potash producers eye big price increase

Russia potash miners eye big price China increase
Fri Mar 21, 2008 10:36am EDT

MOSCOW, March 21 - Russian potash suppliers are set to secure huge price rises on sales to main export market China after Uralkali (URKAq.L: Quote, Profile, Research) more than doubled term prices to India's largest fertiliser importer, analysts said on Friday. Russia and China were likely to conclude negotiations in April or May, with major Russian suppliers to the global market such as Uralkaliy (URKA.MM: Quote, Profile, Research) and Silvinit SILV.RTS set to score record price increases, Moscow-based analysts said. "The situation on the potash market is very favourable, with producers remaining firmly in the driver's seat. The agreement with India will send a very bullish signal across the global market," Troika Dialog analysts said in a note.

Shrinking world stocks have pushed grain prices to record highs and given farmers the incentive to use more fertilisers, resulting in large price increases for soil nutrients worldwide.

Belarussian Potash Co (BPC), Uralkali's export trader, on Thursday agreed to sell 750,000 tonnes of potassium chloride to Indian Potash Ltd at $625 per tonne from May 2008 to March 2009.

The price is more than double the $270 per tonne under the previous deal signed in June 2007.

"The price provides for no discount to the spot market and is well above expectations, which points to the persistent tightness of the global potash market," Deutsche Bank analysts said in a note.

"More importantly, it significantly weakens China's position at the ongoing price talks with BPC."

Troika Dialog, referring to China, added: "The country lacks any serious negotiating leverage for now and the upcoming accord will doubtless be positive for producers."

Troika said India had been eager to strike an agreement before China -- and pay a much higher price -- to ensure it received enough potash during a global deficit. Indian stocks are running low while China is relying on stockpiles, they said.

In order to boost fertiliser use by domestic farmers, Russia also said this week it would introduce an 8.5 percent tariff on nitrogen fertiliser exports and a 5 percent tariff on potassium fertiliser exports until April 30, 2009.

Russia will also raise the tariff on exports of fertilisers containing nitrogen, phosphorus and potassium in any combination of the three in packages not exceeding 10 kg (22 lb) to 8.5 percent from 5 percent currently.

(Reporting by Robin Paxton; editing by Chris Johnson)

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSL2161729220080321?sp=true