China's Fertilizer Needs in View

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"China's goal is self-sufficiency in grain production."

As all eyes look to China for a possible competing offer for Potash Corp., the country’s fertilizer needs are increasingly in the limelight.

Underlying this interest is a mineral that China relies on to fulfill a goal considered paramount to national security—self-sufficiency in grain production.

China is critically short of potash, and increasingly relies on the mineral as urban growth shrinks arable land and Beijing seeks to boost crop yields. The country is using about 7% of global arable land to feed about 20% of the world’s population, according to Informa Economics, the US-based agribusiness consultancy.

The Chinese Academy of Sciences, a think-tank that advises the government, said in a recent report that China’s reliance on imports "may become a major threat to its fast developing national economy and long-term strategic needs."

China imported about half of its potash last year, much of it from Canada and Russia. Domestic production is 3m–4m tons annually, with potash demand last year of 7.9m tons. Farmers have cut their use of potash due to the economic crisis, according to Wang Ling of China Fertilizer Market Week, but pre-crisis demand stood at about 11m tons annually.

China has the world’s sixth-largest reserves of potash in the world and the country has been aggressively expanding domestic potash production, with output doubling between 2005 and 2009, according to statistics from China Chemical Reporter, an industry magazine.

But the domestic deposits are not large enough to match the country’s growing appetite for potash. Hence, China is working to develop resources in Laos, and earlier this year Chinese companies were reportedly eyeing a possible potash investment in Belarus.

"The prospect of a hungry and growing market in China creates a very positive operating environment in the years ahead."

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