India reaches agreement w/ canpotex$530 a ton starting Q1 next year sounds good to me. With India back in the game, supplies are going to be even tighter next year. Wonder if that might spark a bidding war?
North American Potash Producers Reach ‘Face-Saving’ Indian Pact
Q
ByChristopher Donville-Aug 3, 2011 4:35 PM CT
North America’s three largest potashproducers reached a “face-saving” agreement to supply Indiawith the crop nutrient after at least four months of publicsparring over prices.
Canpotex Ltd., owned by Potash Corp. of Saskatchewan Inc.,Mosaic Co. (MOS) and Agrium Inc. (AGU), will sell India potash at $470 ametric ton in the fourth quarter and $530 a ton in the firstquarter, Denita Stann, a spokeswoman for Potash Corp., saidyesterday in a telephone interview. That compares with $370 aton that India paid in the year ended March 31.
“These prices reflect what’s going on in themarketplace,” Stann said. “Supplies are tight and prices arerising.”
The Fertiliser Association of India said in April it mighthalt potash imports because of “exorbitant” prices and the“cartelization” of potash suppliers. In May, Potash Corp.Chief Executive Officer Bill Doyle said an Indian boycott wouldbe “highly unlikely.” And last month, Mosaic CEO Jim Prokopankosaid that North American producers would be unable to supplyIndia in the third quarter because Canpotex’s “cupboard isbare” after a deal was signed with China in June to sell potashfor $470 a ton.
“This is a face-saving deal for both sides as India paidthe same price with China for the fourth quarter while producerswere able to obtain their asking average price of $500 permetric ton,” Edlain Rodriguez, a New York-based analyst atGleacher & Co., said yesterday in a note to clients. “The priceis in-line with expectations.”
Supply Agreement
India will get 670,000 tons under the supply agreementannounced yesterday, Stann said. The Asian nation, which doesn’thave indigenous potash supplies, had sought a one-year supplydeal and a 10 percent discount to the spot price.
Potash for immediate delivery in Southeast Asia traded atabout $500 a ton at the end of July, 32 percent more than a yearearlier, according to ICIS, a commodity-pricing service.
“The fact that India settled should significantly tightenthis market up,” Agrium CEO Mike Wilson said yesterday on aconference call after the release of his Calgary-based company’ssecond-quarter earnings.
Doyle said last week that demand for the form of potassiumand limitations of global production are pushing up prices forthe mineral.
“This year’s India potash negotiations have been a realtragedy and it’s one in which there was failure to recognize thechanging marketplace,” Doyle said July 28 on a conference call,adding that India was the company’s only remaining“acrimonious” market.
‘The Rules’
“The rules of supply and demand, they apply to everyone,”Doyle said on the conference call. “There’s no market immunefrom supply and demand fundamentals.”
India, which also purchases potash from producers in Europeand the Middle East, bought 6.4 million metric tons of potash inthe year ended March 31, according to the Fertiliser Associationof India.
Canpotex and Belarusian Potash Corp., a marketingorganization controlled by Russia’s OAO Uralkali (URALL) and Belarusianproducer Belaruskali, account for 57 percent of global potashexports, according to figures from Uralkali (URKA) in a December 2010slide presentation.
Potash Corp., based in Saskatoon, Saskatchewan, raised itsfull-year profit forecast last week to $3.40 to $3.80 a shareamid expectations for higher prices. That topped an Aprilforecast of $3 to $3.40 a share.
The company’s sales by volume of potash increased 32percent in the quarter in the second quarter to 2.5 millionmetric tons from a year earlier. Potash Corp. sold potash for$416 a ton, on average, up 35 percent from a year earlier.
Potash Corp. rose 56 cents, or 1 percent, to C$55.15yesterday in Toronto Stock Exchange trading, while Agriumclimbed C$2.15, or 2.6 percent, to $83.75. Mosaic, based inPlymouth, Minnesota, advanced $1.16, or 1.7 percent, to $70 inNew York.
To contact the reporter on this story:Christopher Donville in Vancouver atcjdonville@bloomberg.net.