<div>Potash buyers India and China are seeking aggressive price cuts of 25 per cent or more as they press their advantage over producers after the collapse of a major cartel.</div><div> </div><div>Russia's Uralkali rocked the global potash market late last month when it quit one of the world's two big cartels and forecast prices of the crop nutrient could fall to $300 a tonne.</div><div> </div><div>India is aiming for an 11 per cent discount off already agreed deals for the rest of 2013 -- saving $90 million-plus -- citing a weaker rupee and a trade-off between price and future sales growth.</div><div> </div><div>China wants to pay less than $300 a tonne for new contracts for the second half of 2103 and 2014, down sharply from $400 a tonne in the first half and $470 last year, pointing to its high stocks of the fertiliser and rising domestic output.</div><div> </div><div>"Prices above $300 will not be accepted by Chinese buyers, who are now facing high inventories at home and sluggish sales," Wei Chengguang, chairman of China Potassium Salts Industrial Association, told Reuters.</div><div> </div><div>"Chinese importers have been losing money in the first half and last year from high import prices," he added.</div><div> </div><div>China and India are two of the world's biggest users of the crop nutrient. China imports about half of the 10-11 million tonnes it uses each year. Potash use in India, which relies on imports, has slumped from about 6 million tonnes to 3.5 million tonnes due to rising prices.</div><div> </div><div><strong>Cartel Collapse</strong></div><div>Uralkali's decision to abandon Belarussian partner Belaruskali in the BPC cartel and boost its sales has encouraged buyers to expect increased production and greater competition.</div><div> </div><div>"Uralkali will ignore pricing parameters and will try to maximize production and sales volumes, trying to raise its share in the markets where the company has competitive pricing advantage - India, China, Brazil," chief executive Vladislav Baumgertner said at the time.</div><div> </div><div>The BPC and North American Canpotex cartels accounted for nearly 70 percent of global potash sales.</div><div> </div><div>Spot prices have slipped up to $50 in Brazil to $390 a tonne, while Uralkali has cut its potash price to China by $20 a tonne, Scotiabank analyst Ben Isaacson said in a research note.</div><div> </div><div>India, which agreed in February to buy nearly 4 million tonnes of potash in 2013 at $427 per tonne on a cost and freight (CFR) basis, is seeking a discount for the more than half of the contracted nutrient which has yet to be landed at ports.</div><div> </div><div>"We had asked for reduction to compensate 11 percent weakening of rupee," P.S. Gahlaut, managing director at top potash importer Indian Potash Ltd (IPL), told Reuters in a text message.</div><div> </div><div>"So far no confirmation (from sellers), but we are hopeful," said Gahlaut, who has been leading negotiations with potash suppliers on behalf of Indian buyers.</div><div> </div><div>The Indian rupee has fallen more than 10 percent against the U.S. dollar since companies signed potash imports deals in February and is trading around record lows.</div><div> </div><div>An official with a leading Indian co-operative fertiliser company said he expected most sellers would offer a discount to India in order to win new contracts.</div><div> </div><div>"There is competition among sellers. India is asking to dispatch at $380 per tonne, but the way inventory is building up at the seller's end, I don't think they will have any problem in accepting this price," the official said.</div><div> </div><div><strong>Volume Trade-off?</strong></div><div>Uralkali and Potash Corp of Saskatchewan <POT.TO> declined to comment on possible negotiations with India, but an industry source at a producer outside Canpotex and the former BPC cartel discounted talk of price cuts.</div><div> </div><div>"I can't see India getting any reduction in prices on existing contracts," the source said.</div><div> </div><div>There had been a lot of "noise" from India on re-negotiating prices and, in one case, a buyer contacted the firm to seek lower prices but did not send in an official request, he said.</div><div> </div><div>A Russian industry source said the pricing of a signed potash contract had never been changed in the past. But the source pointed to a possible precedent in the phosphate market, when Phosagro agreed in 2011 to a discount on its contract with India in return for a pledge to purchase higher volumes.</div><div> </div><div>India has said its potash consumption, which has been squeezed by higher prices, could return to levels around 6 million tonnes a year last seen in 2008/09 if suppliers made big price cuts.</div><div> </div><div>However, Chinese officials said its push for lower prices would not be linked to increased purchases.</div><div> </div><div>China's domestic potash output would exceed 6 million tonnes in 2013, up from about 5.4 million tonnes in 2011, while domestic stocks would rise above 5 million tonnes.</div><div> </div><div>"Even with the price fall, I don't expect China to increase imports because of large inventories, while domestic production has been expanding. Imports should decrease gradually on a year basis," said the industry association's Wei.</div><div> </div><div>(Reuters)</div>
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