Potash is a key fertilizer in agricultural production, and it's also a fairly rare resource. If BHP's hostile takeover bid is successful, it could drive up global potash prices, causing a headache for grain producers like China.

China relies on potash as a key crop nutrient. But the resource is in short supply in the country. In 2009, demand for potassium hit 10 million tons in China. 70 percent of that was imported, making China the world's largest potassium buyer. With such high stakes, it's no wonder China is keeping a keen eye on the BHP-Potash takeover drama.

China's largest potash production base is in western Qinghai province, where salt-collecting boats work 24 hours a day.

Xu Desheng, Worker of Qinghai Salt Lake Group, said, "The best season for production is summer - in July, August, and September. We take advantage of the weather and wind conditions, to evaporate the haloid water."

China's three biggest potash producers churn out nearly 5 million tons of the fertilizer each year, and Qinghai's Salt Lake Group accounts for nearly half of the country's total supply.

Li Xiaosong, Chiarman of Qinghai Salt Lake Group, said, "Our potash supply is increasing, and it's determined by demand. And we're considering boosting production in the near future."

Gao Yunlong, Deputy Governor of Qinghai Province, said, "China lacks potash resources, so we have to rely on imports. If the Salt Lake dries up, import prices for potash will surge dramatically."

Aside from Qinghai, potash can also be found in Xinjiang Uygur Autonomous Region. But the China's potash reserve only accounts for 3 percent of the world's total. Under the current rate of development, domestic supply of the fertilizer is likely to dry up in the next 30 years.

Go to Forum >>0 Comments