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Russia-India potash deal to force price rethink -BPC

Published 07/11/2009, 08:47 AM
Updated 07/11/2009, 08:56 AM
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* BPC expresses surprise at price of Silvinit-India deal

* Says new conditions demand correction of plans

By Robin Paxton

MOSCOW, July 11 (Reuters) - Belarussian Potash Co, a major supplier of potash to world markets, may revise its price offers after reports that rival supplier Silvinit agreed a deal with India at levels far below market expectations.

BPC, a 50-50 joint venture between Belaruskali and Russia's Uralkali, was surprised at reports Silvinit had agreed to sell 850,000 tonnes of potash to India at a delivered price of $460 a tonne, a senior company official said.

The price, cited by analysts quoting Fertecon and FMB, is more than 25 percent below the $625-635 a tonne range proposed by all other major producers and caused a sharp decline in potash company shares on Friday.

"We did not expect such a significant reduction in price," Oleg Petrov, head of sales at BPC, said in comments emailed to Reuters late on Friday.

"Without doubt, the new conditions demand a correction of our plans," he said. "I believe that in the near future, we will be able to announce how the conditions of the contract ... have affected our own negotiations with Indian partners." Petrov did not confirm the price, and was commenting only on the analyst reports. Silvinit has not issued any official comment and a spokesman said it does not publicly discuss its pricing and marketing policies.

THAW IN POTASH MARKETS

The price of potash, a key crop nutrient, has remained stubbornly high even as demand has collapsed, as a small group of companies accounting for roughly 75 percent of global supply has drastically cut production in a bid to maintain pricing.

However, concerns that cash-strapped Silvinit might cave on pricing arose after the price it bid in the recent Indian tender was kept confidential, while the prices bid by other major suppliers were made public.

India typically imports between 4 million and 5 million tonnes of potash annually. The contract with Silvinit will account for just a small portion of its 2009 potash requirements, but it will put pressure on other major producers to cut prices.

Analysts are optimistic the settlement of this contract price with Silvinit will lead to a thaw in global potash markets, which have remained frozen as buyers waited for India and China to ink contracts.

China is the world's largest potash buyer and the global price setter. It typically negotiates annual contracts with BPC and Canpotex, a partnership between Potash Corp, Mosaic Co and Agrium Inc.

These companies, along with K+S and Silvinit, account for about 75 percent of global potash supply. (Editing by Anthony Barker)

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