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India’s higher potash import price threatens volumes

19th May 2015

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) - Having failed in a bid to avoid a price hike in the first two potash import deals for the financial year, fertiliser producers in India expected inward shipments of fertiliser minerals to drop during 2015/16.

Indian potash importers have concluded their first two deals of the year, of 1.3-million-tonne and 80 000 t with Canadian potash exporter Canpotex and Russia’s Urakali respectively. Both the shipments would be at $332/t and remained fixed through the current year.

Senior government officials in the Department of Fertilisers said that the contracted price was a hike of $10/t over the average price of shipments during the previous financial year, and while price increases had been resisted, importers had clearly failed to negotiate deals with potash exporters, at last year’s prices.

However, having concluded two deals for the year, potash importers would set the price of $332/t as the ceiling for all other contracts for potash supplies for rest of the current year, the official said.

A section in the Department of Fertilisers was apprehensive that with the government keeping the subsidy on potassic fertilisers unchanged for 2016/17, the higher contracted price for potash imports would push up retail prices of di-ammonia phosphate (DAP) and muriate of potash (MoP).

This, coupled with the forecast of poor monsoon rains across the country, could depress demand for high-priced potassic fertilisers and imports of potash could dip by a minimum of 50 000 t from an import estimate of five-million tonnes during the year; the highest projected since 2011, the official added.

In fact, the government had ruled out any increase in subsidy to keep the retail prices of potassic fertilisers in check in the wake of the higher contracted price.

In 2010, the Indian government de-controlled potassic fertiliser prices, giving producers freedom to fix the maximum retail price (MRP). However, the government continued to provide a fixed subsidy announced each year based on the retail price of fertilisers. Earlier this month, the government decided to keep the subsidies unchanged at the previous year’s level of $196 /t in the case of DAP and $147/t for MoP.

Officials said that the forecast of a poor monsoon, would not only depress demand for potassic fertilisers and result in a possible reduction in imports of five-million tonnes, as estimated last month, but there would be larger shift to urea by farmers, as this was sold at government-administered retail prices entailing a higher subsidy element.

The Indian Meteorological Department in the first forecast in a series of monsoon forecasts, last month, said that the country “would face 33% probability of rains being less than 93% of the long-term average”, or drought conditions.

Deficient rainfall for the second consecutive year would definitely lead to a fall in fertiliser consumption and the demand situation would only be aggravated by the rise in potash import prices, which would have to be passed on to farmers in the absence of a higher subsidy allocation, the official said.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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