India may be ready to compromise on MOP contracts

14 June 2011 11:08  [Source: ICIS news]

LONDON (ICIS) – The Indian government is expected to increase its potash import parity price within the next week, a major potash marketer said late on Monday.

“We’ve had an indication from them [Indian government officials] that an increase is coming,” the marketer said, adding that the price will probably be around $450/tonne cost & freight (CFR) (€310/tonne CFR), or just under.

The current import parity price was increased to $420/tonne CFR in April from $390/tonne CFR, yet there still remains a large discrepancy between Indian buying ideas and the price targeted by major producers, which is closer to the $500/tonne CFR mark plus credit.

A spokesman for Indian Potash Ltd (IPL), the government-run largest potash importer in the country, was adamant the subsidy will remain at $420/tonne CFR, however, and insisted that if that price cannot be achieved, then muriate of potash (MOP) will not be imported.

“There has not been any… tangible progress,” the spokesman said. “Yesterday we were talking to [suppliers], but we are still some way apart [in price ideas].”

But other market sources believe the Indian government will soon raise the subsidy level to around $450/tonne CFR. Major buyer Indian Farmers Fertiliser Cooperative (IFFCO) had viewed this figure favourably last month, but the government has been slower to warm to the higher price. However, Indian traders say political tensions are rising and the country will have to meet internal demand for potash quickly in order to secure shipments for July, when potash inventories will be too low to meet summer agricultural demand.

Historically, India has been able to negotiate a discounted price from major marketers Canpotex and Belarusian Potash Company because India’s MOP demand exceeds 6m tonnes, accounting for more than 10% of global potash demand. Last year, India negotiated contracts at the $370/tonne CFR level, beginning in February. But this year, the longer India has waited to settle contracts – particularly after some industry officials announced a “holiday” from imports in April – the higher prices have climbed.

Since India’s negotiations with MOP producers began in the first quarter of this year, major producers have boosted international sales price targets twice. As an example, Brazilian granular MOP spot sales prices have increased by nearly $100/tonne CFR. Canada-based Canpotex last week achieved 230,000 tonnes of spot sales into Brazil at the newest target of $550–560/tonne CFR for third-quarter shipments.

But the bullish nature of the potash market is worrying Indian buyers. One importer says his country must compromise on the issue this year because if it foregoes imports now, the MOP amounts India will have to secure for next year (likely to be at even higher prices) would be even more difficult for the government to subsidise.


For more information on potash and fertilizers, visit ICIS Pricing Fertilizers.

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

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