The deadlock between Indian fertiliser firms and global suppliers of muriate of potash (MOP) over pricing of imports for the current fiscal continues, with neither side ready to blink for the time being.

Indian potash importers failed to reach a supply and pricing agreement with Canpotex Ltd – the world's No. 1 potash exporter based in Canada's Saskatchewan province – at the Annual Conference of the International Fertiliser Industry Association in Montreal during May 23-25.

Stalemate

For 2010-11, Indian Potash Ltd, Coromandel International, Tata Chemicals, Zuari Industries and Indian Farmers Fertiliser Cooperative (Iffco) had jointly negotiated a price of $370 a tonne (cost & freight India) with a cartel of MOP suppliers, including Canpotex, Israel's ICL Fertilisers, the Belarusian Potash Company and Arab Potash Company of Jordan.

This time round, Canpotex and others are quoting a rate no less than $500, which is the ruling spot price for delivery in South-East Asia.

Indian companies, however, maintain that imports are not viable at over $ 420 a tonne, which is the Government's benchmark import parity price used to compute the subsidy on potash incorporated into various complex fertilisers.

At the Montreal conference, the Managing Director of Iffco, Dr U.S. Awasthi, was quoted as saying that India would, at best, consider a price of $ 445-450 a tonne, representing a 10 per cent discount to the prevailing spot rate.

Earlier, on April 11, the Fertiliser Association of India declared a potash import “holiday,” stating that “the country had enough stocks for the ensuing kharif season.”

India does not have any exploitable potash deposits and imports its entire requirements in the form of MOP (containing 60 per cent of the nutrient).

During 2010-11, MOP imports touched a record 6.4 million tonnes (mt), valued at around $ 2.35 mt.

Of this, 3.9 mt was sold directly as MOP and the balance incorporated into complexes with different proportions of nitrogen, phosphorous, potash and sulphur.

Who will blink first?

There are two questions that are now being asked, the answers to which will probably decide the ongoing war of nerves between global suppliers and Indian importers.

The first is: How long can India hold out by not importing? The second is: How long can the suppliers dictate prices, given that India today accounts for some 13 per cent of the global potash (MOP equivalent) imports of 48 mt. Since 2003-04, India's MOP imports have risen nearly 2.5 times from 2.6 mt to 6.4 mt, making it the largest buyer, ahead of the US (five mt), China (four mt) and Brazil (two mt).

“We are prepared to wait, as we have stocks till end-June. Even after that, the real requirement of potash for the kharif crop would be only during the flowering stage from August. And if our farmers manage this season without potash, it will amount to a permanent demand destruction, which is not good for the global suppliers,” warned a domestic industry source.

According to him, the non-availability of potash may impact production of popular complex fertilisers such as 10:26:26:0 and 12:32:16:0. “But we can still go for other (non-potash) complexes, including 16:20:0:13, 20:20:0:13, 24:24:0:0 and 28:28:0:0”, he added.

On the other hand, Mr Bill Doyle, President and CEO of the Potash Corporation of Saskatchewan Inc. – one of Canpotex's three equal shareholders, along with Agrium Inc and the Mosaic Company – recently claimed that “the markets are not waiting for India,” while dismissing the talk of an import holiday as mere “negotiating tactic.”

The spurt in MOP prices follow a general hardening of global corn and wheat prices, besides increased demand from Brazil, Australia and South-East Asia that grow sugarcane and oil palm – crops requiring extra potash.

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