IFA '11: Indian MOP negotiations remain in deadlock

26 May 2011 13:52  [Source: ICIS news]

MONTREAL (ICIS)--Negotiations between major potash fertilizer suppliers and Indian buyers remain in deadlock, despite hopes by a Canadian producer for a resolution during the International Fertilizer Association (IFA) convention in Montreal this week, Indian buyers said late on Wednesday.

Bill Doyle, CEO of Saskatchewan-headquartered Potash Corp, told investors earlier this month that United Arab Emirates-based IFFCO was considering a price of $450/tonne (€320/tonne) CFR (cost & freight) plus credit, even though the government subsidy only allows Indian muriate of potash (MOP) imports at $420/tonne CFR.

Suppliers, including the Minsk-headquartered Belarusian Potash Company, however, have been unwilling to budge from a price near $495/tonne CFR, which already represents a discount from established international MOP prices of $510/tonne CFR.

Indian MOP demand, totalling about 6.1m tonnes last year, accounts for almost 15% of global potash demand.

The Indian government announced in April that the kharif season, or summer harvest, would require 2.26m tonnes of potash.

In a surprise move in April, a top Indian fertilizer official announced the country would take a “holiday” from MOP imports because of exorbitant prices.

Despite more shipments due later this month from Tel Aviv-headquartered Israel Chemicals Limited, Indian buyers suggest the country will require more of the nutrient by July. That would enable Indian farmers to maximise crop yields during the favourable monsoon season that government weather forecasters have predicted.

One agronomist, who works closely with fertilizer balances in developing countries, says that if the Indians maintain an import “holiday” this year, it will put overwhelming pressure on the country to secure more potash imports next year. However, prices by then may be even more painful for the Indian government to accommodate.

IFA officials say the bullish trend of the market will continue during the next five years, underpinned by high agricultural commodity prices and rising food and biofuel demand.

An interesting result of the MOP stalemate between India and potash suppliers is that the Chinese, who typically settle second half 2011 MOP contracts in June, have started price discussions earlier than in previous years.

One Chinese trader says that if the Indians wait too long to settle their contracts, China may be at an advantage to secure a slightly lower price, especially if producers feel pressured to commit inventory for the third quarter of 2011 while prices are firming.

Other Chinese sources, however, say this is unlikely for historical reasons and because Chinese buyers generally prefer to negotiate prices based on finalised Indian contract prices.

($1 = €0.71)

For more on potash and fertilizers, visit ICIS Pricing Fertilizers
For more on Potash Corp and other companies, visit ICIS company intelligence

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

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