Potash likely to spurn China

Potash Corporation, the world's largest fertiliser producer, probably doesn't want China to win control in a takeover war with BHP Billiton, says an analyst at Beijing Orient Agribusiness Consultant.

"China's potash demand will be more substantial in the long run than that of Brazil's or India's," said Xu Hongzhi.

"Who would want their biggest customer potentially to take control and tell them what to do with their product sales prices?"

BHP Billiton, the world's biggest mining company, last week made a hostile US$40 billion ($56.65 billion) offer for Potash after the Canadian company rejected an approach as "grossly inadequate".

Ian Henderson of JP Morgan Chase said China might bid for Potash because it was dependant on the company's imports.

Xu said several Chinese companies might be able to afford to buy Potash.

"The question is whether the company or the Canadian Government will allow their strategic resource to be controlled by the Chinese."

Rival bidders for Potash might include Vale, Rio Tinto Group and groups in Russia and China, the world's biggest user of fertiliser with about 30 per cent of global consumption, said Macquarie Group.

Potash owns 22 per cent of Sinofert Holdings, a listed unit of Sinochem, China's biggest chemicals trader.

In the absence of a higher bid from BHP, Potash sees its best alternative offers coming from companies including Sinochem and Sinofert, two people familiar with the matter said last week.

"I don't quite believe the speculation that Potash is seeking Chinese help," said Xu. "It might be a smokescreen to entice higher bids."

State-owned Chinese companies might not be able to act fast enough to bid because an investment of that size would need approval from China's Cabinet and Premier, he said.

China is the second-biggest importer of the crop nutrient, after India. Chinese demand for potash is tipped to grow 5 per cent to 6 per cent a year in the next decade.

The country buys almost half of its potash need. Last year that was about 7.25 million tonnes of potassium chloride equivalent.

- Bloomberg