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
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
'Loyal and long-term
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
"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.
However, this week's deals have received a mixed response from
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.
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