Rising global costs of potash could push India to sign costly imports in 2017

The Dollar Business Bureau

Rising global demand for potash a widely used fertiliser, could make India sign costly import contracts in 2017 compared to that of last year. Incidentally, in April the government has decided to reduce the subsidies to the farmers thereby reducing the demand of potash in the country.

India is one of the top buyers of the crop nutrient and helps set the global benchmark along with China. Its contract prices are keenly watched by other buyers like Indonesia and Malaysia.

Recently two of the biggest potash producers, Potash Corp of Saskatchewan and Russia's Uralkali, have tightened the prices of potash by reducing their output. Potash Corp expects global shipments this year to increase to 3 million tonnes compared to that of 2016.

India could in all likelihood agree to a higher potash contract when discussions begin in the second half of July. Speaking to the media an Indian negotiator said, they could agree to a marginal price increase, but efforts will be made to retain the prices at last year levels.

China last week agreed to a new potash contract at $230/tonne with Uralkali, which was higher than $219/tonne agreed to in 2016. India agreed to $227/tonne in 2016 which is higher than that of China due to a difference in freight.

Industry sources in India caution that higher potash contract prices could dent the demand as the government has reduced the domestic potash subsidies.

The government cut potash subsidy by 20% from previous year to Rs 7437/tonne for FY 2017-18. This could translate to domestic potash prices seeing an increase, thereby reducing the demand to 3.5 million tonnes from 4 million tonnes in 2016.