PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:24 UK, 7th Feb 2013, by Agrimoney.com
India tips potash spree in favour of North America

India followed up its purchase of former Soviet Union potash with an order from North America too and, unusually, awarded the higher volume to the Canadian and US producers.

India, the second-ranked potash importer, purchased 1.1m tonnes of the fertilizer from Canpotex, the marketing cartel for groups including Saskatchewan-based PotashCorp, the world's biggest fertilizer group, and US-based Mosaic.

The price, of $427 a tonne, matched that of a deal signed on Wednesday with Belarusian Potash Company, the export marketing group for Belruskali and Russia's Uralkali, with the delivery period for the nutrient, to January 2014, identical too.

However, India's award to Canpotex was 100,000 tonnes more than bought from BPC, in contrast with recent deals which have seen more business go to the former Soviet Union producers.

In 2011, Indian buyers purchased, at 1.2m tonnes, nearly twice as much from BPC as the 670,000 tonnes bought from Canpotex.

In 2010, BPC scooped a 900,000-tonne order, ahead of Canpotex's 600,000 tonnes.

India, which is expected to purchase 3.5m tonnes overall, is also a big customer of Israel's Israel Chemical

Price comparisons 

The deals follow fraught and extended talks between producers and Indian importers which, facing a reduced government subsidy regime and saddled with a drop of more than 20% in the rupee against the dollar since the 2011 deal, had held out for lower prices.

And, indeed, the price of this week's deal represents a sharp discount to the $490 a tonne paid last time.

However, an agreement by China with producers last month, at $400 a tonne was seen as putting a floor on prices.

China, the biggest importer, typically receives the lowest price.

'Loyal and long-term customers'

Steven Dechka, the Canpotex chief executive, said that Thursday's deal "demonstrates the continued importance Canpotex places on the Indian market and on supporting its loyal and long-term customer base in that market".

"We are very pleased to sign supply contracts with our long-term Indian customers, and to continue our history of being a leading supplier to this important market," he said.

Canpotex also said that it would "collaborate with its Indian customers" on programmes to help "provide Indian farmers with the educational tools needed to improve yields through balanced fertilization and best management practices".

PotashCorp considers that Indian growers use too little potash compared with nitrogen, at a ratio of 1:9 rather than a historic level of 1:6, and the 1:3 seen in the US.

'Key catalyst'

However, this week's deals have received a mixed response from investors.

Paradigm Capital said that India's purchases, which have come before the late February period that the market had expected, represented "a key catalyst we have been waiting for", and was "very positive for PotashCorp".

"India and China were the primary culprits behind a disappointing year for potash shipments in 2012, and at a combined 15m tonnes of consumption, or about 25% of the market, their re-entrance should aid significantly in what is expected be a strong rebound in 2013," the broker said.

Paradigm restated a "buy" rating on PotashCorp shares, with a price target of $61.00.

'Too optimistic'

But in Russia, Credit Suisse said that the BPC deal "doesn't make us more bullish" on shares in Uralkali, noting the deal's volume, and its price discount from last time.

The terms suggest that "consensus currently looks too optimistic" on Uralkali, in forecasting group sales of 10.5m-11m tonnes when "10m tonnes is more realistic".

A price rise of 0.5% for the second half of 2013, compared with the first half, also looks "more likely" than the 10% the market is factoring in.

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