MUMBAI/BEIJING: Agriculture in China and India will be the biggest winner after Russia’s Uralkali walked away from one of the world’s two big potash cartels, paving the way for consumers to demand hefty price cuts.
The two Asian countries account for around 30 percent of global demand for crop nutrient potash, and had been forced to swallow high prices for a decade in a market dominated by Uralkali’s Belarus Potash Company (BPC) and Canpotex, a North American producer group.
Uralkali ended its joint venture with Belaruskali on Tuesday, citing a deadlock over sales and said it would export via its Swiss-based unit. Chinese state-owned trading companies held urgent meetings yesterday to discuss the break-up, which comes just ahead of this year’s contract negotiations expected in the next month.
“This will up-end the market price ... it strengthens our hand in the next round of pricing talks,” said Kong Xuan, investor relations officer at Sinofert, China’s largest fertiliser distributor.
Potash prices could drop by as much as 25 percent this year, Uralkali said on Tuesday, to about $300 per tonne. The Russian firm now plans to boost production in a bid to increase sales to India, Brazil and China, where it will ship more than 2.5 million tonnes in 2013, up from 2 million last year.
“(Uralkali) has thrown a bomb by saying prices will go down to $300 per tonne,” a senior executive at an Indian fertilizer firm said. “Today if you ask someone to buy potash at $370, they will say no. Why should I buy at such a high level when prices are bound to correct by much more?”
India and China are the world’s leading producers and consumers of grains and among the largest sugar and oilseeds farmers. India has to import all its potash while China imports about half its annual requirements of 10-11 million tonnes.
“Considering ongoing developments, I think sellers will accept our demand and cut the price,” said US Awasthi, managing director of Indian Farmers Fertiliser Co-operative (IFFCO), which buys through Indian Potash Ltd.
Uralkali’s focus on volumes will leave Canpotex owners — Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc — little choice but to follow.
Reuters
