Saskatchewan potash producers took a hit Wednesday as India’s government announced a month-long halt to its potash imports.
Low demand caused by drought pushed India to stop importing potash for the year to end-March and delay negotiations for next year’s contracts until at least June.
“This wasn’t anything we were anticipating necessarily. We don’t know necessarily that there’s an impact associated with it. We’ll have to wait and see how the other factors play out as we go forward,” said Denita Stann, Potash Corporation of Saskatchewan investor and public relations vice president.
Other factors include how quickly the Indian government settles their new subsidy rates for farmers, how they decide to deal with contract volumes they already committed to and the quality of the monsoon this summer.
Successive droughts in India have pushed down crop production and the need for fertilizer.
This decision from one of the world’s largest fertilizer consumers will likely push potash prices even lower as the industry continues a multi-year slump. Spot prices of potash are at an eight-year low of around $230 USD a tonne, down by a quarter from last year.
India represents roughly five per cent of all of Saskatchewan’s potash exports.
Stann said last May, Indian fertilizer producers agreed to import 4.5 million tonnes of potash worldwide, with an option to increase the order to 5.2 million tonnes, but so far this fiscal year, they have taken only 3 million tonnes.
PotashCorp’s market overview had predicted a boost in consumption from India. K+S Potash Canada declined to comment.
Even with India’s announcement, PotashCorp stocks rose 8.56 percent to $17 Wednesday.
“It’s pretty initial on seeing this announcement and I don’t think it’s a major surprise or a major concern at this point.”Saskatchewan Ministry of Economy mineral policy director Cory Hughes said.
Hughes said the province has not spoken with anyone in the Indian government yet.