indians to look for greenfield potash projects

It is very likely that potash is going to be a commodity like oil which has very high strategic importance for a country! Oil price is tipped to go above $130 in 12 months by Goldman Sachs yesterday.

From the news below, you can see how a greenfield mineral (potash in our case) project draws attraction from the major consumers of that mineral.

Here it comes..!

The coming thing is the interest to the greenfield projects from the major potash consumer countries in this very thight supply environment. Interest can be exposed as a takeoff agreement or a takeover offer.

That is very natural as those big consumer countries of potash have to secure their future potash fertiliser supplies.

Indians are offering $450pt, however it seems that they would be happy to pay $500pt, but Cantopex won't give any consession and asks for $550pt.

Negotiations in Montreal this week have failed to settle a pricing dispute between potash producers and India, and both sides continue to signal that they will not back down.

Source: Click here
May 25, 2011

The International Fertilizer Industry Association's (IFA) annual conference brings together the biggest global buyers and sellers of fertilizer to discuss important issues facing in the industry. With food security and high prices on the minds of governments worldwide, it takes on more significance every year.

This year's event in Montreal was especially important for the Indian visitors, as they are stuck at an impasse with the potash companies. They insist that their farmers cannot afford to pay current high prices, and are demanding that producers give them a 10% discount on spot prices (currently just under US$500 a tonne).

Indian negotiator P.S. Gahlaut said that no resolution was reached at the conference, though talks will continue. "A big market like India should get a little preferential treatment. We can't be equated with [smaller markets]," he said in an interview.

U.S. Awasthi, managing director of the Indian Farmers Fertilizer Cooperative Ltd., which represents small farmers, said that India can tweak its agricultural practices and take advantage of "sufficient potash" in its soil to avoid importing for years, if necessary.

Indians after the greenfield potash projects!
(My note:
Thailand; not possible! (that resource is not minable)
Ethiopia; Volcanic potash! Not sure at all!
Elsewhere; What about Congo?)

He also pointed out that there are greenfield potash projects popping up around the world in Thailand and Ethiopia and elsewhere, and expressed confidence that India can take advantage of these new supplies. That would mean less reliance on marketing groups such as Canada's Canpotex Ltd.

"We are prepared to work out a potash price of US$445 to US$450. We don't think farmers can support more than this as of today. If [the producers] don't agree, then we have no intention of buying potash," Mr. Awasthi said.

Bill Doyle, the chief executive of Potash Corp. of Saskatchewan Inc., said he doubted there would be a long-term potash boycott from India. He also dismissed Indian claims that they do not need to import potash as a "negotiating tactic". "Their own agronomists would tell you something different," he said in an interview.
(My note: This is the market research PotashCorp makes very well as I told you on my previous post. So Indians have no chance)

The Indian contract is a crucial one for the potash industry because the country is such massive consumer of fertilizer. According to Potash Corp.'s own numbers, Indian demand could reach 6.9 million tonnes this year. Total global demand is expected to be 55 million to 60 million tonnes.

If potash producers decided to give such an important customer a break on prices, experts pointed out that others would demand the same treatment. That could make it tougher to push through price increases in the future.

Mr. Awasthi maintained that India deserves special treatment. He stated that about 600 million people in India depend on agriculture for a living, much of which is subsistence agriculture that is not for profit. The Indian government already helps its farmers out with a major subsidy program.

Ajay Shriram, an Indian citizen who is also president of the IFA, expressed confidence that the dispute can be resolved. He pointed out that India backed out of the market a few years ago when fertilizer prices reached record levels, and "things worked out all right."

Mr. Doyle also said he is confident that a deal will get done. He is seeking a six-month contract with India. That is shorter than most prior contracts, which he said could "take some emotion out of the process."

(My note: PotashCorp. happy to sign a short term contract like 6 months as they are sure prices will go further upside. They may then ask for $600pt after 6 months. Indians will have to make a good decison here; Pay $550 now for 6 months or pay $550 for 12 months! Up to you!)