCorp is definitely a bigger piece of fat.

Goris also does not deny that "this is a valuable opportunity to acquire world class portfolio."

BHP Billiton's takeover offer shows that PotashCorp is the world's largest fertilizer, related industrial and feed Integrated Company, and the world's largest potash producer.

In 2009, its potash production capacity was about 11 million tons, accounting for 20% of the world's total.

If PotashCorp is successfully acquired, the BHP Billiton will be no match.

Official data from PotashCorp show that, with the development of related mines, its production capacity will increase to 17 million tons in 2015, while other BHP's potash mines will have nearly 8 million tons of capacity, which will account for 60% of last year's global potassium production capacity.

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Global potash campaign

A head of Sinochem Group told the finance and economics weekly that BHP Billiton's acquisition is not only to increase market share, but actually it is seeking to play an active regulator in the international supply and demand relationship of potash by maximizing the control of resources.

BHP Billiton's acquisition is becoming the focus of the world, and many forces are involved in the acquisition.

According to PotashCorp's board of directors, "countless potential competitors" are competing to offer them.

Of course, there are BHP Billiton and the BHP Billiton in the field of iron ore, also known as the "three major mines" Rio Tinto, Vale, the latter two of the previous expansion in the international potash market did not lose BHP Billiton.

In 2008, Roger Agnelli, President of Vale Valley, made it clear that Vale will strive to become the main fertilizer producer and distributor in 4 years.

Under the guidance of this train of thought, Vale has been in the market of potash fertilizer in recent years, and there is no lack of contact with PotashCorp.

Chinese enterprises also joined the battle group.

Sinochem Group, Chinalco, Minmetals, CNOOC and Magnolia investment have become one of the potential competitors.

According to foreign media reports, Sinochem has hired HSBC as its consultant to purchase the case.

In September 2nd, a Chinese potash expert who was close to Sinochem told the finance and economics weekly that the investment bank recommended that Sinochem abandon its overall acquisition of PotashCorp, but combine it with China's $300 billion sovereign fund to choose a large number of shares or form a joint venture with PotashCorp.

"As the largest potash fertilizer enterprise in China, we have very good cooperation with PotashCorp, and we will pay close attention to this acquisition, of course."

Li Qiang, director of Sinochem office, told the finance and economics weekly that although he did not explicitly intervene in the takeover, he acquiesced that Sinochem was working with HSBC.

As early as 2006, BHP Billiton joint venture to invest in Canada's Canada's potassium mine and began to enter the world's most abundant potash mining area; two years later, BHP Billiton completely annexed the 7338 to square kilometers of potassium exploration rights.

More market rumors, Rio Tinto is preparing a plan to join Chinalco in the acquisition of PotashCorp.

However, in an interview with the finance and economics weekly, Rio Tinto people in China reproduced the official opinion. "We do not comment on the rumours in the market."

"If a Chinese state-owned enterprise is putting its banner on the top of the potash industry, it may mean that the struggle in the agricultural geopolitical field will become more and more bitter."

FT wrote in Chinese net.

Chinese style embarrassment

As food supplies become increasingly tight, countries have begun to value potash as much as oil, and regard it as a strategic commodity that is being pursued.

For a long time in the past, potash has not been treated as a strategic resource in China.

Although BHP Billiton has opened up a lot of potash in the potash field, some Chinese potash companies are not worried about it.

At the beginning of this year, an executive from the China Agricultural Group admitted in an interview with the financial and Economic Weekly that BHP Billiton only started the layout of the potash mine, which is far from the scale of the future, and it is hard to say that it can grow into a potash giant.

China's potash deposits account for only 1.6% of the world's total, while 56% of the total cultivated land in the country is short of potassium. More importantly, more than 50% of potash fertilizer needs to be imported every year in China.

According to the statistics of China Inorganic Salt Industry Association, in 2008, 5 million 170 thousand tons of potash fertilizer were consumed throughout the country, of which 2 million 470 thousand tons were produced and 2 million 700 thousand tons were imported, accounting for 55% of the total consumption.

This import ratio basically reflects the current situation of potash import in China, and in 2007 it accounted for 72% of the total annual consumption.

"Potash fertilizer is actually equal to grain."

Morgan Stanley analyst Vincent Andrews said.

It is also in the dual demand of grain and potash fertilizer that only between 2006 and 2008, the price of potash fertilizer surged to no more than US $150 / ton to nearly US $1000 / ton.

With the development of BHP Billiton PotashCorp, the market structure of potash fertilizer will seriously detrimental to China. It also worries Qi Zhaoying, Deputy Secretary General of the salt branch of China Inorganic Salt Industry Association.

Prior to this, Qi Zhaoying once handed a research report on potash fertilizer to the Ministry of industry and commerce.

The report points out that China is seriously short of potash fertilizer, and the international potash giant has begun to encircling resources. In order to prevent the embarrassment of reproducing iron ore type, the government needs to increase its support for enterprises going abroad.

Around 2009, Canadian Chinese Zhou Danyuan once sold her Potash Corp to China for two times, but no Chinese company expressed interest. Her company was eventually bought by BHP Billiton in January 28, 2010 at a high price of 2 billion 200 million yuan.

In fact, Zhou is in charge of the second largest potash fertilizer enterprise, Athabasca potash company, which has more than 4000 square kilometers of potash rights.

Once BHP has acquired PotashCorp, the entire potash market and pricing system will be in control.

One and a half months before the deadline for the BHP Billiton deadline, October 19th, domestic public opinion has shown concern, similar to "China's agricultural killing" remarks have been circulated.