Potash Seen falling on China, India price negotiation

VANCOUVER (CANADA): China and India are set to negotiate the biggest price cut in three years to buy potash as they break a deadlock in meetings with Russian and North American producers that dominate the $24 billion market for the crop nutrient.

Indian talks have begun and China could start in January or February, said Oleg Petrov, marketing director for Russian supplier OAO Uralkali. The countries may pay as little as $430 a tonne, down at least 8.5%, according to analysts at Credit Agricole Securities, Dahlman Rose and Goldman Sachs.

Potash Corp of Saskatchewan Inc, the world’s largest fertilizer producer by market value, in October and November announced the idling of a total of four mines for eight weeks.

Demand for the potassium-based salt is elastic because farmers can skip an application for a season if they choose and rely on residual traces of the nutrient in the soil.

The price Asia’s biggest consumers pay in the 50 milliontonne-plus potash market provides a global benchmark for other contracts. China delayed regular shipments since a $470-a-tonne accord expired on June 30 while India’s last contract, for $490, concluded at the end of the first quarter, with supplies to the countries continuing through the third quarter.

The two mostpopulous nations put off new accords since then with the aim of getting cheaper supply. “It comes down to the negotiating power of these very large purchasing blocks,” said Steve Hansen, an analyst in Vancouver at Raymond James.