phosphate giants squeeze higher prices, india

Phosphate giants squeeze higher prices from India
22:25 UK, 1st September 2011, by Agrimoney.com

North American fertilizer giants, fresh from squeezing Indian customers to pay elevated potash prices, have won a hike in phosphate values too, as a three-year supply deal approaches the half-way stage.

Indian buyers have agreed to pay North American cartel Phoschem $677 a tonne, including freight, for about 1m tonnes of diammonium phosphate, for delivery in the half-year to March 2012.

The price represents a $65-a-tonne hike from the $612 a tonne agreed for the current six-month period, ending this month.

However, it comes against a backdrop of firming fertilizer markets, with the spot value diammonium phosphate rising back above $600 a tonne in the early summer in the US port of Tampa ? a rise of more than one-third year on year, according to data from PotashCorp, one of the Phoschem members.

Part of the benefit of the rise in phosphate values for fertilizer groups such as PotashCorp has been swallowed up by increased raw material costs, although firm farmer demand and expectations of weakened exports from China have enhanced their pricing power.

Furthermore, North American producers' stocks were, as of the end of June, some 70,000 tonnes below average levels for the time of year, albeit up 105,000 tonnes during the month.

Phosphate vs potash

Gordon McKenzie, the PhosChem president, said Thursday's deal "demonstrates our commitment to serving the growing demand for phosphates in India".

"We are pleased to reach this agreement and look forward to continuing to serve the Indian market and our Indian customers in the years ahead."

PhosChem, whose other members include Mosaic, the world's biggest phosphate group, In March 2010 struck a three-year deal with Indian Farmers Fertilizer Co-op and Indian Potash to supply 2m tonnes a year.

The price for the first year of the deal was set at a "fixed, market competitive price", being increased thereafter to reflect market conditions.

The longstanding deal contrasts with shorter-term agreements struck in potash, the latest a six-month contract agreed in August, after months of wrangling, at an average of $500 a tonne, compared with $390 a tonne that Indian customers had been holding out for early in the year.

Shares in Mosaic closed down 0.7% at $70.65 in New York, with PotashCorp shares losing 1.3% to Can$57.20 in Toronto.

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