China and India to Start Talks for Improved Potash Prices

on Dec 19, 2012
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**Asian Purchasing Blocks Aim for Cheaper Terms from Major Suppliers**

China has delayed regular potash shipments since its $470-a-tonne accord expired June 30, while India’s last contract for a price of $490 a tonne concluded at the end of the first quarter, with potash supplies to the countries continuing through the third quarter of the year. Since their last contracts’ expiry, the two Asian nations havepostponed new accords with the aim of securing a cheaper supply. Now, according to a Bloomberg report from 19 December 2012, India and China are set to negotiate the biggest potash price cut in three years as they break a months-long deadlock in meetings with North American and Russian producers which dominate the crop nutrientmarket.

The paper cited marketing director of Russian potash fertiliser companyUralkali (LON:URALL, MCX:URKA),Oleg Petrov, who said that India has already entered negotiations with the world’s top producers, while China would start talks about a potash price cut in January or February next year.According to analysts at Credit Agricole Securities USA, Dahlman Rose &Co. and Goldman Sachs Group Inc, the Asian countries may agree to pay as little as $430 a tonne, which would be down at least 8.5 per cent from current potash prices. As the price that the Asiantop fertiliserconsumers pay for the crop nutrient provides a global benchmark for other contracts, such an agreement would affect the global potash market, analysts say.

Steve Hansen, an analyst at Raymond James Ltd., told Bloomberg: “It comes down to the negotiating power of these very large purchasing blocks [China and India]. They’re not reluctant to capitalise on that power.”
**“There is No Hurry”**
Currently, India has 700,000 tonnes of potash in inventory, which is enough to satisfy demand for the mineral until early March, said P.S. Gahlaut, managing director of Indian Potash Ltd., the country’s largest buyer. It will then need 3 million to 3.5 million tonnes of potash to last through 2014, he said in an interview last week.

!m[Mineral Prices Seen Falling as Asian Top Consumers Negotiate Biggest Discount in Three Years](/uploads/story/1064/thumbs/pic1_inline.png)
“There is no hurry in signing potash import contracts,” Mr Gahlaut said. Talks with Canpotex Ltd. — the offshore marketing arm that represents Potash Corp., Canada’s Agrium Inc. (TSE:AGU) and US-based Mosaic Co. (NYSE:MOS) — will begin later, he said despite the statement from Uralkali’s Mr Petrov’s that India has already started negotiations.

**Producers Respond by Cutting Production**
And while India claims that it can rely on inventories, potash producers cannot rely on current demand for the crop nutrient amid the prolonged deadlock between the major consumers and producers of the fertiliser. Potash companiesresponded to the months-long standstill with output cuts that will protect prices from an even steeper decline. Earlier this year, Uralkaliannounced plans to cut its production by half between December and March. The world’s largest fertiliser producer by market value, Potash Corp. of Saskatchewan Inc. (TSE:POT), has also responded by reducing its output. In October and November, the Canada-based potash producer announced a halt in production from a total of four mines for eight weeks. It also predicted 2013 shipments of 57 million to 58 million tonnes, compared to a September view of as much as 60 million tonnes.

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