PAO Uralkali, the largest potash supplier by volume last year, sees a possible supply deal with India taking place ahead of China for the first time since 2008, signaling a price increase.
China, with larger stockpiles, won’t rush to lock in a new deal, said Oleg Petrov, chief of sales.
“China may have around 4.5 million tons of stockpiles now,” he said in Moscow. “We saw higher levels in the past but still this is far from the 2.5 million-ton level which is seen as more comfortable for the new contract. On top of this we saw Belarus shipping four cargoes in January to China. Some of those volumes went to the market, some stay in the port, but still this is delaying the opportunity for the new deal.”
Normally China, the biggest consumer of the soil nutrient, strikes a deal first, and that contract provides the benchmark price for the year, with India paying a premium. Only once, in 2008, a contract with India came first, and China paid the premium.
China’s potash demand was 14 million metric tons last year, when the market hit a record 62 million tons, Uralkali’s press service said today, updating last-month estimates. The country last signed contracts at $305 per ton in January 2014 covering the first half of the year, later prolonging them to year-end.
Talks are likely to resume in March and be carried out alongside negotiations with India, Petrov said. It’s not possible to say how long discussions with China will last.
“India paid $322 for a ton of potash in 2014 and its demand is increasing, so the producers have a chance to increase the price for India, which may lead to a price increase for China,” said Konstantin Yuminov, an analyst at ZAO Raiffeisenbank in Moscow.
The Indian market grew to 4.2 million tons in 2014, and Uralkali expects it to expand further in 2015. “This is a big expansion from an annual 3 million tons we saw a couple of years ago,” Petrov said.
Potash imports by India, the world’s second-largest producer of sugar, rice and wheat, may jump as much as 22 percent to 5 million metric tons in the year starting April 1 from a year earlier, P.S. Gahlaut, managing director of Indian Potash Ltd., said in an interview on Feb. 4. That would be the highest since 2010-11, according to Fertiliser Association of India data.
Uralkali’s 62 million-ton estimate for the 2014 global potash market was far higher than it previously expected, Petrov said. Some of that growth was due to clients building inventories. This year it sees a decline of about 3 million tons, he said. “The pricing environment is quite healthy and we don’t expect it to be worse than in 2014,” he said.
While competition in the potash market has intensified since Uralkali pulled out of its Belarusian venture, the former partner hasn’t yet eroded Russia’s market share.
“Belarus is building its market share in Brazil, offering product at discounted prices,” Petrov said. “We don’t expect that Uralkali’s market share in the country will be affected. Belarus is likely to compete with Israel or Canada in Brazil.”
Belarusian Potash Co. shipped supplies to China this year as some of last year’s shipments were delayed, according to Irina Savchenko, a spokeswoman for the exporter. The company doesn’t plan to send cargoes in February, she said.