Uralkali Contract with Indian Company Could Stimulate Potash Demand

Uralkali Contract with Indian Company Could Stimulate Potash DemandWhen it comes to major deals in the potash space, 2015 has been a little sluggish. Furthermore, the deals that have been inked have come in at lower-than-expected prices.

For example, Belarusian Potash signed a deal with China in late March for $315 per tonne. And while Russia's Uralkali (LSE: URALL) said at the time that the price was "significantly" less than was possible, it was singing a different tune on Friday when it signed a deal with Indian Potash for $20 less than it hoped. Specifically, it agreed to the sale of 800,000 tonnes of potassium chloride for $332 per tonne, just $10 higher than last year's contract.

Uralkali CEO Dmitry Osipov has called the agreement a "compromise," though at the same time has noted that the contract will "undoubtedly become one of the major drivers for industry development, stimulating potash demand."

North American producers likely to follow suit

That demand is likely to come from North American producers, which are expected to follow Uralkali and secure their own contracts with India. Canpotex, the sales agency for Mosaic (NYSE:MOS), Potash Corporation of Saskatchewan (TSX:POT,NYSE:POT) and Agrium (TSX:AGU,NYSE:AGU), has already officially finalized potash supply contracts for 2015 with all of its major customers in China, including Sinofert, at pricing that meets "current competitive levels."

The consortium believes that its 2015 shipments to China will be a minimum of about 1.8 million tonnes, surpassing the 1.6 million tonnes shipped the prior year. Potash imports to India are also expected to rise to 5 million tonnes in the 2015 financial year, which began April 1, and the news already has suppliers buzzing.

"Industry potash sales in India are up almost 20 percent in the first quarter of 2015 despite uncertainty about the government subsidy," Mosaic CEO Jim Prokopanko told Agrimoney last Friday. "We are very optimistic about demand growth in India."