Uralkali measured India in length
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Uralkali was the first to sign a long-term contract for potash supplies to India in 2023, setting a benchmark for other players in the global market. The price turned out to be almost 30% lower than last year’s world contracts and amounted to $422 per ton. Experts predict an increase in supplies to Asia, taking into account European sanctions.
Uralkali has entered into a long-term contract with the largest Indian importer of mineral fertilizers Indian Potash Limited (IPL) for the supply of potassium chloride to India. The agreement will be valid until September 30, 2023, the scope of the contract is not disclosed. Its price was $422 per ton on terms of delivery to the buyer’s port (CFR). This is 28% below the level of $590 per ton that India signed contracts in 2022 with other potash producers. Uralkali itself did not announce a contract with India last year.
“The agreement reached objectively reflects the current situation in the industry,” are given in company message words of its CEO Vitaly Lauk. — We see that the market positively accepted our initiative, and we expect that the Indian contract will become one of the main price targets this year.
We are talking about the fact that Uralkali was the first among the largest producers to conclude a contract in 2023, thus setting a price benchmark for the global potash market.
Such a scheme is standard practice for the largest consumers of fertilizers – China and India. Only these countries buy potash under long-term contracts. As a rule, the price of the first contract concluded for the current year becomes a benchmark for other manufacturers. In this case, usually the first contract was concluded with the largest consumer – China, which set the minimum price for the market. Following the agreement was signed by India with a premium of $ 10-30 per ton to this level.
Until 2013, this benchmark was traditionally set by the joint trader of Uralkali and Belaruskali, the Belarusian Potash Company (BPC), which occupied more than 40% of the world market. After the manufacturers refused from single sales, negotiations were conducted by Uralkali, but since 2015 this role has been taken over by Belaruskali (its trader retained the name BPC). For the sake of quickly concluding agreements with the largest consumers, the Belarusian company resorted to dumping, offering a price below the market. The market has also changed: long-term contracts have ceased to be annual and now do not have strict bindings in terms of conclusion and duration. And India was often the first to sign treaties.
All this led to the fact that since 2018, when BPC entered into another agreement with a discount to the market, the rest of the world manufacturers, as a protest, began to reduce supplies under direct contracts, preferring to sell goods on spot at a higher price. In some periods, no long-term agreements were concluded at all. But at the beginning of 2022, against the backdrop of a shortage of fertilizers in its market due to the introduction of export restrictions by China and a record increase in world prices, India not only returned to active purchases of potash, but also switched to long-term contracts for other types of fertilizers. The country announced its intention to import at least 1 million tons of diammonium phosphate and potassium and about 800 thousand tons of complex fertilizers (NPK) per year.
According to Nina Adamova from Gazprombank’s CEP, Russian potash producers not so long ago, in 2021, shipped only 1.3% of their total exports to India. Now, she says, with the reversal of many trade flows to Asia, the situation is changing.
Russian suppliers are interested in expanding their presence in the Asian market, including India. It is clear that Indian buyers are also interested in this cooperation, despite the fact that for the 2023/24 agricultural season the country is scheduled to reduce by 26% (to $44.6 billion) the volume of subsidies allocated to the agricultural sector, including the purchase of fertilizers.
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