Global potash prices are unlikely to spike from the shutdown of a flooded Russian mine, as producers will likely re-start idled capacity to pick up the slack, Indian fertilizer company Coromandel International Ltd said last week.
Coromandel buys about 500,000 tonnes of potash annually, mostly from Canpotex Ltd, the offshore sales arm of North America's Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc. Coromandel re-sells the fertilizer to Indian farmers.
India is the biggest global phosphate importer and relies completely on foreign potash supplies.
Uralkali OAO, the world's biggest potash producer, is starting repairs at the Solikamsk-2 mine in Russia, which accounts for 3.5 percent of global capacity.
"I don't think it will have any major impact (on potash prices) because I think demand is just beginning to revive," Kapil Mehan, Coromandel's managing director, said from Secunderabad, India. "And a lot of (miners) have taken production cuts also. That will enable them to come back online or improve their operating rates."
Coromandel, one of India's largest potash buyers, has supplies under contract through March 2015, and Indian stockpiles are slightly larger than normal, Mehan said.
Sluggish potash demand growth for the last eight years suggests producers should be wary of price spikes destroying demand, Mehan said.
"I suppose Uralkali will try to make up those volumes from their other mines and if that happens, I don't think it should disturb the stability of prices," he said.
Uralkali Chief Executive Dmitry Osipov said last week that it may commission new mining capacity in other areas.
Canpotex's current potash price for Indian companies is $322 per tonne on a cost and freight basis. A floor for next year's global potash prices is expected to be set in contract talks with Chinese buyers, followed by Indian companies.
Canada's Potash Corp is monitoring the Russian mine shutdown, but is not sure how it may affect the company's operations, if at all, spokeswoman Denita Stann said. The company last December said it would slash its workforce by 18 percent as it struggled with slumping demand and weak prices.
It has since recalled some workers.
Cormandel signed a five-year sales agreement with Canpotex last week, with terms to be fixed annually.