September 3, 2013 / 11:45 AM / 4 years ago

India secures discounts for existing potash deals-officials

3 Min Read

MUMBAI, Sept 3 (Reuters) - Potash suppliers have agreed to cut prices for Indian buyers on existing contracts to help them cope with the impact of a weaker rupee, although the size of the discount still needs to be agreed, Indian industry officials told Reuters.

Buyers were expected to seek lower prices for new deals after Russia's Uralkali abandoned the Belarusian Potash Company cartel, shaking up a market where nearly seven in ten globally traded tonnes are supplied by either BPC or North American producer group Canpotex. If India can secure substantial discounts on existing contracts, it would underscore the scale of the shift in pricing power.

Sellers and Indian buyers have agreed on a cut but are still discussing the size, P.S. Gahlaut, managing director at top potash importer Indian Potash Ltd (IPL), told Reuters.

An official with a Mumbai-based fertiliser firm said the price cut would be more than 12 percent as the Indian rupee has fallen by around a fifth since Indian companies signed agreements in February, pushing up the local price of the dollar-denominated crop nutrient.

"Suppliers will bear at least half of the burden," the official said.

"The Belarusian delegation last week made clear that it has no problem reducing prices reasonably for old deals."

Officials at Uralkali and Belaruskali declined to comment.

A source at a producer confirmed discussions to reduce prices on current contracts, but said these were still ongoing.

"The Indians are trying to renegotiate and reduce prices substantially. So far no new price level has been agreed," the producer source said.

India agreed in February to buy nearly 4 million tonnes of potash for 2013 at $427 per tonne on a cost and freight (CFR) basis.

The reduction would be applicable for around half remaining that would he shipped in next four months, said an official with a Delhi-based fertiliser company.

India, which together with China accounts for around 30 percent of potash demand, had been forced to swallow high prices from BPC and Canpotex for a decade, but the collapse of BPC has changed that.

Representative from Belaruskali and Uralkali are trying to persuade traditional buyers like India and China to buy from them as relations between Belarus and Russia are strained following the breakup of BPC.

Belarus last week detained the chief executive of Russia's Uralkali, the world's top potash producer, accusing him of inflicting severe economic damage.

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