- Potash miner agrees to sell 700,000 tons at $227 a ton
- Analysts say price is higher than previously expected
Belarusian Potash Co. agreed to supply potash to India at the cheapest price in almost a decade, but a level that analysts said exceeds previous estimates and indicates renewed demand for the crop nutrient.
Indian Potash Ltd. will buy 700,000 metric tons at $227 a ton in the new agricultural season starting July 1, according to a statement from Belarusian Potash Co. or BPC. Last year, the price initially reached was $332 a ton, before being reduced to $297. The new price is the lowest since the start of 2007, according to Raiffeisenbank.
"The price is fair and reflects the current situation on the global potash market," Elena Kudryavets, chief executive officer at BPC, said in the statement. The deal "will have a positive impact on the entire global potash market in the very near future, will give confidence to all participants, stimulating demand for potash."
Potash, which helps plants withstand dry conditions, is mostly mined in Russia, North America and Belarus. The two major consumers, India and China, usually sign pacts at the start of each agriculture year to buy the nutrient from companies including Russia’s Uralkali PJSC and Canada’s Canpotex Ltd., the exporter for Potash Corp. of Saskatchewan Inc. Uralkali said it isn’t ready to sell to India at the “low price.”
The new price is mostly in line or slightly higher than spot prices, said Elena Sakhnova, an analyst at VTB Capital in Moscow. Because India subsidizes farmers’ fertilizer purchases, it’s almost impossible for other potash producers, including Uralkali, to get a better price, she said.
This is the first time since 2009 that India reached an agreement before China, which may affect the price of the Chinese contract. Both China and India delayed deals this year because of high stockpiles.
China may pay more than $200 a ton this year, more than previously expected, Konstantin Yuminov, an analyst at Raiffeisenbank, said by phone from Moscow.
"The agreed terms of the Indian accord are very good for the market as they signal that the demand on potash will be healthier," he said. The lower price will help Indian farmers battling drought, Indian Potash Ltd. said.
The deal with China may be signed at the end of summer or start of autumn, Uralkali’s management said on June 22. In 2015, the country agreed to buy at $315 a ton.
Mosaic Co., the largest U.S. potash producer, fell 8.2 percent to close at $24.69 in New York on Monday, and Potash Corp. of Saskatchewan Inc. dropped 6.3 percent. Intrepid Potash Inc. and Agrium Inc. also declined.
India’s signing price was “generally in line” with expectations, and compares with a 2015-16 contract at $332 a ton, RBC Capital Markets analyst Andrew Wong said in a report. “We think having a contract in place will help the potash market form a bottom for prices, although we see limited potential for upside improvement,” Wong wrote.