Coromandel Intl Seals 5-yr Import Deal with Potash.

NEW DELHI: India’s Coromandel International has clinched a five-year potash supply deal with Canada’s Potash that will see assured imports of around three million tonne of the commodity.

However, both parties have chosen to keep secret the price at which the deal was clinched, a crucial factor in gauging subsidy savings for the Indian government, which has initiated a long-term strategy to pare down its massive yearly fertiliser concession bill.

The deal with the marketing consortium Canpotex will ensure at least 5,00,000 tonnes of potash annually between April 1, 2011, and March 31, 2016.

India imports around 5 million tonne of this key soil nutrient annually and the price secured in this deal could set the benchmark for subsequent import agreements. “It is a significant supply deal,” Fertiliser Association of India (FAI) chief Satish Chander told ET but added that price and not the availability was not the problem for India, the world’s biggest importer of the commodity.

“It is a good price if potash supply was agreed on $350/tonne or lower,” he said. At $350 a tonne import price will reduce the subsidy by Rs 70 crore annually. In February 2010, a consortium of Coromandel and Tata Chemicals bought 6,00,000 tonnes of the nutrient from Canpotex at $370/ tonne (including freight), a good $20/tonne higher. That $20/tonne difference is what this year’s savings are projected on.

Speculation on the price is heavy, especially since the global potash space has heated up of late with the news of potential M&As involving a hostile takeover bid on Potash besides the news of a possible merger of UralKali with Russia’s biggest potash supplier Silvinit.

Current import price for India, however, will be significantly lower than the $625/tonne level that Indian companies paid for potash supply in a deal with Canpotex in March 2008, when global price for the commodity was much higher.

It would also be lower than the 2009 price of $460/tonne Indian Potash for three million tonne of the commodity from Silvinit. Through September, though, potash spot prices remained largely unchanged in at around $342.50/tonne and the surmise is that the price for the new supply deal would, therefore, be around that level.

But some analysts have said on account of drought in Russia and parts of Europe, potash price will climb upward. While many other importers such as Russia choose to buy at spot prices, India, given its huge import quantities, prefers to enter into negotiated long-term supply deal-based prices, perceiving this as the best strategy to clinch competitive prices.

Source : economictimes.indiatimes.com