All,

Thought you might like to read the following article that highlights the potential for an Asian bidding war for the assets that Legend is prepared to sell off.

This article was published in Intelassia on Friday.

Japan struggling in fertilizer race

03/Dec/2010 Intellasia | Asahi Shimbun

3 Dec, 2010 - 9:47:24 AM

With China apparently set to expand its stockpiling plans, Japan is struggling amid intensifying international competition to grab part of the limited supply of fertilizer minerals in the oligopoly market.

China on Wednesday announced it would place a 110-percent duty on some fertilizer exports through Dec. 31, triggering bitter memories among Japanese businesses of Beijing's de facto ban on rare earth exports this fall.

"The situation has come to resemble the rare earth case," said a senior official in charge of fertilizers at a major trading house. "China likely intends to secure fertilizers for long-term domestic use."

China had in the past temporarily raised export duties on fertilizers during peak seasons of domestic production. And Japanese businesses had expected an increase to 30 or 40 percent possibly next year.

But the sudden and sharp rise on Wednesday could effectively block those exports to Japan, industry officials say.

China accounts for almost one-third of the world's production of phosphate rock, an essential ingredient of ammonium phosphate used in fertilizers. The export duty on ammonium phosphate was raised from less than 10 percent to 110 percent.

Fertilizer ingredients, much like rare earth minerals and iron ore, are apparently becoming a strategic material vital to the national interests of China and other countries.

Global demand for fertilizers is expected to soar as the world's population is projected to increase to 9.1 billion in 2050, from the current 6.9 billion.

The three key fertilizer materials are nitrogen, phosphoric acid and potassium. Only nitrogen fertilizers can be industrially produced. Phosphoric acid and potassium must be mined.

The world's three top producing countries for phosphate rock and potassium account for more than 60 percent of global production.

The international price of ammonium phosphate more than quadrupled in spring 2008 from the 2006 level as grain prices shot up. The price now hovers around double the level of 2006.

While giant resource companies are getting into the mix, a sense of "resources nationalism" has also emerged.

BHP Billiton, a British resources major, launched a hostile takeover bid this summer for Potash Corp. of Canada with a $40-billion (3.35 trillion yen) offer.

But the company abandoned the plan after the Canadian government rejected the TOB on grounds that it runs counter to its national interests.

The United States, too, has gradually reduced phosphate rock exports since the latter half of the 1990s.

Japan is on the opposite end of the growing competition. The country relies on imports for all phosphate and potassium used as fertilizer ingredients.

The farm ministry is carefully monitoring price trends, while the industry ministry is said to be considering building stockpiles.

Japanese trading companies are already taking action.

Mitsui & Co. in April announced that it has agreed with Vale S.A. of Brazil to acquire a stake in a phosphate mining project in Peru.

Hiroyuki Kojima, general manager of Mitsui's fertilizer resources department, said the acquisition was intended to ensure a stable supply for Japan as well as sales to emerging economies.

"If the raw material market becomes more oligopolistic, we will have no choice but to accept a demand for a price increase," he said.

Sumitomo Corp. and other trading houses are pursuing potassium mining rights.

Domestically, Japan's fertilizer producers have been criticized as inefficient.

Industry officials say a delay in the industry's structural reform has left about 30 makers unable to compete internationally.

A trading business source said a failure to procure raw materials will lead to fertilizer price increases.

"That will add to the difficulty in farm management," the source said.