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A large potential surplus of 7.9 million tonnes may materialise in the global potash market over the next four years, suggests International Fertilizer Association (IFA) data. If this happens, this is likely to benefit Indian fertiliser companies, which can import it for the domestic market.
Globally, around 30 potash-related projects are planned for completion between 2011 and 2015. This is expected to push up output, leading to a surplus of close to 15 million tonnes of potash by 2015, assuming they are completed on schedule.
IFA forecasts that global potash may increase from 43.8 million tonnes in 2011 to 54.7 million tonnes in 2014. The bulk of the new potash capacity will be in the form of muriate of potash (MOP).
Relying on imports
North America will be the world's largest supplier in 2015, with a 39 per cent share of potential world supply, followed by East Europe and Central Asia (29 per cent), West Asia (8 per cent) and Latin America (5 per cent).
India is dependent on overseas sources for its potash nutrient requirement, importing its entire requirement of over six million tonnes, as the resource is absent in the country.
Nevertheless, Indian companies have been bargaining hard for reduced prices for potash, deferring their purchases in view of sufficient stock availability this kharif season.
Now that the slowdown in global demand has hit the profits of global potash suppliers, the potential surplus could offer Indian companies the opportunity to whittle down the purchase prices while they negotiate new contracts.
Go-slow approach on projects
However, what could upset this rosy picture in the near term is a slower-than-expected ramp up in output. Potash sales have witnessed a slowdown in 2012 as buyers deferred purchase decisions amid the volatile global economic scenario. Due to this, some potash suppliers have adopted a go-slow approach on new projects, preferring to constrain capacity to protect prices.
OAO Uralkali, the world's largest potash producer, announced production cuts of about 40 per cent in the first quarter of 2012 on account of the decision of India and China to postpone purchases and has not ruled out a further reduction.
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