Russian fertiliser major Uralkali on Wednesday said it expects potash prices to firm up before it signs supply contracts with India for this fiscal and that it is finding ways to avoid mid-year price re-negotiations by Indian buyers after signing yearly purchase deals.
One of the options under consideration is to go for half yearly contracts. Importers like Indian Potash (IPL) had last fiscal resorted to mid-year price re-negotiations due to a steep devaluation in rupee against the dollar that made it difficult for them to sell the price-controlled commodity in the local market without an increase in state subsidy. IPL supplies the imported fertilizer to firms like Iffco, Coromandel International and Tata Chemicals.Indian firms are importing the commodity at $490 a tonne from Uralkali now.
Uralkali?s sales and marketing head Oleg Petrov told FE over the telephone that the company went for an yearly contract with India last fiscal because it suits the Indian system of annual state subsidy payments. ?But we have not decided on that yet for the next contract. India is now the only country that has annual contracts?.
Petrov is also optimistic about a firm trend in potash price this fiscal due to strong demand from China.
?There is no downward pressure in price regarding our next contract, whereas I do see some potential for an upside,? Petrov said. The demand for potash is very strong in Brazil and US on high corn prices, he said.
India, which gives a fixed amount of subsidy to potash even after its deregulation in April 2010, cut down the amount further by 10% to R14,440 a tonne last month. The country has earmarked R60,974 crore as total fertilizer subsidy for the current fiscal.
Supply contracts, which are usually signed at the beginning of the fiscal, is likely to be delayed till July this year as protracted price negotiations between Indian buyers and global suppliers had delayed last year’s contract till August.
Besides requests from Indian buyers for lowering the price mid way through the contracted period, Uralkali also had to face non-offtake of the contracted quantity of fertilizers. Petrov said about 35% of the contracted 2.1 million tonne of potash is still to be lifted by Indian customers. The delayed signing of contracts that made the plant nutrient available after its peak demand season and the rupee’s weakness forced Indian buyers to delay the purchase of part of the contracted quantity. Uralkali wants certainty in buyers fulfilling their contracted purchase. ?The execution of the contract is very important for us as we need to plan our production cycle,? Petrov said.
