India gets discounts on existing potash deals
Potash suppliers have agreed to cut prices for Indian buyers on existing contracts to help them cope with the impact of a weaker rupee, although the size of the discount still needs to be agreed, Indian industry officials told Reuters.
Buyers were expected to seek lower prices for new deals after Russia's Uralkali abandoned the Belarusian Potash Co cartel, shaking up a market where nearly seven in 10 globally traded tonnes are supplied by either BPC or North American producer group Canpotex. If India can secure substantial discounts on existing contracts, it would underscore the scale of the shift in pricing power.
Sellers and Indian buyers have agreed on a cut, but are still discussing the size, P.S. Gahlaut, managing director at top potash importer Indian Potash Ltd (IPL), told Reuters.
An official with a Mumbai-based fertiliser company said the price cut would be more than 12 percent because the Indian rupee has fallen by around a fifth since Indian companies signed agreements in February, which has pushed up the local price of the dollar-denominated crop nutrient.
"Suppliers will bear at least half of the burden," the official said. "The Belarusian delegation last week made clear that it has no problem reducing prices reasonably for old deals."
Todd Coakwell, a spokesman for Canada's Agrium Inc, which owns Canpotex with partners Potash Corp of Saskatchewan Inc and Mosaic Co, said there was no change in the terms of Canpotex's existing contracts with Indian buyers. He said Canpotex continues to discuss a second-half potash supply contract with China's Sinofert Holdings Ltd.
Officials at Uralkali and Belaruskali declined to comment.
A source at a producer confirmed there were discussions to reduce the prices of current contracts, but said these were ongoing.
"The Indians are trying to renegotiate and reduce prices substantially. So far, no new price level has been agreed," the source said.
India agreed in February to buy nearly 4 million tonnes of potash for 2013 at $427 per tonne on a cost and freight (CFR) basis.
The reduction would be applicable for about the half remaining potash shipped in the next four months, said an official with a Delhi-based fertiliser company.
India, which together with China accounts for around 30 percent of potash demand, was forced to swallow high prices from BPC and Canpotex for a decade, but the collapse of BPC has changed that.
Representatives from Belaruskali and Uralkali are trying to persuade traditional buyers such as India and China to buy from them. Relations between Belarus and Russia are strained following the breakup of BPC.
Belarus last week detained the chief executive of Russia's Uralkali, the world's top potash producer, accusing him of inflicting severe economic damage.
- How much corn can the ethanol industry use?
- Economist: Taxing P could reduce risk of algal blooms
- Commentary: Government wants farmers to quit farming
- Ag markets made a generally mixed showing Thursday night
- What is the relationship between maturity group, yield?
- Commentary: Ambulance-chaser lawyers take on Syngenta