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Potash Split Prompts India’s Biggest Buyer to Seek Price Cut

August 2, 2013

India’s biggest potash importer will seek to renegotiate prices for the crop nutrient after suppliers suspended a venture controlling almost half of global exports.

"We will ask for a suitable reduction in the price" before the current contract expires, said P.S. Gahlaut, managing director of Indian Potash Ltd. The company had contracted to buy 1 million metric tons from a marketing venture between Russia’s OAO Uralkali and Belarus at an average $400 to $410 a ton until March 31. Half of that has already been supplied, Gahlaut said.

The $20 billion global market for potash is set to become freely traded for the first time in eight years after Uralkali said this week it decided to end production restrictions that underpinned global prices. It will no longer sell potash through Belarusian Potash Co., the Minsk-based marketing company it established in 2005 with rival miner Belaruskali. The venture controlled about 40 percent of global potash exports.

"There is oversupply of potash and it’s putting pressure on prices," said Gilad Alper, a senior analyst at Tel Aviv- based Excellence Nessuah Brokerage Ltd. "Uralkali reached a conclusion that the market is not going to rebalance any time soon and it’s better just to let prices drop so that they can start selling volume."


Below $300


Uralkali declined to comment. The company said July 30 it had started talks with clients worldwide to arrange new contracts without Belarusian Potash. Global potash prices may fall below $300 a ton after the change in trading policy, it said. Filipp Gritskov, a Belarusian Potash spokesman, declined to comment on any renegotiation of prices with Indian Potash.

"If prices fall to this level the contracts will become untenable," Gahlaut said yesterday by telephone. "As long as there is no cartel it suits India. We will renegotiate with all our suppliers to get the best price."

Indian Potash will hold talks on new contracts with Uralkali and renegotiate the existing agreement with Belarusian Potash, he said.

"The country may get an additional discount as competition between the producers has started and the price may fall," Kirill Chuyko, BCS Financial Group’s head of equity research, said by phone from Moscow. "This is good for India, but bad news for potash producers."


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