Indian Potash ‘Very Close’ to Signing Uralkali Deal (Update1)

By Pratik Parija and Maria Kolesnikova

July 15 (Bloomberg) -- Indian Potash Ltd. said it is “very close” to signing a purchase agreement with the trading joint venture of OAO Uralkali, Russia’s second-largest producer of the fertilizer raw material, at about $460 a metric ton.

Indian Potash will follow the accord by signing agreements with other producers by the middle of next week for a total of as much as 4.5 million tons of potash through March, Managing Director P.S. Gahlaut said in an interview in New Delhi today.

Producers are giving in to pressure to cut charges after previously seeking to support prices by slashing output. They initially offered to sell to Indian Potash at between $625 and $635 a ton, analysts at Citigroup Inc., Troika Dialog and VTB Group said. International Potash Co., the marketing arm of Russia’s biggest producer OAO Silvinit, last week agreed to supply India with 850,000 tons by March 10 at $460 a ton.

Uralkali venture Belarusian Potash Co. initially offered the second-lowest price, followed by Israel Chemicals Ltd., K+S AG, Jordan’s Arab Potash Corp., and Canpotex Ltd., a marketer representing North American producers Potash Corp., Mosaic Co. and Agrium Inc., Gahlaut said.

“So we are, in that order, calling people,” Gahlaut said.

Other producers will have to match the $460 price, though prices are unlikely to fall below the new benchmark, he said. The amounts supplied by each producer will be decided next week, he added. Uralkali spokesman Alan Basiev declined to comment.

Lower prices threaten to curb earnings for producers in the $28 billion market including Potash Corp. of Saskatchewan Inc., the world’s largest maker of the crop nutrient, and K+S AG, Europe’s biggest. Cheaper fertilizers may also spur farmers to use more on their fields, bolstering yields.

Potash producers sought to shore up prices by curbing output by as much as 50 percent from peak levels. Uralkali cut its price for potash exported to Brazil from March to May to bolster sales, in the first price cut since 2006.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net,

Last Updated: July 15, 2009 11:45 EDT