Major doubts emerge over Indian potash import 'holiday'

04 May 2011 17:09  [Source: ICIS news]

LONDON (ICIS)--Signs are starting to emerge that India will have to re-enter potash fertilizer contract negotiations before June, industry insiders said on Wednesday.

The source, a seasoned industry professional based in India, said there was a significant need for potassium in the country’s soils.

“No scientist here would ever say potash is not a requirement,” he said, stating he hoped Indian stubbornness wouldn’t “muddy the waters” of the negotiation process.

Confirmation came during a conference call to investors last week by Bill Doyle, CEO of global fertilizer company PotashCorp.

“It’s important to remember that India has one of the worst N to K [nitrogen to potassium] ratios of any major agricultural country in the world,” Doyle said. “They know they need to move [on the prices].”

Concern over India’s potash requirements contradict statements made in April by Satish Chander, director of New Delhi-headquartered The Fertiliser Association of India.

He claimed India would take a “holiday” from importing muriate of potash (MOP) because of exorbitant prices. At the time, Belarusian Potash Company (BPC) had concluded spot sales of MOP into Brazil for $525/tonne (€352/tonne) CFR (cost & freight) and into South Asia at $510/tonne CFR.

A few weeks ago, Indian importers claimed potash inventories could last through the kharif, or summer planting season. Traders, however, wrote this off as a negotiating tactic. 

Russian-based producers say the last MOP shipments from previous contracts will arrive and be used by June, indicating India’s political and agricultural stability depends on new contracts to supply the second half.

Acknowledging the previous $390/tonne subsidy was not in line with the market, the Indian government recently raised the subsidy to $420/tonne CFR for MOP. Buyers, however, still want producers to give them roughly a 10% discount on the international price.

Doyle told investors a major buyer – New Delhi-based Indian Farmers Fertiliser Co-operative Limited (IFFCO) – had discussed a price at $450/tonne CFR, or roughly a 10% discount on international prices, but that level was not yet agreeable to its marketer Canpotex.

BPC says it has offered a price closer to the $500/tonne CFR mark plus credit, but it was refused.

Industry insiders say local demand can support the high prices of today’s market. India’s agricultural GDP grew 5.4% last year, the source argued, and farmers who profited from last year’s gains have the money to spend on fertilizers.

This, combined with the healthy monsoon season predicted by India’s official weather service, boosts farmers’ potential for a robust crop yield that could surpass last year’s, the source added.

There are no potassium deposits in India and in 2010 the country imported 6.1m tonnes of potash, almost 15% of global exports of the mineral fertilizer. The government announced last month that this year’s kharif planting season would require 2.26m tonnes of MOP.

($1 = €0.67)

For information on potash and other fertilizers, visit ICIS Pricing Fertilizers

By: Lauren Williamson
+44 (0) 20 8652 3214

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